Both these things were designed to be so painful that congress would be forced to come to some sort of agreement, and yet they bit right through both of them without blinking. The sequester? Swallowed it with nary a gulp. Every single time congress has made an ultimatum to itself in the past few years, it has completely ignored it. I'm about to get slightly political, so excuse me. The problem is the precedent that it sets. Congress will probably put something together a few days or a week or so after it happens, and then everything will start humming along again as normal. If you'll allow me to guess, I'd say nothing bad, at least not right away. The US federal government borrows LOTS of money from a whole bunch of different sources, in many different ways, one of which is the sale of US Treasury bonds, which for the past 50 years or so, have been regarded far and wide as the safest investment on the face of this planet and probably a few others.Īs to the question of what happens when the US government reaches its debt ceiling and defaults on its financial obligations? I don't know. The worry is about the US government defaulting on its loans. Speaking from a position of absolutely no knowledge of the particulars of how the US federal debt system works, first I'd like to correct your question. And neither do you fucks who watch youtube videos about this shit. Ronnie has a beautiful belief and dedication to prosperity in America but he doesn't understand modern financial systems.
If the u s defaults on its debt full#
This article is straight from the 1% on Wall Street and in case you don't quite get it, they are not sleeping well.ĮDIT: The Ron Paul/"fractional reserve"/inflation hawks are deploying in full force. The entire world was monoglot and no cultures could interact outside their own language sphere. Imagine if the whole world woke up on debt limit day and found there were no bilingual people in the world. This is a properly terrifying comparison to make: American paper is basically the language of the financial system. Sometimes the US debt is perceived as so safe that investors buy bonds at such a low interest rate that they are LOSING MONEY on the deal and this means in effect that as far as the financial world is concerned, drumroll please:ĪMERICAN PAPER IS WORTH MORE THAN AMERICAN DOLLARS It is entirely conceivable North Korea owns American debt.
If the u s defaults on its debt free#
The US treasury paper constitutes the "risk free rate" of capital in the economy and guides borrowing and lending decisions in every single country, city, and bank in the entire world, Iran included. On a different, economic level of understanding, you should understand that money costs money, there is a COST OF CAPITAL in business and investment that reflects issues like business risk, time risk, information risk, etc. The ENTIRE financial system, Goldman Sachs, your local bank in Idaho and your local bank in Kuala Lampur, uses American debt as the benchmark investment upon which all other strategy is guided and all other decisions made. The expectation of full repayment makes US issued debt the safest financial instrument in the world on the scale of literally trillions of dollars. It does this by issuing Treasury paper, these aforementioned notes and bonds. The US has been borrowing money for its entire existence and has always paid every single cent back. The biggest manifestation of this rule of law, which produces investor faith in financial operations is the US Treasury Bill/Note/Bond. The United States remains the largest and one of the wealthiest economies on earth because the US federal government supports "rule of law" better than any other nation on earth (well in the last 40 or so years Europe has caught up but I digress). Such relatively complex financial tools demand a responsible and supportive legal system that helps to guarantee that when you loan someone money there is established legal recourse for getting it back. They help to distribute RISK across many financial actors instead of a few. These monetary instruments allow money to flow more freely and efficiently through markets (not stock markets, any market). The issuance of debt (bonds) and equity (stocks) is the basis of the financial system. WOAH WOAH WOAHHH It looks like almost no one here is financially literate and is just taking a stab at the question.Ī default is a BIG fucking deal.
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