What will the consequences be when amerika, inevitably, defaults

on the national debt? The Japanese own the biggest piece of us, the Chinese second, I think the Brits are next, so if we say sorry we don't have it what can they do?

happen. Treasury can simply print money.

just like Germany after WW1.. they'd be printing 1 billion dollar bills.

the treasury wouldn't do that.

Default of Government bonds especially US government bonds would cause
a huge economic crisis not only in America but worldwide. Treasury would rather fight inflation than total economic collapse.

Wouldn't have to be hyperinflation, but a healthyh dose of inflation is just what the doctor ordered to make the debts more manageable.

I am lost here. How does increasing interest rates and resulting debt accumulation make debt more manageable? :shrug: We already pay as much in debt expense (interest on our debt) as we do Defense every year.

will be felt immediately as all those offshored companies start charging us prices that reflect what we already owe them, plus they'll demand we pony up in advance. Everything from t shirts to car parts to puter guts to OIL will inflate drastically. We'll also be last on the list when corporations, frantic to keep their profits high, will sell domestic production offshore to achieve it.

Wages, of course, will not keep pace.

You can't starve the people at the bottom and expect anything good to come out of it. The consumer economy will collapse practically overnight, fueling more unemployment as retail outlets start to shut down. Banks, already nervous enough over unsecured consumer debt to double those minimum payments, will start trying to grab whatever they can. Mortgage companies will start getting nervous about anybody in a negative situation (house is worth less than the loan) and will foreclose.

This is going to be ugly, and there isn't much that can be done to stop it. The greedy have been in charge and have been stripmining the country for too long.

Just case I'd like to go out for lunch.

Our debt is in dollars. The Us Treasury has lots of printing presses. We would simply print money to pay.

This would cause all sorts of problems but technical default is not one of them.

that devalues the dollar by whatever percentage a billion represents and causes a corresponding amount of inflation?
If that is correct (please let me know) how would the creation of a domestic and international version of the dollar effect us? I know this is something that they have been trying to get through for many years.

I don't think we'll default on everything all at once. A lot of that money is owed to domestic lenders. We probably won't default on that. Secondly, these countries and the entire world need a healthy American economy for their own benefit. They probably will do a lot to make sure we don't default.

If the worst happens, however, the only things they can do are 1) never borrow from us again 2) borrow again but at a much higher interest rate and 3) sell all their stocks of US dollars in order to drive our currency down. I think the last option is unlikely as long as OPEC only accepts payment for oil in dollars. If that changes, however, it is a likely scenario.

huge and many tornados?

continued job losses?

who will have any money left after paying heating bills this winter?

will the newly printed empty money make a difference?

I'm also wondering if it would force us to return to self-reliance? If we can't afford a Chinese t-shirt, we'd have to make them here wouldn't we?

i really don't appreciate this kind of hysteria at a time when we need to be investing more in our infrastructure and recovery so, yeah, i'm going to continue to call people on it, you are doing real harm to real people

what will be the consequences when america defaults on its responsibility to usa citizens who are without homes, neighborhoods, and entire towns and cities right now this minute?

it really bothers me that people are more concerned about some "what if" that may but probably won't happen in 100 years than they are worried abt getting proper levees built to protect american citizens who are alive right now today

what's wrong w. you people?

i expect debt hysteria on the freeper and wingnut sites, it has been a hallmark of libertarian scare-mongering since at least the 1970s

it doesn't belong on a progressive website

it's truly disgraceful and proof that too many people don't think, they just absorb by osmosis any bit of noise they hear repeated by the wingnuts loudly and longly enough

jeez, you'd think howard ruff and doug "crisis investing" casey had crawled out of their bankruptcies and started posting on this site

3 months after 911 were you crying abt the debt or were you in favor of rebuilding new york, all 3 effing buildings that actually fell down?

