Of course! We should *default* on the public debt. Here's why:

[MannyGoldstein]

Struck me like a ton of bricks today: the Very Serious Adults who are always trying to give my money to the wealthiest are telling me that defaulting on our debt would be the worst possible thing we can do. D'oh! If that crowd says it's awful, in all likelihood it's the best thing we could do, no?

So, as always, I checked for precedents. Turns out Argentina defaulted on their debt at the end of 2001. How &%$#ing horrible was it?

http://www.indexmundi.com/g/g.aspx?c=ar&v=74">Unemployment immediately plummeted, and has dropped from 25% to 8%

http://www.indexmundi.com/g/g.aspx?v=69&c=ar&l=en">Poverty rate immediately plummeted, and has dropped from 60% to 23%

Looks like things worked out pretty well for the 99%. Probably sucked for the 1%.

Our own economy is currently a catastrophe. http://www.shadowstats.com/alternate_data/unemployment-charts">Real unemployment is more than 15% and rising at a good clip.

Right now we have a choice. We can be "hostaged" by Republicans into further savaging the 99%, and we'll keep getting savaged periodically whenever any other government business needs to get done. Or we can default, get it over with, clean ourselves off, and move on. Particularly given the teeth-gnashing of the Very Serious Adults, I'm thinking that latter option is far preferable.

Anyone with facts to confirm or refute, please weigh in.

[panader0]

1. Iff the government defaults

can I default on my credit card bill too?
You've raised a serious question.

[ElboRuum]

5. There's a saying...

If you owe the bank a little, they own you.
If you owe the bank a lot, you own them.

[Fearless]

68. You could to the same effect... your credit rating would be screwed.

The company holding the bill will likely try to get something from you... a pound of flesh perhaps... just like our lender nations will... ahem... China... ahem...

[FreakinDJ]

2. The only looser is the Wall St Banks and their Global Operations

That is who is pushing the Whole Debt Reduction meme

[MannyGoldstein]

3. This might be our best chance to turn the tide.

How much worse can it be? And it might be a hell of a lot better.

[FreakinDJ]

16. It is all about the Wall St Banks

I was researching this the other night wanting to post an OpEd here at DU. I knew some thing had to ne going on the EU's austerity measures and now USA's Entitlement Cuts. What I found was European and Wall St banks are fighting to position theirself as the World's Banking Leaders

[MannyGoldstein]

21. So your best guess is that default's the way to go? nt

[FreakinDJ]

43. They should "Share the Burden" at least

Yes keeping the Dollar as the World's Trading currency does have its advantages - but lets face it - We the Middle Class will never see 1 red nickle of the massive profits the Wall St Banks make from that distinction

[RebelOne]

7. It is the only loser, not looser. Sorry, but that error drives me crazy. n/t

[Blue-Jay]

10. Don't be rediculous.

(That's the one that sets my teeth on edge for whatever reason.)

[FreakinDJ]

18. Sorry guys - this shit gets me sideways

[Blue-Jay]

58. No apology necessary. Not at all.

I got the gist of your post, and that's all that matters.

:pals:

[SmileyRose]

84. Which reminds me.

why oh why doesn't spell check work in the "subject" box.

I'm a complete idiot without spell check. Well, OK, I'm complete idiot with it too but still. :)

[Sheepshank]

97. spell checker does work for me in the subject box

but there wasn't a typo...it doesn't check for grammar or syntax.

I too got the gist of the comment with the word spelled just the way it was spelled.

From the typo queen (who has yet to have someone make fun of errors....my thanks to those who know my intent with making me feel dumb).

[Sheepshank]

98. self delete

[Curmudgeoness]

113. Spell check doesn't work if the wrong word is still a word.

And looser is a word, although the wrong one. As in: Look, my clothes are looser since I lost all that weight! Yeah, well I can dream.

[coalition_unwilling]

107. Wrong. Many retirees like my father own U.S. treasuries (or bond mutual

funds that are concentrated in U.S. debt). They would be massively damaged by a general U.S. default.

[napi21]

4. I don't know anything about Argentina, but I don't believe it demonstrates

the outcome here in the US. The wealthy would not suffer because they havee little to no debt. Interest rates would rise dramatically thereby finally killing an already very sick housing industry. the National Debt that so many keep crying about would rise dramatically because of the rise in interest rates. Unemployment would explode because of the employers having to cut to be able to afford the interest on their loans, and on and on. I see absolutely NO positive aspect to a default. NONE!

[MannyGoldstein]

6. Then why did it help Argentina so much?

And why are the 1% here so afraid of it?

[Go2Peace]

39. Not the same for too many reasons

Our entire economy revolves around the psychological value of the dollar. Our industry is far more anemic and we make far less of what we consume then Argentina during their collapse.

I have relatives who lived through the collapse of the Soviet Union. One thing all my Russian relatives and friends here agree on: A collapse here would be far more destructive than the one they had. Why? Because houses were not bought on credit and paid month to month and families were close and often lived together. I would imagine the same in Argentina.

