In the book “The Mandibles: A Family , 2029-2047“, the US defaults on it’s national debt and all sorts of Bad Stuff happens. Its a very good book, in my opinion, except for the somewhat out-of-character ending.
Could the US actually default on it’s debt? What would happen? Well, here’s one limey’s interpretation:
The notion that a bankruptcy would kick off some type of Purge-like orgy of violence seems a bit dramatic. Crime go up? Sure. But unlike every other country that has gone through that sort of thing, there are enough people with guns in this country that a large part of the population would be quite a bit safer than the rest. The problem with this sort of thing, as seen in places like Venezuela and similar venues, is that only the bad guys have guns. In ‘Murica, it’s a different story. I’m not saying its going to be all sunshine and stun grenades, but stuff like you see on the news in those Third World places? Mmmmm…not so much. Except for our own little pockets of Third World-like places such as New Orleans, any major California city, Detroit, etc.
Could the US go bankrupt? I don’t know enough about economics to say. But I do know this – when the US catches a cold, every other country sneezes. Just from a self-interest standpoint, it would be in the best interest of a lot of the planet to make sure the US doesn’t have something like that happen. That might mean a degree of debt forgiveness, renegotiation of terms, loans from the World Bank, etc, etc. I’m fairly confident what it won’t mean is hyperinflating our way out of it.
But…one never knows, does one? Which is why Zero had food, guns, and silver. And, really, probably why you should too.
The problem is something like 2/3rds of our national debt is owed to Americans. If your mutual funds or retirement fund owns Treasuries (or if you own them directly) then the National debt is money owed to you. How big a haircut are you willing to take?
The US (or any nation) can simply repudiate any debt, especailly foreign debt (hello, China?). Simply say that no, we’re not going to honor it.
The ramifications are unknowable, but really, what would China (say) do? They are as dependent on US manufacturing to keep their citizens in check: Decide not to deal with us any more and what would happen to them is worse than that which would happen to US.
Other countries could decide to deal with us, or not…With much the same issues, although lesser magnitude.
Not suggesting it, and not saying it would be a trivial matter…
The bankers will gladly exchange the debt for land. Half the west is federal lands, how much you want to bet the bankers pick it up for pennies on the dollar?
Our national debt is 105% of GDP; the debt itself has doubled every decade for the last several decades. In this ‘booming’ economy we’re running $1.5 trillion annual deficits, so we’re definitely continuing apace. What’s our national deficit in a recession?
Its becoming harder and harder to conceal that we’re fundamentally insolvent. Our only saving grace is that the rest of the world is equally as profligate. The world economy, and democracy in general, is predicated on a growth model, on a planet of finite resources. Some forced re-structuring of arrangements will be necessitated.
If we continue to weaponize financial sanctions, use beggar-thy-neighbor policies, and/or engage in more elective war, the ultimate end road is the rest of the world will de-dollarize. The standard of living here in the States will change radically.
“I’m fairly confident what it won’t mean is hyperinflating our way out of it.”
As the 14th amendment specifically prohibits the U.S. from defaulting on its debt, I honestly don’t know what other avenue we have than hyperinflation. Debts shall be repaid.
The rational answer is to radically cut expenditures, but does anyone seriously see that happening? Our last grasp at that option was (ironically) at the end of Clinton’s administration when we briefly balanced the budget & had a (very modest) theoretical surplus.
Our debt growth is now literally exponential. Doubled under Bush, quadrupled under O’Bama,, and is on pace to octuple under Trump.
How long can we keep these “plates spinning”? Dunno. Clearly longer than I would have ever imagined. Maybe 20 more years? I’ll probably be compost by then, but I hate to imagine what my kids/grandkids will have to go through. Won’t be anything good, I suspect.
Aside from establishing a self-sufficient homestead, I guess I’ll just keep ‘stacking’. $20+ ASEs are still pretty cheap by my math.
Cheers.
“When the US sneezes, the world catches cold” is rather outdated, and is frankly embarrassing in its hubris. Russia exports more wheat than we do, so I wouldn’t call us The World’s Breadbasket any more. No one is buying NEW Treasury bonds any more ( the PetroDollar is dying, fast and hard ). Without fracking we would be back to importing 70% of our oil ( and fracking isn’t even oil, per se ). World trade is down drastically, already, so China has overproduction issues. This was prior to any trade war. I’m not saying I’d rather be anywhere else. Just saying, don’t lie to yourself and expect good outcomes.
Consider the source,wearing glasses and a british accent don’t make someone intelligent or informed. Whoever wrote this had little understanding of the subject and got very little right. Issues of a reserve currency failing usually happen during wartime or internal unrest from the precursors of the main action,bombs and land seizures will probably go hand in hand with hyperinflation/hypertaxation before a reset. You might try reading “Economics in one lesson” or what happened in occupied Germany/Japan after WWII.
Funny, isn’t it? Whenever it’s time for our betters to condescend to us, they trot out the British accent.
He could read the ingredients off a dog-food can, and come off like a genius.
” But I do know this – when the US catches a cold, every other country sneezes.”
Not as much as in the past and American influence is being reduced more and more in the world as time goes by.
https://foreignpolicy.com/2019/08/09/america-ignored-trump-mediate-kashmir-dispute/