On Friday the International Monetary Fund urged the United States to raise its federal debt ceiling to avert a default. Almost everyone takes it for granted that a failure to raise the debt ceiling will eventually force the United States to default on its Treasury debt.
The United States will reach its debt limit of $14.3 trillion by August 2. If Congress doesn’t raise it by then or shortly thereafter, the government would not be able to make its debt payments.
America is in serious financial trouble, and its economy is much more precarious than almost anyone realises. The debt collectors are no longer just on the horizon, they are at the door.
Also this week there have been concerns Greece will also default on its loans. That is the question weighing on the market right now as the in-fighting amongst Euro zone members appears to be dominating discussions.
Do you think america will default on its loans? And if it does what effect will it have on us here in Australia.
Explain to me what happens when the USA does default on its loans. Exactly what are the implications of this?
I am not talking about the Gold, silver and commodities go up implications. I am asking about the deep political, military, cultural, aid and economic tentacles that the USA has embedded throughout the globe. How will any of these change? Because of these deep interdependencies, the USA differs from all of the previous national hyperinflation examples given in that article.
If the US dollar crashes to ridiculously low levels, won't their manufacturing base become much cheaper? Many Aussies are already buying US goods and having them shipped to their doors because the prices are so darn cheap.
Most American products and manufacturing has moved to India, China and other developing countries because it is much cheaper to manufacture these goods. This is why everyone is confused why the USA isnt recovering..a big part of it is all their manufacting jobs have moved overseas. The same thing has happened here in Australia over the last 10 years.
If the U.S does default it will mean the country is bankrupt. That means all its banks will go bankrupt, there would be no cash in the ATM's. The people would use goods such as coffee or rice as barter as well as gold and silver. US housing would plummet again and it would be horrible.
China who holds a large part of Americas debt will not get there money back which means many chinese banks and companies may also fail.
With the two biggest economies down and out, it will effect us here in Australia. If china turns inwards it will not need out resources. We would certainly face recession at best.
But luckily this is all hypothetical…for now, but interesting to think about.
Some well respected economists are now saying it is mathematically impossible for the US to pay its debt and will have to default…how long they can string it along is another question all together.
What happens?
Would you loan money to someone with a history of defaulting? Whats the additional margin you might want on your interest rates?
I just find some amusement in the concept of a debt ceiling, where as soon as you approach it the automatic solution is to raise it some more.
I do have more thoughts, but coffee must come first.
No money in the ATM.. wow
That concept alone would bring the world to a standstill. Is this true.. I suddenly want to stuff my matress
the last major nation to default which was Argentina with $95bn-worth of public debt. They went through this exact process not so long ago.
so it has happened in the past… The people who held real assets and not paper money were the big winners in a massive wealth transfer.
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