big double standard here & i for am sick of it

I and the other posters who've been kind enough to reply are not being hysterical in any way. I merely posed a what if scenario because my background is science not economics and I don't really know what the consequences would be.
There is nothing in the post about letting the suffering continue and I'm pretty sure we would all like to see our nation repaired, something that the Dems have ignored for decades as well. You have assigned priorities that do not exist except, apparently, in your own mind.
It is refreshing to finally meet (sort of) the final arbiter of what is progressive, though I'm sorry we don't meet your expectations.
:crazy:

i'm going to call people on it

if those called on it are offended, i actually don't care, one or two threads on the matter would be one thing, multiple threads start to look fishy and somebody needs to say so instead of humoring the hysterics

hysteria over usa debt and unbalanced budget has been the rallying cry of the gop and the libertarians since the 1970s

it is not a progressive cause but a regressive one and it steals from those in need and it steals from investment in our infrastructure

i will continue to speak the truth as needed

you will not balance the budget on the backs of the poor and the displaced on my watch

... that we do have a problem of crisis proportions - "fixing" it on the backs of the poor is the last thing I want to do.

The fact is, the most likely scenario that will result if nothing serious is done is massive inflation, AND THAT WILL HURT THE POOR MORE THAN ANYONE ELSE.

.... well I'm not sure what brought THAT rant on, but as a country we ARE IN FACT facing a severe monetary crisis, and probably not in the very distant future.

I agree with the others here who say we won't "default" per se, we will inflate out of it. If you think that is a trivial problem with trivial consequences, I think you are sorely mistaken.

Just because ants are biting our legs doesn't mean we can safely ignore the hungry alligator 20 feet away.

What is the basis for your belief that "as a country we ARE IN FACT facing a severe monetary crisis, and probably not in the very distant future."?

We have an $8 trillion debt. We have an $11 trillion dollar economy, which is EVERY YEAR, why the debt is an accumulation over decades. We have over $24 trillion in total capitalization. This debt is not that high in proportion to the asset base.

Don't get me wrong, i don't like the "lower taxes but spend like a drunken sailor" policies any more than you. But, there is, in fact, NO evidence that we are facing a "severe monetary crisis" and it certainly is not a short term concern.
The Professor

us off. I'm talking beyond 9-11.

That bad.

Democrats will retake Congress in '06 and spending on the military will be reined in. (>$500B/year?!?!? Outrageous!).

Then we re-take the Presidency in '08. We fix social security simply be eliminating the taxable cap now at $90K. We balance the budget by reducing military spending, simply because we don't need to spend more than the rest of the world combined, and we'll put in place foreign policy that ceases to cause everyone in the world to hate us.

Budget balanced.
Social Security fixed.
Money left over to pay down the debt (which stimulates capital markets, just like in the Clinton years).
Money left over for badly needed social programs.

Problem solved. :)

:party:

go for the "soft on defense" wingnut line, as they have so many times before, if we make the needed DOD budget cuts. Also, unless the Dems can get a super majority in both houses and the Presidency, we can't undo the damage that's been done.

insulting the voter by calling him amerikan is always a good way to get started

but I'll merely address this one issue.

The other governments of the world are ALREADY planning to stop tying their economies to ONLY the U.S. Dollar. Many, many steps in this direction have ALREADY been taken.

China, and the Asian block, have begun to strengthen their trading ties, and are creating markets that will hang together in the event of a U.S. collapse.

Iran is starting their own Oil Bourse in March of 2006 in order to start trading oil futures in Euro (and possibly a basket of other) currencies. This is why the bush administration is looking to invade Iran BEFORE the oil bourse goes into effect.

The S.American countries are forming economic/trade allies of their own.

In fact, the whole world is preparing for a change in the dollar hegemony that we have enjoyed for lo these many decades.

To ignore that fact is to have your head in the sand about what other world leaders see happening in the U.S.

IF the Dems take back control and straighten things out, then this may be avoided for a period of time, and stability will slow things down. But now that the world has seen the dangers in having all their dollar eggs in the U.S. basket, things are going to change.

Yes, they're going to change as slowly as possible, so that chaos does not ensue. But the change is going to happen. Just like globalization has happened, and countries are getting smarter and smarter about how to survive, it will behoove citizens of this country to quit burying their heads in the sand, and realize it's a new world. Threads about this (like this one) are astute warnings (NOT "HYSTERIA") to those who will listen that it's time to start seeing our place in the world in different terms.

