Will Republicans/Tea Partiers cause the United States to default on it's debt?

Unless congress authorizes an increase in the nation's debt, the nation will default on its debt in about a month. There is really not good reason for this default. Congress could authorize a debt ceiling increase as it has always done and the world will go on.

If however Congress fails to increase the nation's debt ceiling, the US will default on its debts. It will be financial chaos that will make the Great Recession look like a walk in the park.

We have heard Speaker Boehner (Republican) admit that failing to raise the debt ceiling in unthinkable and in the next sentence say that he won't do it unless his spending cut demands are met (e.g. defunding healthcare).

If Democrats are smart, they will hold the line and refuse to be held hostage to the insane financial demands of the Republican/Tea Party...the very same people who created this financial mess. And if Republicans do what they are threatening to do, they will cause The United States to default for the first time in history.

I predict Republicans will cause the nation to default. I seriously hope I am wrong. But given their past actions and recent statements, I think they have every intention of running the nation into bankruptcy.

On the good side, I think a Republican caused default will finally put an end to the Republican Party and all of this nonsense that has come to characterize the party these last few decades.

What do you think?

 

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I think you are trying to find a scapegoat for the inevitable collapse.

 

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Then let it default and take the problem on to get back to a better policy than SPEND, SPEND, SPEND! Because if they continue SPENDING the way they are there won't be much of an economy left in a short time anyway. After all just how much can you borrow when there's nothing there to borrow to begin with? We borrow money that we create and that's a sure way to see the failure of this system collapse only it will just take a few more years to do so. The axe is going to fall, whether its now or then is all up to Congress at this time in history.

 

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I agree . The monster has been gut shot and is set to die . Do we let it happen now and take the pain or just keep propping it up and make the bleed out go on and on dragging out for generations of pain . I want to get it over with and move on my self . Cut back Government spending enough so we don't default . Let Government feel the pain of small business and put uncertainty in there lives like what has been done to business . Maybe they will empathize with the displacement of other industries if government is subject to displacement too

 

Personally, I hope you get what you are asking for.

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Government will not feel the pain, you will. And you will be wishing for the good old days rather quickly after a default.

 

No just being honest.

 

If anyones dumb enough to do this, the republicans are.

But, how does this work?

I'm a high school senior so my understanding of debt and the economy are arguably superficial at best.

How does not raising the debt ceiling cause a default on debt?

 

It means that Congress has authorized the spending, but has failed to put enough money in the checkbook. So the US Treasury will not be able to pay the debts owed by the country.

So if you own US debt, you will not get paid. If you are a federal employee, you are likely not to get paid. If you are on Social Security and or Medicaid, your medical bills an Social Security payments will not get paid as the federal government owes trillions to the Social Security Trust fund. The US government will not be able to pay its bills. For all intense and purposes, it will be bankrupt. Nursing homes and hospitals will go bankrupt, and lord knows what will happen to their patients as there will be no one to take them.

Owners of US debt are likely to sell US debt in large numbers. That will cause problems for the holders of national debt like Japan an China. China's growth which has been driving the world economy will faulter. It will not have the money to fund its growth.

The US economy will take a serious hit, since about a third of the economy is driven by the federal government. Almost a third of the US economy will vanish over night. It will cause a very serious contraction in the US economy putting millions of people out of work with no social safety net (unemployment insurance, etc.). There will be people homeless on the streets and soup lines if we are lucky.

It is likely in my view that in order to mitigate the effects of a global depression, the Federal Reserve will be buying US debt like there is no tomorrow which will result in runaway inflation. Pensions and savings thought by most people to be safe will be destroyed in the blink the eye.

The sad part is that this is not necessary. We don't have to go down this road. There is a way out of this mess. Remember, that before Republicans took over all three branches of government in 2000 we had budget surpluses and projected suprluses for decades. If we had continued down that road, we would have almost a trillion dollars in surplus now. But Republicans took a different path. And it appears they want to take a different path again.

Now I also think the pain will be so great, that this will not last long. I think Americans will be so enraged that they will rue the day they ever heard of the Republican Party for decades to come. But by then the damage will have been done. The US will no longer be considered the gold standard in security around the globe. And that will mean higher prices on everything including interest rates for decades to come. China could then replace the US as the gold standard of security with in a year. And the way would be open for China to fill the roll the US now plays on the global stage.