When the collapse happened most still had a roof over their heads. So they just needed to find enough work for food. Medical was free. Mass transit remained cheap through the collapse.

In the US we are almost all tied to a house payment or rent. So massive homelessness. The dollar collapse would send inflation skyrocketing. Food is now a GLOBAL market and we get it "wholesale" due to the dollar. Our wonderful corporations will sell that food to the highest bidder even while our people starve. Our government will have to keep up the military because the world will be even more dangerous when we lose our heavy influence the dollar gives us. Our people earnestly believe they only have to help themselves, not others... that alone would change the dynamics here.

Granted, some of those factors could change, such as there might be enough pressure that the government will not protect the landlord's rights, but don't think for a minute you can compare.

[MannyGoldstein]

44. Skyrocketing inflation would allow mortgages and other debts to be paid off

Hmmm...

[napi21]

59. Why do you say THAT? the closest I came to severe inflation was back during the last year of Jimmy

Carter. Mtg. interest rates were over 18%! The only good thing I can recall is my mother was retired and had a small amt. of $$ in ira's. She loved it because she was getting 11% int. Everything else went to hell!

[Hugabear]

77. The wealthy have no debt?

LOL - the wealthy have PLENTY of debt. After all, they don't get rich by spending their own money. The wealthy are constantly borrowing money, and it's usually easier for them to borrow money because they're wealthy.

[flamingdem]

101. +100 This is the correct answer, defaulting will wreck the economy and increase rates nt

[AverageJoe90]

8. Sounds really good, but.......

There is a risk something could happen to the president who tries it...........

[MannyGoldstein]

9. What - he'll have to share some sacrifice himself for a change?

Feh.

[dionysus]

15. with the situation this country is in, you really want to trash our ability to borrow money?

you'll see some real austerity then.

[MannyGoldstein]

20. Will it be worse than what he and the Republicans are planning to do?

Things now are awful, and getting worse.

[dionysus]

22. yes. nt

[MannyGoldstein]

23. Can you point to an example where it made things worse?

To counter my example where it helped a lot of people?

[Go2Peace]

45. See my post #39

Mandy, you are usually right on, but on this you are wrong. It will not be anything like argentina here.

[MannyGoldstein]

47. You may be right

But seeing an example where it made things worse would be helpful.

[SammyWinstonJack]

46. LOL!

:evilgrin:

[dionysus]

11. .

:spray:

[LooseWilly]

12. Interesting question.

If the debt is Treasury Bonds, then all the investors who bought them will suddenly stop getting payment on them. That would be... I'm not sure. Investors, investment banks trying to hedge risk with "safe" investments, Chinese banks and Saudi banks also seeking to hedge risk, individual investors looking for tax-free "safe" investments, 401K funds...

So what happens if they all find that they can't redeem the bonds and collect their money? They lose money.

401K funds would likely take a hit. Retirement/pension funds too. Banks. Foreign banks. Wealthy capital portfolio jugglers.

:shrug:

Meanwhile, the government would suddenly be out from under all the interest expenses of finance charges related to debt. There'd be money to "unfreeze" federal employee wages, make payments to states to provide for services facing cuts, investments in... lots of stuff and programs. With the renewed spending would, potentially, come a return of jobs, and more business for businesses, and then more jobs...

If the Government then decided to go with a National Bank into which to deposit all government revenues, and which could then lend the money back to the government at 0% interest... then there would be almost no need to shoulder the burden of the debt interest any more.

Since the default would likely cause all those pissed off investors to never buy Treasury Bonds ever again, interest on any such bonds would be insanely high, to draw in those who might be willing to take the chance... though, if there's a National Bank that's lending at 0% interest—who cares?

There're some guesses that sound logical... ;)

[FirstLight]

27. that may be

the clearest explanation i've heard in a while...and i will be the first to admit that finance and bonds and such are far beyond my knowledge...


however, here's my question.
if the only reason they are wanting to continue to run on endless debt is because of hedge finds and financing their WAR machine...then i am all for a default.
screw it, if the shit is hitting the fan for us anyway, wouldn't it be best to just pull the rug out from under the fat cats now and get it over with..?
.then maybe we can take back some of our own dignity, and make some NEW rules...

[LooseWilly]

52. To be honest, I don't know.

The reason the explanation is clear is because my understanding is so vague that it isn't cluttered with pesky details.

The fear seems to be interest rates spiking. There is talk of businesses and the real estate market facing some sort of apocalypse.

I can only assume that all businesses take out loans to pay payroll—at least that's the shape of the argument that interest rate hikes for businesses would be apocalyptic. I, personally, am not convinced. Big corporations are sitting on piles of cash. If they are financing payroll with loans it can only be because they judge that interest rates are currently so low that it is a sound investment to use their money to invest elsewhere, while using low-interest loan money to cover payroll. A spike in interest rates would simply lead them to re-allocate their funds back to covering expenses like payroll.

