What Happens If the US Defaults Next Week?

If you are going to use the specious analogy of a person's budget, at least use it correctly. Right now people are willing to lend to the US (we can still get mortgages, car loans, credit cards, etc). Presumably we are using this credit to build our country up so that in better times we can save and pay back (think student loans for a law degree). The problem with this situation is the last time things were good, we took a pay cut (the Bush tax cuts).

If we default and decide not to cover our loans, people will refuse to loan to us (look at people who were foreclosed, what happened to their credit scores). This situation would lead to our economy collapsing and likely carry over to the rest of the world. (this has no parallel in an individual's life except maybe if Bill Gates had run up crazy debts in the multibillions, but people kept loaning to him assuming he was loaded, and then decided not to pay which ruined the banks he had loans from because his loans were large enough)

At this point if we want to start to bring down our level of debt we need to save more. This means finding a higher paying job (raising taxes) and reducing our expenses (cutting spending).

Here's hoping we eliminate the idiotic debt ceiling and get our fiscal house in order without destroying our economy. (which both default and cutting $4 trillion would do)

just saying wrote:

Yours is a horribly simplistic look at taxes. Just look at the taxes on flights. Since the FAA is shut down they can't collect those taxes right now. What did airlines do? They raised prices to exactly the difference. So getting rid of the tax did nothing to the price paid by consumers, it was just a windfall to airline companies.

The airline tax issue is very short term issue. Everyone knows that the tax elimination is short term. If the tax was eliminated, competition would pull the price down by the amount of the tax. Competition is ruthless. A airline would decide to cut prices to get more business and eveyone would respond accordingly. By the way, airline prices came down significantly after deregulation in the 80s and have stay low in comparison to inflation. You came up with an interesting rebuttal and it was a nice try.

with something as public as this has been I would think that competition would have worked pretty quickly. you seem to think that it just hasn't had enough time to work its magic.

also we are getting a lot less from airlines now that they have been deregulated. so the price decrease reflects that aspect as well.

it will be interesting to see what happens to fares when taxes go back into effect. many observers seem to think that the fares won't change but the taxes will be added on top. we'll see if the magic of competition brings them back down, or if this has just been an excuse for an oligopoly to raise prices and deflect blame.

30 year fixed mortgage rates will go up 1% in a single day. Same for car loans. Money Market Funds will break the buck as hundreds of billions are withdrawn in a single day. Anarchy in the streets soon to follow. Congratulations, Tea Party - you got your way!!!

win, aka Tea Party

coach d wrote:

As has been mentioned by the Republican Leadership, the "Republican Brand" becomes toxic. Just like after the Great Depression, for a generation or two people will recognize what a bunch of irresponsible losers Republicans/Tea Party and such really are.

Which is why I'm not so sure now that Obama shouldn't just sit there and let the Republicans put the country into default that they get blamed for.

The worst injustice is to be guilty of the same thing you accuse someone else of.

Anisotropic Al wrote:

30 year fixed mortgage rates will go up 1% in a single day. Same for car loans. Money Market Funds will break the buck as hundreds of billions are withdrawn in a single day. Anarchy in the streets soon to follow. Congratulations, Tea Party - you got your way!!!

More misinformation by the loony left. Nothing will happen to "30 year FIXED mortgage rates". That's why they call them fixed stupid!

And 'anarchy' will follow? Please! We're you loony leftists worried about 'anarchy' in 2006 when EVERY democrat in the senate, including Obama, voted to NOT raise the debt ceiling?

SazHoo wrote:

More misinformation by the loony left. Nothing will happen to "30 year FIXED mortgage rates". That's why they call them fixed stupid!

And 'anarchy' will follow? Please! We're you loony leftists worried about 'anarchy' in 2006 when EVERY democrat in the senate, including Obama, voted to NOT raise the debt ceiling?

Um, first of all, NEW issues of 30 year FIXED mortgage rates could go up. Not the loans already established. You know people buy houses every day and that could get more expensive for them.

In 2006 the debt ceiling increase was easily passed so it doesn't matter how many votes in the minority were against it. They were just symbolic votes.

Now that the majority of votes are against raising the ceiling there are some real problems that would be created and uncertainty is not good.

The social security thing is up in the air.

Technically there is a two trillion dollar reserve for SS and part of the $14.3 T debt is money already owed to SS.

So they could issue bonds to raise cash and instantly pay that same amount to SS. The net effect is that the debt will still be $14.3 T and the SS reserve will shrink by the amount of cash raised.

