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Old 02-14-2013, 20:50   #1
rock_jock
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What will happen when the US defaults on the national debt?

Serious thread. What specifically will happen? Not the vague descriptions of doom and gloom, but the inevitable consequences.

Will we go into receivership, with creditor countries dictating a budget for us?
Can we unilaterally discharge our debt and, if so, what will be the effect on the world?
Can we devalue our currency, go into a massive inflationary cycle, and pay off the debt with worthless dollars?
Will we be forced by international court into liquidation of assets?
What will happen when the banking system collapses?

I'm surprised that no one seems to be covering this, not even Fox News. I think most Americans find the idea so unsettling that they cannot seem to rationally confront it as a reality, one that I believe is not just a potential but rather as an inevitability.

I see one consequence occurring. I think secession will go from a fantasy of the far-right to a blueprint for a new republic.
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Old 02-14-2013, 21:05   #2
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Quote:
Originally Posted by rock_jock View Post
Serious thread. What specifically will happen? Not the vague descriptions of doom and gloom, but the inevitable consequences.

Will we go into receivership, with creditor countries dictating a budget for us?
Can we unilaterally discharge our debt and, if so, what will be the effect on the world?
Can we devalue our currency, go into a massive inflationary cycle, and pay off the debt with worthless dollars?
Will we be forced by international court into liquidation of assets?
What will happen when the banking system collapses?

I'm surprised that no one seems to be covering this, not even Fox News. I think most Americans find the idea so unsettling that they cannot seem to rationally confront it as a reality, one that I believe is not just a potential but rather as an inevitability.

I see one consequence occurring. I think secession will go from a fantasy of the far-right to a blueprint for a new republic.
How can you default when you just print more money?

The problem then becomes inflation. The only thing preventing runaway inflation at this point is low interest rates.

There will be no callopse of the financial system until those that hold dollers view them as worthless. The biggest danger is losing the status as the worlds reserve currency.

If the rest of the world doesn't want to deal in dollars, then we will have a problem.
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Old 02-14-2013, 21:41   #3
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China stops devaluing their RMB and makes a push for it to replace US dollar as the world currency. China is buying huge sums of gold and stockpiling it. They are under-reporting how much gold they own now as well in order to strengthen their claim to world currency WHEN we default.

Then we are truly screwed.
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Old 02-14-2013, 21:48   #4
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We sell China West Virginia coal for their steel making processes. WV coal is extra special compared to that dirty Montana and Wyoming coal. However, that coal is good enough for Chinese power plants.

Germany also wants WV coal. They are shutting down all their nuclear power plants and are looking at the Hatfield and McCoy families to help them out.

Japan loves our beef. So does Italy. Switzerland imports about half their food.

We don't have to buy German or Japanese cars. Computer factories could be re-started here in the USA. We still have chemical plants. WE export gasoline to other countries.

The US is a lot more independent than many people think.

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Old 02-14-2013, 22:31   #5
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Most americans don't care. I've been asking around, at work and out and about. Some of the people have said they didn't know that we as a country carry debt.
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Old 02-14-2013, 22:41   #6
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We sell China West Virginia coal for their steel making processes. WV coal is extra special compared to that dirty Montana and Wyoming coal. However, that coal is good enough for Chinese power plants.

Germany also wants WV coal. They are shutting down all their nuclear power plants and are looking at the Hatfield and McCoy families to help them out.

Japan loves our beef. So does Italy. Switzerland imports about half their food.

We don't have to buy German or Japanese cars. Computer factories could be re-started here in the USA. We still have chemical plants. WE export gasoline to other countries.

The US is a lot more independent than many people think.
A lot of countries are starting to get their meat from NZ and other countries now though because they have less hormones and other crap.

We'll be "ok" until the rest of the world doesn't want the U.S dollar anymore. The chances of this happening will increase as the U.S. dollar becomes worth less. Which is happening. China will make a strong push for their currency. As said before, they hold a LOT if gold. Most of the world's product comes from China. At some point it is very likely that it will make sense for countries to use the Chinese currency.

Its not a doom or gloom situation but very well could be.
Something REALLY needs to be done about our spending.