As for the threat to the housing market... as far as I can tell it's cratered already. The only people who are getting credit to finance home loans currently, from what I'm hearing and reading, are those who are so wealthy that a few extra percent on the interest rate might well not make any difference in decisions about whether or not to buy. Besides—if an interest rate spike craters the market some more, then maybe the market will have to "adjust", in the form of house prices falling. This may be a pants-wetting prospect for the middle management class who's invested much of their wealth into real estate, but for those of us who will never be able to afford to pay the inflated prices in the current market (I'm in CA)... it's not so scary.

I leave it to others to decide how terrified they are of the prospect.

The reason, as I see it, that they want to push austerity is that "they" are banking interests who want less of the government money to go to people so that they can be sure that they will be paid back in full with interest, before the debt gets so large that they start to get nervous about ... the possibility of default.

(I've also read some interesting articles about how new money is printed by means of the Treasury advising the Fed to have member banks add numbers to an account—and the "created" dollars are then leant to the Federal Government, which has to pay it back plus interest. Thus, every new dollar "printed" comes with a fee which is charged by the bank that printed it for the government, as well as the obligation to pay it back—the debt of the full amount plus interest on the government's books.)

There are, however, so many financial and bundling and so on such-like games played with the money to try to squeeze every last micro-cent of productivity out of it, or con anyone who might try to keep track of it, that I'm sure my grasp and explanation are barely superficial.

[Cant trust em]

13. We shouldn't just look at a set of outcomes and think that the situation would be replicable

There are probably thousands of reasons that the US economy and the Argentine economy are dissimilar. Before we jump to any conclusions we should take a serious look at what Argentina did and what their unique situation was. We shouldn't just look at a couple of line graphs think that their experience is replicable.

You might want to check out this paper I found if you're interested.

http://www.cepr.net/index.php/publications/reports/argentinas-economic-recovery-policy-choices-and-implications/

[MannyGoldstein]

19. At least it clearly demonstrates that it *might* be a huge improvement

Are there any instances where it made things worse?

[Cant trust em]

24. Russia in 1998

I got this from the wikipedia page.

Russian inflation in 1998 reached 84 percent and welfare costs grew considerably. Many banks, including Inkombank, Oneximbank and Tokobank, were closed down as a result of the crisis. Prices for almost all Russian food items had gone up by almost 100%, while imports had quadrupled in price. Many citizens were stocking up for bad times and throughout the country shop shelves were being emptied, leaving a shortage of even the most basic items, such as vegetable oil, sugar or washing powder. The crisis has reduced demand for food and lowered food consumption, because substantial depreciation of the ruble significantly raises domestic prices for food stuffs. The crisis also increased social tension. The middle class that was already forming by that time had some hope for stability. The confidence of crisis prevention ceased to exist as millions of people lost their life savings from the bank closures. On 7 October that year, demonstrations were held in many cities: around 100,000 took to the streets in Moscow, In Vladivostok 4,000, in Krasnoyarsk 3,000 and in Yekaterinburg 6,000. Defence Minister Igor Sergeyev cancelled his scheduled visit to Greece in the first week of October, in order to be at hand should matters get out of control. Similarly select military units were placed in a state of readiness. On 20 October, President Boris Yel’tsin also signed a presidential decree barring "mass protests" in Moscow between the hours of 10 pm and 7 a.m.and limiting them to a maximum of five days.

This is just from 5 minutes of googling. There is probably better and more comprehensive information on other countries and their experiences. I'm still reading the CEPR paper on the Argentine default.

[MannyGoldstein]

26. Unemployment and poverty rate have HALVED since their default:

http://www.indexmundi.com/g/g.aspx?v=74&c=rs&l=en
http://www.indexmundi.com/g/g.aspx?v=69&c=rs&l=en

Thanks for the tip! Any others that you can find?

[Cant trust em]

32. Or maybe it had something to do with oil production.

http://www.indexmundi.com/g/g.aspx?v=88&c=rs&l=en

The point here is that it's not just to look at a time series graph and have that explain the one causal effect that we care about. Debt may be one of the factors that led to the Argentine or Russian recovery, but you can't tell just by seeing that their poverty rate went down after they defaulted. You might really have something here, but there really needs to be a lot more research into this.

[MannyGoldstein]

40. But can you give an example where things got worse?

Argentina isn't a huge oil economy and things improved after they defaulted, too.

I'd say that we certainly don't seem to be able to prove that defaulting is a catastrophe. We do know that continuing the status quo in the US *is* a catastrophe.

[Cant trust em]

80. Things got worse in Russia. It just depends on how long your term is.

Does defaulting mean that the country ceases to exist and all countries become a failed state? If that's the case, then no it has not been catastrophic. Then what we're currently facing in the US isn't catastrophic either.

Or is it really difficult for a few years and then the countries find a different way to rebound? The factors of recovery could be completely independent from the default.

Also, I'm not an economic historian. The fact that I can't spend 5 minutes googling sovereign debt crises and find an example that is sufficiently awful doesn't prove your point. A lack of evidence doesn't make something true. This whole thread is fueled by logical fallacies. As much as we can't prove that default may fit your definition of catastrophe, we certainly can't prove that it is an economic cure-all either.

