If the U.S. defaults, it will be much worse than the financial crisis that nearly three years ago brought the economy to the brink of collapse. At least that's how President Obama's former economic advisor Larry Summers put it on CNBC's Wednesday morning edition of Squawk on the Street.
In May, the U.S. hit the official debt limit, but Treasury Secretary Tim Geithner extended the country's ability to borrow into August using "extraordinary measures." Still, with August fast approaching and no deal in place, Summers, a former Treasury Secretary, says not raising the limit will be disastrous.
"It's gonna be Lehman on steroids," Summers said in the interview. "It's gonna be financial Armageddon, and I'm not sure that we're gonna have the capacity to put the financial system back together."
Not that this is the first time Summers has compared the possibility of default to the 2008 bankruptcy of the investment bank Lehman Brothers, one of the largest in history and the symbolic tipping point of the financial crisis.
Previously, on Fareed Zakaria's CNN program GPS, Summers discussed the Lehman Brother-debt ceiling comparison in more detail, saying not raising the debt ceiling would be nearly unthinkable. "A panic begins on money market funds and many parts of the financial system and a cascade that makes Lehman Brothers seem like a very small event unfolds," he then said.
The disaster that would unfold would have clear and recognizable culprits. “It would be a totally self-inflicted cataclysm," Summers also told Zakaria.
Summers is not the only market expert to express such dour sentiments.
In a July interview with CNBC, Berkshire Hathaway CEO Warren Buffett compared those Congressional Republicans preventing the government from raising the debt ceiling to hostage takers. The Republican controlled Congress, Buffett stated, is "trying to use the incentive now that we're going to blow your brains out, America, in terms of your debt worthiness over time."
Watch Summer's full CNBC interview here: