What would happen if the US defaults?

im not saying its gonna default,im just asking what would happen to the US, what would happen to the people in the US, and also what effect would it have on the world economy, just curious :*)

Answer #1

The US has always honored its obligations. Every dollar the US borrows is backed by the “full faith and credit” of the US. If the US doesn’t pay its bills the same thing will happen to us collectively that happens to an individual who reneges; we will have a lower credit rating and the interest we will have to pay on all of our debt will go up. Economists tell us that Greece defaulting would have an economic ripple effect throughout the world economy. Imagine the US with an economy over 40 times as large Greece’s defaulting. I could be wrong but I can’t remember a single time in American history that legislators played politics with the debt ceiling and threatened having the US default on loans to hold the entire country hostage to further their political ends. In the words of the great Adali Stevens, “Have you no sense of decency?” I guess among Republicans the answer is sadly no.

Answer #2

Odds are this will not happen. There are many more countries in much worse shape than we are. If we don’t default and they do, it will hurt their country in the long run and actually benefit ours because of a great amount of inflation in europe. When businesses want to invest, they will choose the US. However, it will hurt us in the short run. All businesses will be scared to invest and costs around the world will rise.

Answer #3

Not much really… the sun will rise as always… birds will chirp… babies burp… the scaremongering will have all been for naught. Americans will finally learn that a debt based economic system is criminally insane.

All ponzi schemes succumb to their top heavy structures in the end. Just as the debt grows exponentially year by year… it requires more and more sacrifice on the part of the people to sustain it. Forfeit more money in taxes and inflation. Resign social security and welfare benefits. All to satisfy some ridiculous notion that we are obligated to fund the whims of those who have the ear of the Federal Government. To what end? So that the next year we can all give more?

Imagine an avalanche building momentum down a mountainside. It is inevitable that it will collide with us at some point. The solution of the statists… both republican and democrat.. is to collectively pelt the avalanche with snowballs from the bedrock to try and slow the descent. The result… of course… is a bigger mass of frigid death headed our way. Once the haze of chaos from the first salvo of snowballs has cleared and the newly amassed juggernaut is revealed… the statists suggest another round of snowballs… only more this time and thrown a little harder. This cycle is repeated ad nauseum until there isn’t enough snow to throw at it… nor enough strength left in the people to repel what is headed their way. This is madness!

We’re fast approaching this dead zone. Does it make sense to wear ourselves out adding fuel to the entity that will consume us all while simultaneously depleting our reserves of wealth and strength leaving us completely at its mercy when it inevitably arrives? NO! It makes much more sense to stop now… stop adding to it… brace for the blow… and save what strength there is left to dig our way back out afterwords.

Take a lesson from Iceland. Throw the corrupt bankers and politicians in prison. Pay the penalty with a couple of down years and move to a better sound money system.

Answer #4

What shocks me is the number of people I speak to, who have no idea what is happening right under their noses. Intelligent people, who still cannot see that when the Federal Reserve prints money, it reduces the value of every dollar in the US. Why don’t people understand inflation? Why don’t they understand how criminal the bailouts are? I just don’t get it.

Answer #5

With the current manifestation of the “Fire and Brimstone” preachers holding sway in the government and banks… though I repeat myself… it isn’t any wonder that the true believing public champion bad policy to stave off financial damnation?

Naive people are prey.

Answer #6

While I understand the dangers of our enormous national debt, this is not the time to be extreme. Our economy is on the edge of a knife right now, and to default at this point, or even to make drastic cuts without adding revenue, would be a complete disaster, and would send us right back into another deep recession. The debt is a long term problem that we do need to deal with, like Clinton had started in the 90s. But the lack of growth in the economy is an immediate problem, and the last thing we should be doing is slashing spending and taking even more money out of the economy. All the economists have been saying this is not the time for these kinds of cuts. I almost think the GOP wants the economy to crash again, so they can blame it on Obama in 2012… I wouldn’t put it pass them.

Answer #7

Isn’t it true that Clinton went about balancing the budget by pilfering from the Social Security fund? Now Obama is threatening to withhold social security benefits so that those monies can go to fund the government. So how did Clinton’s method of balancing the budget benefit the economy?