[Go2Peace]

55. That is not due to the default. Ukraine has a 4.5% unemployment rate but very high poverty

The reason Russia and Ukraine have lower unemployment is due to the fact they are still developing in a world where many consumers make more money. Russia is ok right now almost soley due to oil. Ukraine is benefitting due to a very low rate of exchange to the dollar, but at the price of heavy poverty.

That is the trouble with trying to take some statistics and make a general case with them.

I wish what you are saying was true, but I am afraid we would see far worse.

[MannyGoldstein]

56. But certainly neither Russia nor Argentina experienced catastrophe because of the default

Any chance at all that default in our case might not be so awful?

[Go2Peace]

48. See my post #39. Very different circumstances. It will be hell here compared to there

[unblock]

14. yeah, and if you cut your dick off, you can get an implant that will be bigger and longer.

:dunce:

[dionysus]

17. you win the thread.

[Dept of Beer]

34. How can you ordain a winner?

[dionysus]

115. it's a DU catch phrase, rookie, it doesn't really mean anything.

[GrantDem]

25. FTW!

:rofl:

[Unvanguard]

31. Amputation is actually a decent analogy.

With all due respect to the OP, the argument this thread makes is rather like saying, "That guy got his leg amputated, and that kept him from dying; shouldn't everyone get their legs amputated?"

[MannyGoldstein]

60. A gangrenous leg was amputated, and the patient's doing great now

What shall we do with our own gangrenous leg?

[Unvanguard]

65. The difference is that we don't have a gangrenous leg.

We are not in a fiscal crisis. We are in a political crisis brought about by the brinkmanship of the Republicans. We can pay back our debt. To the extent that we have a long-term deficit problem (which is not the same as a debt problem), defaulting would make it worse, not better.

[MannyGoldstein]

69. We have an epic economic crisis

Real unemployment of more than 15% and growing. Cutting Social Security will put even millions more into poverty over the next decade.

There's no way to fix it right now, with both parties champing at the bit to grab even more from the 99% to give to the 1%.

[Unvanguard]

72. An epic economic crisis that has nothing to do with our debt.

And that will be made much worse, not better, by defaulting.

If we do default, we will undergo massive austerity. Don't imagine that there won't be cuts. There will be, when nobody will lend us money at anything but exorbitant interest rates. This is one of several reasons that the economy will suffer. The massive deficit spending that has been going on will have to be reduced really massively really fast. The long-term deficits that Social Security cuts are meant to forestall will become even more unsustainable than they are now. And there's no reason to believe that the sane alternative to screwing over the elderly and the poor--increasing revenues by raising taxes--will appeal any more to the dangerous ideologues in the Republican Party than it does now.

[MannyGoldstein]

73. True, and false

It has nothing to do with our debt - except that's what the crazies are using it to hold us hostage.

And in all cases that I've seen, economies improved massively after defaulting, so I'm not seeing evidence that it's definitely a bad thing to do (unless you're a banker).

[Unvanguard]

75. That's because countries generally only default when they have no alternative.

Which usually means they are in a deep fiscal mess beforehand, and investors already don't trust them to pay back their debt, so they have little to lose. We are not, as I've said already, in a fiscal mess, at least not in the short term (as Paul Krugman has been telling us as loudly as he possibly can for the past two years.) We are in an economic mess, but that really doesn't have anything to do with our government budget.

You are applying the lessons of Argentina far beyond their rightful scope. As I said earlier, it is akin to saying that because some people need to lose a leg for the sake of their health, everyone (or everyone with a serious health problem of any sort) should lose a leg. The real crisis we face with respect to default is a political crisis: we face a non-trivial risk of undergoing default not out of fiscal necessity, but out of political dysfunction. That is a very serious problem, that has probably already had substantial negative economic consequences, and we need accordingly to take it seriously, and electorally punish those responsible.

[unblock]

93. except that in this case the "gangrenous leg" isn't an innocently incurred massive debt

first, our ability to pay down the debt is massively exaggerated. merely returning to sane tax levels would pretty much do it, even if we didn't touch spending.

second, the irresponsible attitudes and institutions that ARE responsible for the debt would remain. if we were to default on the debt, do you think for one minute that congress would pass balanced budgets? that military spending would be kept in check? that tax levels would go back up to responsible levels?

hardly. we may have a "gangrenous leg", but we're talking about cutting off something other than that gangrenous leg.

[TreasonousBastard]

28. Well...

They only owed a few hundred billion and the IMF bailed them out-- hardly the sort of thing that would happen here.

[MilesColtrane]

92. Yep.

Then there's the quandary of what exactly would the IMF use to bail us out if the dollar collapses.

There's only about 850 billion Euros in circulation, and the EU has their own problems right now.

[Unvanguard]

29. Argentina was in a crisis like Greece's. We aren't.

They took a bad option to get out of a worse situation. The US defaulting would be taking a bad option to make a bad situation a whole lot worse. There is no policy reason to do it; it would massively worsen our fiscal situation (because no one would lend to us) and it would deal a shock to the world financial system that would throw both us and the rest of the world into another even worse recession.

We can afford to pay off our debts. We can't afford to suggest to the world that we can't pay our debts--unless we want to put deficit spending off the table forever, which is bad policy.

[girl gone mad]

78. There's some truth in what you say, but we don't need anyone to lend to us.

We have a sovereign currency. Our government doesn't need to borrow to spend.

[Unvanguard]

81. If it wants to avoid really high inflation, yes, it does.

And inflation is just an extremely regressive tax.

[westerebus]

30. The world's reserve currency.

That may pose a slight problem not only for the USA but the rest of the planet as well.

When Argentina defaulted what happened to the price of oil? Nothing.

Try defaulting here and you and I and the rest of the country will pay dearly.

Besides there is no reason for the USA to default.

[SoutherDem]

33. Interesting Thought Experiment

But, I can't work it through to a satisfactory conclusion. Yes, the 1% would be hurt greatly, but it seem to me the 99% would also suffer. I see even a short term default bringing extremely high interest rates, default of much consumer credit and thus in effect the end of credit, maybe for all. We would possibly become a cash only society, this would favor those who live paycheck to paycheck simply because they are use to it, if they are still getting a paycheck. I can't see an improvement to the economy but rather a complete collapse, our economy would "reset". It may level the playing field some, but Nuclear War would also. I understand the notion that since the 1% fear a default it must be good for the 99% simply because usually that is true. I truly respect those of you who think default is what we need, I just don't agree.

[pa28]

35. I don't understand the mechanism. You have more expertise so maybe you can shed light.

IMO the only way you could default would be to have a constitutional amendment making it legal. Secondly you could have the federal reserve take debt on their balance sheet and have them fold. Thirdly there could be some combination.

As for the fed option go look at the regional fed banks and check out their board of directors (a good indication of exactly who their major stockholders are). You'll find their board almost always consists of the largest banks in that district. They won't go along with option #2. Our sovereign currency is not as sovereign as we'd like to believe.

[unkachuck]

36. K&R....n/t

[unkachuck]

37. K&R....n/t

[trackfan]

38. As things stand now, the worst that could happen to me, with no default,

is that I end up living on the streets. If we default on the debt, the same thing applies. I believe that the chances of me ending up living on the streets are somewhat higher with no default than they would be with a default. I see little chance of me getting a job in either case. Therefore, I favor a default.

[Go2Peace]

49. Good luck with food friend... Price of food is driven by the dollar

If the dollar collapsed food will skyrocket and be in shortage as there is plenty of global demand

[trackfan]

53. If the dollar collapsed, debt would be destroyed, which would solve a lot of problems

for a lot of people, statistically.

[Taverner]

41. I have no problem with defaulting

[TheKentuckian]

42. I think for it to work we'd have to drop out of the game.

I'm fine with that, we have enough people and resources to have a sustainable economy.

[Go2Peace]

51. Our country is societally pathologically antisocial ("independent"). We will not "come together"

until after a period where most of the population fights for resources. We are not well equipped by our history and it would not be a pleasant transition. Though we may not have much choice but to learn the hard way.

[DeSwiss]

50. Not only default but tell the banksters to go take a flying leap!

- Capitalism is CANCER. And the only way to be certain we're rid of it, is to cut it out......

K&R

''Ownership" of physical entities by man is untenable in natural law and inherently obstructive to evolution
and realization of the comprehensive emancipation of man.... Only one's own personality and life are ownable.''

~ Richard Buckminster Fuller ~

''I don't understand why we have to pay to live on the planet we were born on. I mean it's such a simple question. But can
anyone answer that? Why does anyone have to pay to live on the planet they were born on? Ask yourself that question? And
who are we actually paying for the privilege to live here? Who decided this? Who made "them" the boss? Who put "them" in-charge?''

~ Alex Collier ~

[Marr]

54. You know what makes this whole thing so hilarious?

If defaulting on the debt really would result in the economic armageddon that's being claimed, then big business has more to lose than anyone, and it will NEVER be allowed to happen. Big business is essentially holding a pop gun to it's own head and telling the rest of us to do as it says or the hostage will die.

It's a ridiculous, phony threat, and it's beyond absurd that they're using it to sell cuts to Social Security.

[MannyGoldstein]

57. Here's the video?

http://www.youtube.com/watch?v=upvZdVK913I starting at 2:40.

[whosinpower]

63. Wall street would BY FAR feel the most pain

The global economy would collapse....but.....that is not the end, but rather a new beginning.

Once a person divests themselves of fear of the unknown - which would be if the US defaulted, you take away their primary tool of control.

But - I feel we are avoiding the real question. Why is money worth anything at all? It is an artifical construct of value, that we blithely spend our whole lives chasing after. And others control its creation and destruction - and by doing so - they enslave us.

Would it be so bad to "do big things" such as re engineering our society as one without money. I know - it is almost unthinkable - isn't it? The bigness of it is so large, so encompassing of everything we do, and how we live, what we build our lives around, how and what we value - it is a blank slate to ponder.

Getting rid of money is like destroying a God.

And that is what they fear the most.

[jaxx]

61. I can't believe this.

I just freakin can't believe it.