Now if you are rich, knowledgable and in the know you can make a killing on this debacle. But if you are an average Joe or Jane you are going to get the screw job of your life.

http://www.sciforums.com/showpost.php?p=2732656&postcount=85

 

But where exactly does Congress borrow the money from ? It must get it from somewhere and that somewhere today is itself. Since no other country will lend America money then America must get any money it needs from itself and since America is already owing over 14 trillion dollars where is the next batch going to be made...the Treasury. So America has nothing in the Treasury but IOU's and it wants to borrow more from the nothing it has, that's a rather interesting trick isn't it?

 

NO, it means you have no clue cosmic.

The US Treasury funds US spending with taxes and with bonds sold at public auction. You know Republicans are fond of point out that China holds a lot of US debt. That debt did not wind up in China's hands by magic. China got that debt by purchasing the debt at public auction or in the aftermarket. So that kind of sinks your notion that no one is purchasing US debt. If the US defaults as Republicans are threatening to do, then no one will want to buy US debt.

When US is debt is auctioned, the price paid for the debt is the interest rate it will earn for the purchasers of US debt. When there are a lot of buyers for the debt, the price (interest rate is low, as has been the case up to now). If there are few buyers then interest rates will be high.

 

But America may not be able to rely on China for much longer. “China is beginning to behave like a normal creditor,” warned Setser. The Financial Times details how China is thinking of investing its vast sums of money elsewhere (emphasis mine throughout):

China’s near $2,000 billion (£1,380 billion, €1,560 billion) in reserves, the world’s largest, are often viewed outside the country as a great strength—an insurance policy against economic turbulence. But within China, they are increasingly seen by the public and even some policymakers as something of an albatross—a huge pool of resources not being used at home that will plunge in value if the U.S. dollar collapses. Why, people ask, should such a relatively poor country bankroll such a rich one?

The article goes on to warn that “the consensus behind recycling foreign currency into U.S. government securities is coming under attack.”

The State Administration of Foreign Exchange (safe), the organization that manages most of China’s reserves, last week announced it was thinking of changing its strategy. “We will actively expand channels and ways to use the foreign exchange reserves. In particular, we will explore how the reserves can better serve domestic economic development,” said deputy director of safe, Deng Xianhong.

http://www.dogpile.com/clickserver/...23=0&40=tsUCH1hbpN01HOnN6PSdzQ==&_IceUrl=true



But over the last year, China has been a net seller of Treasury securities, according to figures released this week by the American government. If that is true, it would be extraordinary, considering the size of the bilateral trade deficit, and there has been speculation that China has been purchasing Treasuries through accounts in other countries.

The Treasury Department estimated that China reduced its holdings of Treasuries by nearly $11 billion in November alone. For the 12 months through November, as the accompanying charts indicate, China reduced its holdings of Treasuries by more than $36 billion.


http://www.dogpile.com/clickserver/...23=0&40=hKwlfU+FwgNk+8qM4MkdiQ==&_IceUrl=true

 

I don't know what point you are trying to make. You just shot a big hole in your previous post claiming that no one is buying US debt. Because clearly they have been up to now. And as previoulsy pointed out to you, the price of US debt is the interest rate it pays. And the interest rate the US has been paying for its debt has been extremely low...indicating good demand. You know, it is that whole supply - demand thing.

This crisis in Washington is artifically and unnecessarily induced by the Republican/Tea Party crowd and has been coming since Republicans/Tea Partiers took control of the House. Given Republicans/Tea Partiers are threatening to default on US financial obligations, you would be a fool to want to buy US Treasury obligations.

There are reasonable ways out of our current situation. But reasonable is not a word that applies to Republicans and Tea Partiers. Let's remember, they are the ones that led to this debt and deficit situation. They are also the ones who orchestrated the financial crisis of 2008.

p/s As long as China trades with the United States, it doesn't have much of choice about holding US debt. China's economy is still very export dependent and it cannot ditch holding US debt without shooting itself in the foot...something China unlike the US is not willing to do. Once China's economy becomes self sufficient, then it can tell the US to tell the US to go fish. But not until then. But that is not and excuse for the US to not put its fiscal house in order. You don't put your fiscal house in order by jumping off a bridge as Republicans/Tea Parties are threatening to do.