So they could fund SS payments without raising the debt.

The problem is, this has never been done before and the mechanics of doing this process aren't in place.

But if they were desperate, they could find a way to get it done.

They could really ride the SS fund for a while without changing the total amount of US debt.

Bump.

Who else wants the US to default?

just saying wrote:

with something as public as this has been I would think that competition would have worked pretty quickly. you seem to think that it just hasn't had enough time to work its magic.

also we are getting a lot less from airlines now that they have been deregulated. so the price decrease reflects that aspect as well.

it will be interesting to see what happens to fares when taxes go back into effect. many observers seem to think that the fares won't change but the taxes will be added on top. we'll see if the magic of competition brings them back down, or if this has just been an excuse for an oligopoly to raise prices and deflect blame.

Yes... you are an idiot.

UsedToBeKnowItAll wrote:

However, if Geithner decides to pass on servicing the debt and pay other bills instead, then you will see some ugly shit.

Prioritizing bill payments may actually be in violation of the law. This story hasn't gotten much play yet, but basically, US law prohibits the Treasury from paying bills in any other order than when they come due.

I'd like to get a real legal opinion on this...my hunch is that in the face of default, this law may simply not be enforced. However, if bills were only to be paid as they come due, then, yes we would be facing an even greater economic catastrophe than we are currently contemplating.

WalterWalter wrote:

Bump.

Who else wants the US to default?

Let's put it this way. I hope the debt ceiling doesn't get raised. It's the only way to stop this reckless spending and out of control debt created by both parties.

Default will not happen. There's plenty of money to cover all necessary spending. A few goodie bags may have to be reliquished but the financial world will be better off knowing we have stopped the bleeding. Then maybe we can start to do what every responsible adult, every responsible state, every responsible business, etc does. Stay within their financial means. Dont buy toys you cant afford. Dont dream that money grows on trees. You know, grow up.

Looks like a default is coming on Tuesday. I'd like to see across the board spending cuts, entitlement raises cancelled, funding for US Genocide and Imperialism against Islam slashed to a bare mininmum.

Looks like a default is coming on Tuesday. I'd like to see across the board spending cuts, entitlement raises cancelled, funding for US Genocide and Imperialism against Islam slashed to a bare mininmum.

It's the greedy and rich right-wing party which has done in the United States economy. Obama is trying to clean up Georga Bush's mess but his GOP cronies are throwing hurdles in his direction so Obama and the Dems take the fall for the misdeeds of the right.

Solution is to heavily tax the wealthy, and usurp any of their ill-gotten fortunes and parachute buy-outs if they have been convicted in a court of law and use that to pay for the US deficit. Use the Enron's CEO money for example, he stole it so give it back to the people. Any ill-gotten money is to be returned to the defrauded and to the US treasury.

Roll taxes back to the Richard Nixon era, where the uber wealthy were taxed in the 50-70% tax bracket. Put constraints in place to off-set the economic loss of greedy US corporations that attempt to ship labor overseas, which also hurts our mercantile economy. Make them stay here. They are too greedy to stop working and have plenty of money to share, money they stole from milking the economy.

Any profiteer guilty of a crime or fraud which somehow damaged and defrauded the US economy should be stripped of all of their assets, and a significant percentage should be utilized to off-set the national deficit which they indirectly helped create.

Don't like it and want to set up shop overseas? Tough shit Sherlock, we should revoke your US citizenship.

The government has tried to appease and please Tea Party hacks for too long. F**k them. There are too many poor people and too few rich people and at some point the rich people will feel the wrath of the poor if they keep holding them down with their self-serving policies which have been so transparently exposed by Boehner and generations of greedy Republican elitists before him.

Power to the People, muthaf**kas.

Obama is no better than Wimp Bush. In 2009, Obama cooperated with Wimp Bush and continued Wimp Bush's slaughter of White Caucasian Muslims and White Semitic Muslims in the Gaza Strip. Lawyers preparing to file war crimes charges have stated that 3,000 White Muslims were murdered by Israel and the United States.

Black Flag wrote:

Obama is no better than Wimp Bush. In 2009, Obama cooperated with Wimp Bush and continued Wimp Bush's slaughter of White Caucasian Muslims and White Semitic Muslims in the Gaza Strip. Lawyers preparing to file war crimes charges have stated that 3,000 White Muslims were murdered by Israel and the United States.

This is false. Obama is exctricating himself out of a worthless excursion into Iraq and went where the criminal of the century is and got him.