[MannyGoldstein]

62. Yes, we understand your feelings: and we await your evidence

showing the folly of the argument.

[jaxx]

64. Read what was already posted about Russia and Argentina.

It's madness.

[whosinpower]

66. Neither Argentina or Russia held one thing that the US has

The US greenback is still the preferred global trade currency. Even as it loses ground - other suffer far more instability.

No - US creditors will want the greenback to maintain its global dominence for no other reason than they hold so darned many of them.

The US will not go the way of Argentina or Russia. This will be new, unprecidented.

[jaxx]

67. It's insanity to think we would get off unscathed.

[MannyGoldstein]

71. Unscathed is not the issue, instead it's...

what sucks less.

We're power-fucked with the status quo. Imagine: real unemployment over 15%, and we have a "Democratic" President who's hell-bent on implementing policies that have always led to even higher unemployment. It's astonishing.

[whosinpower]

74. I did not say that

But you were using Argentina and Russia as examples - and I simply pointed out where there are huge differences.

It would not be the same - but it would not be a cakewalk either.

However, it could be that the faith in the US treasury would persevere far more resiliantly than those doomsdayers predict. We simply do not know. It is unprecedented.

[rdking647]

85. if we default

we wont be the worlds reserve currency anymore.
people will start using teh swiss franc or gold or some other currency

[whosinpower]

111. That is an unknown unknowable

Look - this question really comes down to one thing - confidence.

If the world has confidence in the following statement - "The faith and credit of the United states shall not be questioned", - then even if Congress dicked around, as they ARE, then the US greenback would still retain its dominence.

CONGRESS IS UNDERMINING THAT CONFIDENCE.

The euro is faring worse than the greenback - and gold is not being used as a currency so much as a safe haven.

[MannyGoldstein]

70. You just made my point - in both cases, things got much better

after defaulting.

Read.

Learn.

[defendandprotect]

76. Thom Hartman was talking about this the other day ... evidently....

if I understood his correctly -- and it's late at night so don't take it verbatim --

but he said we couldn't default because our creditors aren't mainly banks -- they're

nations --

and of course the Social Security money invested in Treasury notes which the elites

who used the yearly $250 billion Social Security surplus every year as a slush fund don't

want to repay!!

Of course, I'm sure a way could be found -- if anyone wanted to find it!! :)




How come MIC budget -- $649 billion -- didn't break the bank?

How come the 10 year wars didn't -- We're paying $1,000 a gallon to KBR in Iraq for gasoline --

which would keep a helicopter in the air about a minute!

Extending Tax cuts on rich $120 BILLION didn't --

How much to RCC "faith based" organizations -- last I heard that was more than $500 billion?

Pass MEDICARE FOR ALL would save the government money and create 2.3 million jobs --

Pass a new STIMULUS which would actually create jobs directly and put Americans back to work!!

[MilesColtrane]

79. Your proposal is nuttier than squirrel shit.

The dollar, the world's leading reserve currency, would collapse.

Weimar Republic-like hyperinflation means the purchasing power in savings is wiped out. All that cheap Chinese stuff at WalMart is no longer affordable. $60 worth of gas will get you four gallons.

The housing market, heck, the whole real estate market, the stock market all crash.

Credit becomes unobtainable. (i.e. what almost happened in late 2007/early 2008, really happens)

Companies, without the ability to borrow, or the consumers to buy their goods, are crushed sending unemployment into Great Depression territory.

[MannyGoldstein]

82. Seems like things worked out well in Russia and Argentina

We have a much larger economy, so things would likely work out better here.

Do you have an example where sovereign default was a bad thing?

[MilesColtrane]

88. Yeah, things were just peachy in Argentina if you don't count the hyperinflation,...

the run on banks, the government putting a freeze on people's ability to withdraw money out of their bank accounts, the rioting, the deaths, the collapse of the government.

:eyes:

"But when you talk about destruction
Don't you know that you can count me out"

[MannyGoldstein]

89. Unemployment dropped by 3/4ths, poverty rate by 2/3rds

Is that a catastrophic thing? Or even a bad thing?

I think it's a very, very good thing.

[MilesColtrane]

94. I can relieve myself of a pesky hangnail by sawing my leg off too.

You're defending a very stupid idea.

[MannyGoldstein]

96. What went wrong for those countries on

A societal level? Can you answer that question?

Seems like the well-off took a hit, but the society as a whole is doing way, way better.

Do you realize that real unemployment here is above 15%, and many tens of millions live in poverty?

