Straight up Question: What happens if we default in 3 days??

Just wanted to know the facts from you guys (as how you see it)

Will the value of the dollar god down?

Will it be tougher to get a loan?

What happens, exactly?

Is it all an overblown hype, or is something more significant going to happen?

it's both overblown hype and a significant problem. in general the gov't will not have the available funds to pay all of it's outstanding bills. while that in itself is not desirable, they will have to prioritize what payments to make with the funds they do have on hand or are taking in via taxes. things like interest on current debts, ss, etc.. will take precedence over other payments so the hype that all of the sudden the US will not be able to pay ANY of its obligations is not true. there will be, however, payments that they will not be able to make on schedule, which is a bad thing. think of it as not paying your cc bill because you only have enough money from your paycheck to pay your mortgage and utility bills. you have to prioritize.

Every economist in the world uncorks champagne and watches research papers write themselves.

why are people still talking about default? the Gov cant default on debt, principle or interest. cashflows can handle the debt, it just cant handle the debt and everything else, but the debt is the ONLY thing the government has to pay.

i understand people like to get their news from one of the political propaganda arms on the idiot box, but that does not mean they have to accept their handlers words as gospel.

I'm not sure anybody knows. Do we have any sort of precedence for this? Has it ever happened before, either here or in another country with comparable size and economy?

Except that may not be possible due to the way government payments are made. Even if it is possible it might not be legal. And if it is legal and possible it still destroys faith in the U.S as being a trustworthy place to part money, which is very bad.

It could be a huge problem, plunging us back into a recession.

Be like Greek, I hope not... the government don't have any money, but the depts just way too much.

Non-Americans start calling you guys bums.

We can default if the treasury can't prioritize the payments due to technical and/or legal reasons which is a very real possibility.

Anyways destroying the credibility of the US in paying debts would lead to terrible consequences.

American credit with take another blow.

Pretty much nothing

Would pretty much nothing happen if you decide next month to only pay half of your bills?

we get a mop and rags and clean up, because conservatives will be nutting nonstop

Well yeah...

Don't need cable, internet, phone, etc..

Realistically the housing market would crash, the NYSE might take a dip, and America's credit as a nation would be damaged. China would be pretty screwed too.

Wait, the American government is still in shutdown?

World economy crashes. How big the damage will be is up for speculation, though.

Clause 4 of the 14th Amendment states:

"The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned."

there is only one priority, if jack lew and obama want to risk openly disregarding the constitution and choose to default, that will fall on their heads.

there is one bill that has to be paid, that would account for about 30% of cash flows, the only way it would be possible for the government to default is if the executive chooses to illegally default.

Then Obama should just ignore the debt ceiling and go to the supreme court.

Once again it might not be possible to due to the way the government pays its bills, and there are many possibilities of It being illegal.

The answer to this question is that no body know. The United States has never defaulted before. It's also the case that raising the debt ceiling also comes in the form of a last minute deal. If that deal doesn't happen it certainly won't be as terrible as people say it is. We can still borrow up to the current limit. Our spending can stay the same it simply cannot increase. It probably won't be good to default but the universe won't implode if it does happen.

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Hitting the debt ceiling doesn't necessarily mean that the U.S. is going to default. It could also prioritize debt payments over other forms of government spending which would require slashing other programs to the tune of several hundred billion dollars, which is very recessionary and would probably turn you into Europe for a few years. I am not sure if the federal government is legally allowed to do this though. Overall the best course of action for the country would be to simply get rid of the debt ceiling entirely.

But that would mean an end to the ability for the minority party to hold the world economy hostage and call it negotiating.

getting rid of the debt limit would result in a downgrade, even by the rating agents currently under the government boot, that would start a major run from the dollar. if you want to know what an actual default looks like? take US politicians off of their last budget restraint. watch the deficit rise to 2,4,8, 16 trillion before the end of the decade. it has already gone from a 100b to 1.6T last decade. who gets all of that debased wealth? it sure as hell wont be the people on main street, if you think the poor have been hurting since the 08' crash you have seen nothing yet if the politicians have it their way.

Probably not, the reason why the U.S credit was downgraded is instability and the possibility we might not be able to pay our debt due to things like the debt ceiling fight. The debt ceiling isn't really a restraint in any real sense right now, getting rid of it wouldn't suddenly lead to exploding debt.

Wars, tax cuts and a recession are the main reasons for the debt increase.

@Person0:

S&P gave their reason for the last rating decrease and it was not about politics it was about there being no political will to address the massive gap between the revenues and expenses as well as the size of the debt.

guess who has no political will to address the over spending? neocons and progressives, give them everything they want and you are doing exactly what S&P was worried about.

"No political will" is politics.

"More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned," an S&P statement reads.

"we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon," the statement continued.

Sounds like they are talking about it mostly being due to politics to me.

read your second quote again, and not from the media spin perspective."bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics"

that is all about addressing the finance issues facing the government, not bickering about where to spend more money.

@surrealnumber5: Well if you completely ignore the first quote...

It's both but poitics was a huge part of it.

more quotes

"Our lowering of the rating was prompted by our view on the rising public debt burden and our perception of greater policymaking uncertainty.

The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy.

Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act"

If it is only about the budget and not the political instability why did they wait to downgrade U.S credit until the debt ceiling fight?

i see your point and i cant convey the basis in my view without going into finance accounting and investing way more than i am willing to. i dont think removing the importance of cash flows from government accounting would secure the debt and decrease the risk of default, and by removing the debt limit you are removing any check on deficits, deficits being spending over inflows.

if any entity were to attempt to get rated with that kind of accounting scheme they would not be able to be rated.

The debt ceiling is just a false check though, it always gets raised. it just turned into a political bargaining chip like S&P said.

Trying to compare a government to a business is usually a bad idea.

i can compare governments to governments, there is nothing new under the sun, and that includes government and currencies.

Ok, other countrys' governments have deficits and are still rated. The US isn't really special in that case.

if your perspective is only the here and now, you will be surprised a lot.

Basically the economy would collapse the dollar would become near enough worthless, never mind loans I'd be more worried about been able to feed myself.

Apple would probably buy the government... Kidding aside. Im interested to see how this pans out. I just hope the country stabilises and the population is not too negatively affected

We defaulted in 1979. We are still alive and kicking. But our dollar value may decrease significantly more due to the fact our debt is so much more massive than it was back then.

Should have never been taken off the gold standard.

Pretty much nothing will change for the majority of the country

The 1979 default nothing but a screw up which resulted in missed payments of some $120m in Treasury Bills yet that screw up cost the goverment $12 billion, whats happening now is alot more serious.

lol gold standard. That's a good joke

Better than a system that prints money out of thin air.

Obviously somebody who doesn't know how the monetary system works or about the fact the Federal reserve has been basically printing an extra $40 billion a month out of thin air over the last few years.

Anyone who suggests using the gold standard is the one who doesn't know what the **** they're talking about.

We wont default in 3 days. We just wont have the power to borrow more money when they run out which would occur later on. Doubt it will happen, though. It's just showmanship right now. They arent dumb enough to default as dumb as they seem.

I know. I didn't think it was a joke. We are able to print a sh!t ton of money with nothing to back it anymore.

The gold standard is a terrible idea, and it was discarded in the past for good reasons.

For the life of me, I struggle to understand why anyone would ever support this barbarous relic that restrains economic growth to the supply of a shiny rock.

We won't. The politicians do this every time. It's like one big game of chicken for them.

The worst part is I've been waiting for my DD Form 214(member 4) from the national archives and now it's been delayed for half a damn month. Bastards.