Answer #8

Absolutely false. During Clinton social security was also running with a surplus, meaning we were collecting more than paying out. But even if you don’t include the SS surplus, there was still a surplus of 86 billion when Clinton left office. And Obama is not threatening to withhold SS benefits so we can fund government. He said that COULD happen if we don’t raise the debt ceiling, because the government would have no money, not to use elsewhere. I am pretty sure the even if they don’t agree to raise the debt ceiling that SS benefits will still be paid. It is mostly just a scare tactic. How did Clinton’s method of balancing the budget benefit the economy? Are you kidding? Do you remember the 90s? The first thing he did was raise taxes on the wealthiest Americans, and that directly led to reducing the deficit and turning it into a surplus by the time he left. And during that time we had one of the most robust economies we have ever seen. Not sure where you get your information, but you should do some fact checking…

Answer #9

You’re not the only one who believes that there was a surplus, so I don’t fault you there. But anyone who takes the time to investigate, and look at the numbers themselves at the US Treasury web site, will plainly see the numbers, unfleeced and without biased journalism and clever wording.

Clinton paid down the public debt, not the national debt, which includes intragovernmental holdings. I’ve spent hours this morning looking at the numbers. Through the US Treasury web site, you can get to this page - here’s the direct link for it.

http://funadvice.com/r/1581un5vd8g

I’m not a republic or a democrat, just an interested party in Canada with a few properties in the US and definitely feeling the pinch in this last year with the declining dollar.

This site here gives a comprehensive breakdown of the “surplus.”

http://funadvice.com/r/1581un5vf6q

Answer #10

It is not a “belief” there was a surplus, it is a fact. You are the one listening to propaganda. First off, you are confusing the national debt with the the federal budget deficit. Not the same thing. When Clinton left office he DID have a surplus budget, meaning the government took in more revenue than it spent. Your first link only has info on the debt, not the deficit. But if you actually use this site to look at debt during Clinton’s last year (2000), you can see the national debt was reduced. In Dec 1999 the debt was 5.776 trillion, and in Dec 2000 the debt was 5.662 trillion. That was a reduction of almost 114 billion. That could not happen with out a surplus in the budget.

Your second post is not from the US treasury Dept. It is a conservative website that is completely unreliable. In fact, the only place you ever see anyone disputing the Clinton surplus is on conservative websites. You may not be a Dem or Rep since you are from Canada, but you are probably a conservative, given your apparent proclivity to twist what Clinton and Obama have actually done and said.

Answer #11

Jimahl, you probably don’t know who said this - “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. Increasing America’s debt weakens us domestically and internationally. Leadership means that the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.” You referenced the December numbers from the US treasury link I sent you, but the fiscal year runs from the beginning of October to the end of September.

Sept 1997: total national debt 5.41 trillion Sept 1998: total national debt 5.53 trillion Sept 1999: total national debt 5.65 trillion Sept 2000: total national debt 5.67 trillion Sept 2001: total national debt 5.81 trillion

Try again and you’ll see the negative number. From the end of 1997 to the end of 2001, yes, the public debt went down, but the intra-governmental holdings went up, significantly each year. And the national debt is calculated by adding the public debt to the intragov. holdings. Public debt is stuff like treasury bills, savings bonds, etc. The intragovernmental holdings - well that’s when the government borrows from itself, mostly from social security. So, that’s where the confusion is. Sure, the public debt went down. But that’s because the i.g. holdings went up. There is supposedly a $2 trillion surplus in the Social Security trust fund. Why should that be available to governmental use? It’s funded separately, and if it hasn’t been looted by previous administrations, it should be solvent and not in jeopardy of defunding based on the government’s lack of funding otherwise. http://funadvice.com/r/158dumj7qjn

You probably know of Fritz Hollings, a democratic senator. In October 1999, he spoke in Congress. It’s on video tape http://funadvice.com/r/158dumj7s51. But in case you don’t have time to look, here’s what he said:

“So the table itself, according to the figures issued yesterday, showed the Federal Government ran a surplus. Absolutely false. This reporter ought to do his work. This crowd never has asked for or kept up with or checked the facts. Eric Planin–all he has to do is not spread rumors or get into the political message. Both Democrats and Republicans are all running this year and next and saying surplus, surplus. Look what we have done. It is false. The actual figures show that from the beginning of the fiscal year until now we had to borrow $127,800,000,000. “ Why would he say this?

Now… I’m interested in something else you said: “Your second post is not from the US treasury Dept. It is a conservative website that is completely unreliable. “ Jimahl, do you mean that particular conservative website is completely unreliable? Or all of them? LOL. I looked at his numbers and checked out the links. It’s completely above board! He cites every source and allows you to track back to each one.

This is a really big deal, Jimahl. I swear, it seems like you’re treating my views like they’re some off-the-wall fanatic Second Coming of Elvis belief.

By the way, that quote I started with? Senator Barack Obama Senate Floor Speech on Public Debt March 16, 2006.

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