[MilesColtrane]

102. Sorry, but I'm not wasting any more time with you.

:hi:

[RegieRocker]

108. The system is broken by design. It is inevitable that this will

happen sometime. Most people do not fully understand the banking system. Example: Ever go to the bank and pull your money out? They gave it to you didn't they? How could they if they loaned it to someone else? Banks don't loan money from deposits. The loan money created from loans. For every dollar they loan they get to loan nine more dollars. Yea that is working well.
See this video and watch it all or keep head in sand.

http://video.google.com/videoplay?docid=-2550156453790090544#docid=5352106773770802849

[rdking647]

83. i though the left was educated .

lets say we default.
suddenly us banks have to revalue all their bond holding at current market values making them insolvent. credit availiability doesnt just slow it stops.
without credit companies close. within a short time unemployment is over 25%.
social security payments stop.
so does ass welfare payments.
inflation reaches 20% a year.

any retirement savings you may have are decimated by the stock market fall.
the dollar is no longer accepted as the worlds reserve currency and with its loss of value gasoline suddenly costs $7 a gallon.


i for one find that unacceptable

[MannyGoldstein]

91. So why did things get so much better in Russia and Argentina when they defaulted?

Have you ever been bamboozled before?

[muriel_volestrangler]

105. Your own graph shows the poverty rate increasing to over 50% in the 3 years after default

The figures you claim in your OP are just wrong. After default, unemployment and poverty both went up. They came down later; but note what happened later:

Although it was once the darling of investment banks and the International Monetary Fund, in 2001 the country suffered a lengthy recession that culminated in the government halting debt repayments to its private creditors—a default on some US$95 billion in government debt, the largest sovereign default in history. A highly overvalued, fixed 1-to-1 exchange rate from 1991 and an excessive amount of foreign debt were the two primary causes of the Argentine crisis. The negative trade imbalance caused by an expensive local currency made it impossible for the country to earn the foreign reserves needed to pay the interest on its foreign debt. Argentina had to keep borrowing to pay interests, causing the debt to grow ever larger, eventually reaching 50% of GDP by late 2001. As became evident, Argentina could no longer borrow to meet its obligations and the government was forced to default and to devalue the peso, abandoning its former parity with the U.S. dollar in January 2002. The move essentially shut Argentina out of international markets and slowed the flow of investment into the country, with many creditors filing lawsuits against the government in courts. Eventually, the government struck a deal in 2005 to pay back approximately 75% of debt-holders at a deeply discounted rate of 30%. In June 2010, Argentina tried to restructure what remained of the debt with similar conditions to the one in 2005. This debt swap had a participation rate of approximately 70%, which, added to the previous restructuring, led to a total level of 90%. In order to gain total access to international capital markets, Argentina needs to settle its outstanding debt with the Paris Club nations—approximately US$7.5billion. On November 15, President Fernandez announced that the Argentine government and the Paris Club reached an agreement to start the renegotiation of the debt, on the condition—proposed by Argentina and accepted by the Paris Club—that there would be no intermediation by or presence of the IMF in the process.

http://www.roubini.com/briefings/57113.php

Argentina's problem wasn't the unemployment rate, or poverty rate; it was that they had tried to peg their currency to the US dollar, and they ended up being unable to pay the interest on their national debt. They were far more desperate than the US is now - federal spending on debt interest in 2010 was 5.7% of total federal spending, so that's less than 2% of GDP. And their recovery has been in tandem with restructuring the debt to be reasonable - because they have to persuade foreign investors the default won't happen again. If the USA defaulted just because it didn't feel like raise taxes a bit, no-one would take it seriously as an economy again.

On edit: I misread what the 50% of Argentinian GDP was. But the main point still stands - Argentina couldn't afford their national debt, while the US can.

[MannyGoldstein]

110. Something really creepy is going on

The graph of the Argentinian poverty rate was absolutely different last night - I checked it at least twice using the link in my post.

It changed.

This is really fucking weird.

[sabrina 1]

112. So, Capitalism is a failure. If all that is likely to happen

it is only because of the sysem we live under. And we will always be threatened with these results as long as we live under that system.

It is the same system that has collapsed the economies of the rest of the world. Greece, eg, imho, should have defaulted. It is not for the benefit of the people there that they are being bailed, it is to keep this clearly failed system propped up so that the top 1% keep their ill-gotten gains.

When will we be out from under the threat of what you just described as we continue to do nothing to change the system that makes this scenario possible??

Who is controlling all of this and how much say, eg, did Americans have regarding having their Retirement funds invested in foreign governments? Who made these decisions regarding OUR money? Clearly people who are not too bright, if what you say is true.

And who are we worried about should the govt default? Millions of Americans, Greeks, Irish, Portugese, Spanish, French people are already destroyed economically, many have lost everything. Millions, probably tens or hundreds of millions. People, real human beings!

Most of those people can work. They could survive, start all over again using their skills, to rebuild the societies they live in. But the paper pushers who thought up this system, how will they survive since most of them couldn't cook an egg if they had to?

Seems to me they're desperate to save a very small segment of society, because if this system continues, sooner or later since there is nothing happening to prevent what you describe which are real flaws in the system, there will be a default. The greed that got us here isn't going away, they're still at it.

Maybe it's time to reset the system. To base it on real skills that people actually need in order to survive, like building skills, farming etc.

For so many people what you describe is not all that scary as they are already experiencing it. The Rich however, I can see why they are panicing, trying to get us to help them continue to live their useless lives contributing little to any of the societies they have cheated.