Ironically, we always speak of Obama in relation to Nazi Germany. We can actually learn something about our finances from post-nazi era Germany though.
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Old 02-14-2013, 22:43   #7
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Most americans don't care. I've been asking around, at work and out and about. Some of the people have said they didn't know that we as a country carry debt.
This.
People just don't want to know. They don't think it will effect them.
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Old 02-14-2013, 23:37   #8
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What will happen when the US defaults on the national debt?
I've been wanting to ask Dr. Walter E. Williams this exact question for a few years now.
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Old 02-14-2013, 23:49   #9
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the US makes up about 35% of the world's consumption of consumer goods. We import so much from so many countries, including China, that they would have a harder economic time than we would if they cut off our credit.

Honestly, interest rates would go through the roof, driving more investment into the US. The Fed will probably go into quantative easing, devaluing the Dollar, making goods more expensive but debt repayment cheaper. Remember, inflation is good for the debtor and bad for the creditor.

There are 3 countries in the world that will never fail do to their consumptive power. Germany, China and the US. I would be more worried about a shift from the Petro-Dollar to a Petro-Euro, which will never hapen because of the relationship between euroean powers and Israel.
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Old 02-14-2013, 23:58   #10
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Best case scenario. No country will do business with the US, forcing the US to become economically and industrially self sufficient again. Tremendous internal strife as those on the dole can not be afforded a free income any longer. US ends the Fed, outlaws fractional reserve banking, and dissolves any acknowledgement of debt to the Fed.

Worst case scenario. China and lender countries demand payment in land, and will take it by force if necessary. Ground invasion of the US sparking a third world war.
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Old 02-15-2013, 00:05   #11
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... I would be more worried about a shift from the Petro-Dollar to a Petro-Euro, which will never hapen because of the relationship between euroean powers...
I know I cherry picked a piece of your post for the quote, and usually don't this way...

Part of the goal of the Euro was to replace the Dollar as the world currency. Why they were all so quick to jump into bed together with it, and why England still uses their own currency in addition to. (yea, we're friends, we're just over here so gotta do what they do, ya know.)

England has been like those that contribute to both political parties so they can stand with the winner and say 'I gave, was on your side'. Riiiight.

Look how well that's working out. Ironically the half-commitment of England will leave them in the best spot when the Euro collapses completely. Things may not be great for the Dollar, but they're a lot better then what the Euro is going through.

The Euro failed to establish itself as the world currency, replacing the dollar, because of a decided lack of stability individually, overlooked on a gang run for the prize.

The Euro was the best shot the world could muster to replace the Dollar. That wasn't it's only mission, sure, but definitely part of it. Whatever may happen, it'll be a while before something comes along to displace it.

The absence of a better alternative leaves the status quo.

Last edited by droidfire; 02-15-2013 at 00:05..
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Old 02-15-2013, 00:11   #12
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Best case scenario. No country will do business with the US, forcing the US to become economically and industrially self sufficient again. Tremendous internal strife as those on the dole can not be afforded a free income any longer. US ends the Fed, outlaws fractional reserve banking, and dissolves any acknowledgement of debt to the Fed.
I've been all about that happening anyways. It would do this country a heck of a lot of good.

It sucks that it would take a failure of such measure on our part as a nation to bring us back to something really worthy of being proud of, instead of living in the shadow of past glories.

Some of the stuff going on with this country is just shameful.
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Old 02-15-2013, 00:34   #13
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Originally Posted by rock_jock View Post
Serious thread.
Not a serious question. We are not going to default on our national debt. We'll print more money to service the debt, and deal with the resulting inflation.
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Old 02-15-2013, 00:35   #14
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There will be no callopse of the financial system until those that hold dollers view them as worthless. The biggest danger is losing the status as the worlds reserve currency.
It's crazy to think, but... as bad off as the US dollar is, every other currency is worse.

I'm sure that one day the US dollar will lose its status as the world's reserve currency, but it won't happen anytime soon.
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Old 02-15-2013, 00:35   #15
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China stops devaluing their RMB and makes a push for it to replace US dollar as the world currency.
Right now, they can't. We make too much stuff they need. This is a good bet for how it goes down in the future, though.
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Old 02-15-2013, 00:37   #16
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I would be more worried about a shift from the Petro-Dollar to a Petro-Euro, which will never hapen because of the relationship between euroean powers and Israel.
Less to do with that, and more to do with the structural problems that you get when you make different countries with different economic policy all get together into a currency union. The Euro is doomed to failure as soon as the Germans get tired of paying for it.
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Old 02-15-2013, 00:44   #17
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I've been all about that happening anyways. It would do this country a heck of a lot of good.