 

That China is not going to be buying Americas debt any longer that's the point I am making along with these articles that show you that to lend creedance to my statement. If China is selling Americas securities it holds why would it be then turning around and selling them to others? They are not going to be buying Americas debts as I said but alas you do not seem to understand. So the only other debt buying is going on within America from the Fed, which is buying the debt which it said it wouldn't. Why does and how does the Fed buy the debt when there's no money to do it with? America is bankrupt and you just don't want to admit it.

 

How do you figure? Last I checked, "not increasing the debt" was not the same thing as "being unable to pay the debt."

 

Well if they are not going to buy US Treasuries, what are they going to do with all the US dollars they get by trading with us? Are they going to stick them in their mattress?

You are not making any sense. There is this thing called supply and demand. I suggest you do some reading on the concept. And what is China going to do with all of those dollars that we keep sending them for their products?

If China does anything to destablilize the dollar, they shoot themselves in the foot. They are in a catch 22. They need US trade dollars to keep their economy afloat. They cannot stop buying US Treasury obligations at this point in time.

Additionally no one is arguing that the US debt situation is bad and needs to be corrected. And no one is arguing that the US should not put it's financial house in order because clearly it should. Ultimately the US needs to be put back on to a fiscally sustainable path.

But you don't do that by deliberately defaulting and bringing on the very thing you are trying to avoid. That is like shooting the patient to prevent him from committing sucide. And that is what the Republicans/Tea Partiers are advocating and threatening to do.

You are not making any sense here. Your statement is blatently false. Do you know how much debt the Treasury auctioned off during the last 12 months? Apparently not.

The Treasury auctioned off 6.5 trillion dollars in debt during the last 12 months. Do you know how much debt the Treasury purchased? Less than 600billion dollars. That is less than 9 percent purchased by the Federal Reserve. Six hundred billion is certianly no where near the 6.5 trillion dollars sold by the Treasury. That is simple math.

http://www.treasurydirect.gov/RI/OFAuctions?form=ndnld&typesec=bills

And again you are missing the point and setting up a strawman arguement (a logical fallacy). No one is saying that US fiscal house is not in order, because clearly it is. It is running too much in deficits. So it has to increase revenues and restrain spending to bring its budget back in order. And it needs to bring its debt into line with GDP.

But like I have said several times before, you do that with a clear head and a rational agenda.

 

Not increasing the debt means that the country will not have sufficient cash to pay it's obligations. And considering that 40 percent of every dollar in the budget is borrowed, that is a pretty serious cutback.

http://www.npr.org/2011/04/12/135336968/failure-to-hike-debt-limit-would-have-consequences

 

Begs the question of which obligations they'll choose to pay with what money they do have. My best guess would be that debt service will be among them, which would preclude default.

Although, defaulting on debt is one way of reducing one's liabilities...

 

Treasury Secretary Geithner is on record saying he could go a few weeks past reaching the debt ceiling before defaulting by engaging in some extraordionary measures.

http://www.reuters.com/article/2011/04/13/usa-debt-limit-idUSN0211689720110413

But enaging in extraordinary measures are not something that I think the financial markets will find reassuring.

I had always assumed Washington was ultimately run by individuals who would do what was right for the nation when faced with a crisis. But after Congress defeated TARP, no one can safely come to that conclusion anymore. The ditto head generation created by Fox, Clear Channel and others has created a serious threat to the nation. They have no qualms about burning down the house, because beck has told them that they can rebuild stonger and much better than before. And they believe him and others preaching a similar message.

http://voices.washingtonpost.com/ezra-klein/2011/01/what_a_debt_default_would_mean.html

 

This problem is way bigger than the tea partiers. They might start the house of cards toppling, probably not though... but we've had mismanagement of our country since at least Reagan-and yes, I include Clinton in that.

Analogy:
If you sell your house, you have a huge increase in wealth, right? Which is great until you run out of motel room money...

We allowed the long-term wealth generating aspects of our domestic economy to go overseas, resulting in huge short-term gains.

Now we're out of money. Oops.

Partisanship does not help when both of the two main parties are incompetent and corrupt.

But I also...don't see how to instill planning for the long-term into our system. The Chinese, Japanese, and I believe even the Europeans...they plan further ahead than we do.
We need it, we don't have it,We haven't ever been good at it.

This is why our country is landing in a giant pile of fail.
Maybe we'll recover and learn?
Probably just go battier.

 

It depends if they actually tell everyone the truth about this problem, the sooner the better because if they keep hiding this mess it will only be a bigger hole that we will have to dig out of.