[blkmusclmachine]

86. I love the smell of manufactured Crises in the morning

Makes the Shock Doctrine go down so much easier

[fivepennies]

87. It wasn't just defaulting

that improved the economy of Argentina. It takes a bit more work and co-operation to achieve what they have:



May 6, 2001
To Weather Recession, Argentines Revert to Barter

By CLIFFORD KRAUSS

BUENOS AIRES, May 5: As Argentina muddles through a recession with no end in sight, bartering is making a comeback as an improbable safety net for a forlorn middle class.

-snip

An estimated 500,000 Argentines now barter regularly, and up to one million — or almost 5 percent of the economically active population — do so occasionally, according to sociologists who have studied the trend. About 10,000 people shopped at a May Day "trueque mega-fair" this week in a Buenos Aires suburb.

At the clubs, people set up tables and stalls to peddle goods or the promise of services in exchange for scrip, barter money known as "créditos." They can then use this to obtain other goods or services through the clubs, which have established an informal network.

The goods range from food and produce to clothing and homemade skin-care products. The services include everything from dental work and plumbing to psychological counseling and tarot card readings, often proffered by underemployed or unemployed professionals.

The traders set their prices by supply and demand, making the barter clubs a combination of competition and neighborly solidarity.

Today the clubs have more than $7 million worth of scrip in circulation, bar-coded to guard against counterfeiting. An estimated $400 million in goods and services were traded last year. Organizers say they expect an 80 percent increase in the value of the transactions this year because of the deepening recession.

The recession has been brought on and sustained by plunging commodity prices, rising interest rates, mounting public debt and an overvalued currency that has depressed exports.

http://www.cyberclass.net/krauss.htm

The whole article is well worth reading.

[WatsonT]

90. There's been much debate on raising the debt ceiling lately

And what it would do to us if we don't.

Defaulting would effectively drop our debt ceiling to zero as no one would wish to invest in us any more (where do you suppose that debt comes from?).

So if you believe we can live with no ability to raise foreign capital then by all means default. Be sure to stock up on canned foods and ammo first.

/much of the debt is owned by American citizens. So that'd be a big f-you to all those people who bought in to this country.

[JackRiddler]

95. Federal Reserve holds $1.6 trillion in US debt....

This could be wiped out by changing an accounting entry.

No creditor would be affected.

The markets would go apeshit for a while - screw them.

Here's Dean Baker:

http://counterpunch.org/baker07072011.html

[Sheepshank]

99. US should go into default because of one tenuous example?

Do you have at lease a couple more examples to establish a precdence.

I am not a financial/economics whiz kid, but I'm pretty sure a nation's economics are a tad more convoluted than this simple cause and effect?

Nah, thanks but no thanks on that experiment.

[fivepennies]

104. Actually yes,

the nation's economics are so convoluted that a Philadelphia lawyer couldn't make heads or tails of it. That's the exact reason why this system needs to go away so we can start over with an economy that any high school graduate could easily understand. Surely you don't expect the financial gurus who make out like bandits from the convoluted system they created will ever explain the fundamentals to us proles and make it work for us. After all, its their money - they just let us borrow some of it now and then. And they especially love it when governments borrow their money because the hand that gives is above the hand that takes. Always.

[bemildred]

100. +1!. Annnnnnd, it will screw the living shit of of banks, sovereign wealth funds, and the rich.

How great is that!

[rdking647]

106. and the poor and the middle class

and pretty much everyone.

[bemildred]

109. We are getting screwed anyway. nt

[coalition_unwilling]

103. I'm about as radical as it gets here on DU (Dem Socialist), but a default

on U.S. debt would be a very bad idea.

For starters, the debt is backed by "the full faith and credit" of we the people (the U.S. government).

So, who in his or her right mind would ever purchase U.S. debt, i.e., lend money to the U.S., ever again, once that full faith and credit had been demonstrated to be worth no more than the paper it was printed on?

The effects downstream would be catastrophic for many retirees like my father who own U.S. treasuries and depend upon the interest payments they provide to supplement their social security checks. I could also easily see a general default on U.S. debt causing the entire global financial system to freeze up. We came perilously close to this in 2009 after Lehman collapsed and that was without any threat of U.S. default.

Thinking globally rather than provincially, do we really want to punish the Chinese, Japanese and other foreign holders of U.S. debt for American voters' stupidity? The Chinese did not put a bat-shit crazy Repuke majority in control of one branch of the government.

[Curmudgeoness]

114. I find this thread fascinating, and love the question posed by the OP.

I have also wondered what would really happen if we defaulted on our debt. And I have thought about how if the banks and corporations and Wall Street are so opposed, there might be something to looking at the other side.

But then I keep coming back to the reality, which is that we are the greatest debtor nation in the world, and that would mean we would turn the whole world on it's ass. And that is just for starters. We would have to do an austerity program like none you have ever seen, and that will hurt the poor and working classes the hardest. Imagine the cuts that they are discussing today magnified by hundreds. Imagine prices for everything you buy going through the roof because of higher rates to borrow money (which fuels all business and government as well as us ordinary stiffs) and fewer countries willing to do business with us.

Sadly, if we totally screw Wall Street, we will also totally screw Main Street.