It sucks that it would take a failure of such measure on our part as a nation to bring us back to something really worthy of being proud of, instead of living in the shadow of past glories.

Some of the stuff going on with this country is just shameful.
I'm fond of the saying "Things have to get worse before they can get better."
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Old 02-15-2013, 00:51   #18
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to answer the original question, as if that will ever happen...

world war 3.

no seriously, if we ever look at the rest of the world and say "oops, we can't pay you back now. sorry". it will start a world war. multiple countries will gang up and invade us.

look at the scale. no matter how big or small money has always started some of the largest and ugliest feuds. the U.S. looking at the rest of the world and saying"tough ****, get over it." would be the biggest slap in the face ever heard round the world.
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Old 02-15-2013, 07:14   #19
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China, at least, has been quietly converting its Treasury Debt to real property stateside. Movie theater chain, hotel/motel chains, Chinese buffets, battery makers...


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Old 02-15-2013, 07:30   #20
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Biggest problem is it will freeze up the world economy.

The US dollar is to the world economy what oil is to your car's engine.

Imagine if the oil in 75% of the engines suddenly turned into re-fried beans.

But you know what -

people will still get up and milk the cows - deliver the mail - bake the bread - well maybe not deliver the mail but you know what I mean.

America has a screwed up government and our economy is also messed up - mostly because the powers that be try to control every thing - protect the people that make dumb decisions - provide for the people that are too lazy to provide for themselves. Can't let anyone feel much pain - even if they deserve it.

A "new" currency will be introduced - who ever is in charge will blame someone else - life will go on.

A sudden collapse may be better than a long slow stagnation and decline.

Would you rather be constipated for the next 50 years - or have a week of explosive bloody diarrhea?

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Old 02-15-2013, 07:41   #21
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Originally Posted by IQof1 View Post
China stops devaluing their RMB and makes a push for it to replace US dollar as the world currency. China is buying huge sums of gold and stockpiling it. They are under-reporting how much gold they own now as well in order to strengthen their claim to world currency WHEN we default.

Then we are truly screwed.
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China, at least, has been quietly converting its Treasury Debt to real property stateside. Movie theater chain, hotel/motel chains, Chinese buffets, battery makers...
China has been converting very large sums of foreign currency (mostly dollars of course) into... all things tangible.

Gold, silver, copper, iron, aluminum, coal, land and businesses in the U.S., Africa, and South America, high-tech/high-value machinery and equipment (which they then set about reverse-engineering and copying for use in their domestic markets), and on and on.

They are doing so as quietly and carefully as possible, in order to avoid further devaluation of THEIR dollar holdings.


The Chinese are in it for the long term, they have enough history as a people to understand the long view of world affairs while we remain preoccupied with the next fiscal quarter.
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Old 02-15-2013, 08:51   #22
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China has been converting very large sums of foreign currency (mostly dollars of course) into... all things tangible.

Gold, silver, copper, iron, aluminum, coal, land and businesses in the U.S., Africa, and South America, high-tech/high-value machinery and equipment (which they then set about reverse-engineering and copying for use in their domestic markets), and on and on.

They are doing so as quietly and carefully as possible, in order to avoid further devaluation of THEIR dollar holdings.


The Chinese are in it for the long term, they have enough history as a people to understand the long view of world affairs while we remain preoccupied with the next fiscal quarter.
Well said.
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Old 02-15-2013, 09:03   #23
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There will never be a day of "default" for the U.S. on its debt. The worst possible scenario is an Argentinian style economic crisis (which would certainly not be fun), but there will not be any invasions by foreign powers or descent into a Mad Max style anarchy and there definitely won't be an abolishment of the Federal Reserve.
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Old 02-15-2013, 11:01   #24
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Argentina... should give you a good idea.
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Old 02-15-2013, 11:23   #25
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China stops devaluing their RMB and makes a push for it to replace US dollar as the world currency. China is buying huge sums of gold and stockpiling it. They are under-reporting how much gold they own now as well in order to strengthen their claim to world currency WHEN we default.

Then we are truly screwed.
You can't eat Gold.....cut off wheat and corn to them. They'll need clean water soon also.
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