The America of yesterday is dead and gone, thanks to the economic policies of the conservatives (Clinton included) over the past 30 years. The American dream is something that only happens in your sleep these days. There are new ground rules, and Americans are still living by the old ones in their minds. It is past time we had more of these discussions.

:kick::kick::kick:

Because their currency was garbage because of failed economic policies at home. Dollarizing was a sign of weakness of their economies and the comparative strength of the US dollar.

There actually is a fair consensus on how to run the US economy. Did you notice that there were no big fights about the new head of the Fed? Why? Because there is a good consensus on how to run an economy by both democrats and repubs. Low inflation - Univ. of Chicago school has won the day.

BTW, it is good for America to have a dollar that is worth less. Our goods become cheaper and our manufacturing gets a shot in the arm. (It also encourages foreign tourism). The US has been trying to negotiate a soft landing with China a the last few years.

... against other currencies worries me a LOT LESS than paying 30% of Federal revenues on debt service.

8 trillion dollars is a lot. But for sure, that (falling dollar) only adds to the worries.

Many of us are concerned about the unprecedented deficits so why attack a poster for asking a legitimate question?

We can concentrate on more than one issue at a time.

Are you suggesting we plan to ignore social causes because we question the deficits? I'm confused with your obvious anger directed at this poster's honest question!

us to this sorry state? Were you a raygun democrat?
I don't see the victory that I'm snatching defeat from, I see things getting worse and worse, year after year, and when they back the screws off a little you say things are fine it doesn't hurt as much.
You still have not said anything constructive, or even coherent for that matter. I get it that you're angry, but I'm not sure why a question about one of the giant problems we're avoiding makes you think we want to balance the budget on the backs of the poor. I made no recommendations, I was simply trying to be educated by people that know more than I on this subject and have a certain amount of credibility with me as members of this community.
I refer to them (you?) as amerikans because I believe they no longer are Americans. They have no sense of what America is or is supposed to be, they seem eager to surrender their liberty to any tough talking POS that comes along.
If that pisses you off, well I'll just have to live with that.

"Don't cry for me Argentina. . ."

<<snip>>

Dollar devaluation, not yuan revaluation

Though referred to by the Bush administration as yuan revaluation, what Washington is begging Beijing for is dollar devaluation. Like the 1985 Plaza Accord, Washington is again asking one of its largest trade partners to allow the dollar to depreciate. However, instead of Japan, as was the case in 1985, the US is pushing China to allow the dollar to depreciate against the yuan. The Plaza Accord led to the eventual devaluation of the dollar by about 50% against other major currencies. There is strong reason to believe that what begins as dollar depreciation against the yuan will eventually become another Plaza-style dollar devaluation.

China's foreign exchange reserves, the second-largest in the world after Japan, are expected to reach nearly $750 billion by the end of 2005. These reserves are overwhelmingly invested in US treasury notes. Presumably, Beijing would be loath to take a large capital loss on its investment in these notes in the event of an exchange rate adjustment in China.

Because an exchange-rate adjustment would result from a policy change in Beijing, it is likely that any adjustment would be preceded by the rebalancing of China's foreign exchange reserves, and related investments, out of the US dollar into other currencies. This rebalancing could trigger the devaluation of the dollar against the euro and the yen, currencies which the People's Bank of China would be selling its dollar reserves for.

The rebalancing of reserves by the People's Bank of China could inspire similar reserve rebalancing among other central banks in Asia and the rest of the world, all of which have substantial holdings of US dollars and US treasury notes. By begging Beijing for a dollar devaluation, Washington is inadvertently laying the groundwork for a much larger devaluation of the dollar, higher inflation, higher interest rates, and slower economic growth in the US.

http://atimes01.atimes.com/atimes/China/GE13Ad02.html

discuss liberal/progressive ideas and solutions for bailing this country out of yet another right-wing republican financial mess.

why only let the wing-nuts at cato or aei or even freerepublic debate the economic problems we face?

and this is an issue that most likely will affect the poor more than any other socio-economic group, so liberals should definitely "own" this discussion.