What will happen once United States of America will go bust?

[Douger]

With this level of debt and with this trouble our economy is in the question "will we go bust" turns into "when will we go bust".

What will happen then? I'm too scared to even try to predict.

A 3rd world country like Haiti where we live in shacks.

No. More Like Caracas or Rio where palaces are surrounded by shacks.
The fatcats zoom through town in bullet proofed Toyota and meet their security team at the entrance to their home.
Think Sherman Oaks, Kalifornistan or Coconut Grove, Floridastan but continuing to get much, much, more violent and impoverished.

 

[Avatar4321]

If anyone managed their finances the way government manages it's finances they would certainly go bust. But the big difference between your finances and the government is:

1: The government can never run out money. Why? Because it can create as much as it needs. It usually does this by issuing an IOU to the federal reserve banks who issue the checks. If the government does not payoff these IOU's, they become part of the national debt.

2: The government has an unlimited line of credit. It can borrow as much as it wants. Of course it may have to offer a higher rate of interest.

3. The government never has to pay off it's debt and it never will. It rust refinances by issuing more treasury bills.

As you can see the government can't go bust. It can go on and on with this indefinitely. So who pays the piper? You and I do. Every man women and child in the US pays in the form of higher prices on everything we buy. Government refinancing puts pressure on interest rates. So we all pay more when we borrow money. High interest rates hurt business. The government is only party that's not hurt.

See, here is the main problem:

No we dont have unlimited credit. If we arent paying our bills back, no one will be stupid enough to lend us more money.

If government keeps printing more money, it will continue to inflate the money destroying the economy. When people are being "governed" by incompetents to the point where they are watching their family and friends starve, they will rebel against such authority until the government collapses.

Government is hurt when the people are hurt. Because government only has the power we voluntarily give them.

 

[Screaming Eagle]

Even with a government education I was taught that when someone phrases a statement with an absolute such as "we can never go bankrupt" that the answer was false almost all the time.

 

[MaggieMae]

With this level of debt and with this trouble our economy is in the question "will we go bust" turns into "when will we go bust".

What will happen then? I'm too scared to even try to predict.

The same doomsday scenario has been "predicted" for at least the last eight decades, and it ain't happened yet.

A couple of Winston Churchill quotes:

“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.”

"You can always count on Americans to do the right thing—after they’ve tried everything else."

 

[Avatar4321]

With this level of debt and with this trouble our economy is in the question "will we go bust" turns into "when will we go bust".

What will happen then? I'm too scared to even try to predict.

The same doomsday scenario has been "predicted" for at least the last eight decades, and it ain't happened yet.

A couple of Winston Churchill quotes:

“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.”

"You can always count on Americans to do the right thing—after they’ve tried everything else."

And they were right. Any study of the history of the world would show that they were.

Should I conclude from your quotes that you think overspending is the wrong thing?

 

[MaggieMae]

40 or 50 countries will face severe upheaval and disruption followed probably by their government being overturned or ceasing to function. Political and real famines will probably kill hundreds of millions, if not billions.

That's what I think will happen.

Sadly, you're quite right. Even now with just a temporary (hopefully) problem of agricultural supplies unable to reach sub Saharan regions because of the volcanic ash, their crops are already dying. A few more climactic disasters will wipe out entire populations who are holding on by a thread. Then there's the problem of water. Some predict that the next world war will not be over boundaries, religion, or energy resources but over water supplies. It's not a pretty forecast. Mother Nature is pissed off.

 

[MaggieMae]

With this level of debt and with this trouble our economy is in the question "will we go bust" turns into "when will we go bust".

What will happen then? I'm too scared to even try to predict.

It's not going to happen, at least not the way most people would envision it. Here is something you might not be aware of. 60% of the national debt is owed to the public, both here an abroad. The government owes 40% of debt to itself, via loans between agencies. So it's not like the bank is going foreclose. Remember the treasury can always create more money which of course causes another set of problems.

As the US debt rises as percent of GNP in relation to the debt of other nations, those who loan money to the government, mostly buyers of treasury bills will demand a higher rate of interest. This will force up interest rates which tends to depress business. Also foreign investors become concerned about the risk of investing in the US. This will cause the dollar to devalue making foreign goods more expensive. These two event will result in an increase in inflation plus a depressed business climate.

In short, the government never goes belly up, but the public suffers a decline in purchasing power of dollar and waves of recession. All which leads to a decline in our standard living.

Good, concise analysis.

 

[MaggieMae]

Luckily if the United States goes bust, Federal power would revert back to the hands of the States and the people.

Now, if the States and the Federal government both collapse, we have some major problems.

States have overreached too. How much of the stimulus money had to go to prop up their budgets? Assuming "states rights" fixes everything is ludicrous.

 

[MaggieMae]

With this level of debt and with this trouble our economy is in the question "will we go bust" turns into "when will we go bust".

What will happen then? I'm too scared to even try to predict.

A 3rd world country like Haiti where we live in shacks.

Hardly. The U.S. can still boast much of the personal wealth in the world at around $43 trillion.

 

[MaggieMae]

Guess what?

The US is the wealthiest nation on earth

We are not going "bust"

Im pretty sure Babylon said that at one point too.

Babylon's history of rising and falling had to do with its boundaries and neighboring religious factions.

 

[MaggieMae]

Guess what?

The US is the wealthiest nation on earth

We are not going "bust"

The day will come when the piper has to be paid and if we don't drastically curtail our spending it will be an ugly day. We could go bust quite easily actually. All it would take is for China to recall their debt and/or refuse to buy anymore. We'd be bankrupt just like that. The only other option would be to massively print more money which would send us into hyperinflation and that would be just as bad, maybe worse. See Zimbabwe.

You sound like people I knew before 9-11 who said the USA would never get attacked on our own soil.

China is not going to call in our debt when it exports just under $300 billion in goods to us annually.

 

[MaggieMae]

If anyone managed their finances the way government manages it's finances they would certainly go bust. But the big difference between your finances and the government is:

1: The government can never run out money. Why? Because it can create as much as it needs. It usually does this by issuing an IOU to the federal reserve banks who issue the checks. If the government does not payoff these IOU's, they become part of the national debt.

2: The government has an unlimited line of credit. It can borrow as much as it wants. Of course it may have to offer a higher rate of interest.

3. The government never has to pay off it's debt and it never will. It rust refinances by issuing more treasury bills.

As you can see the government can't go bust. It can go on and on with this indefinitely. So who pays the piper? You and I do. Every man women and child in the US pays in the form of higher prices on everything we buy. Government refinancing puts pressure on interest rates. So we all pay more when we borrow money. High interest rates hurt business. The government is only party that's not hurt.

You have just demonstrated conclusively that you don't know the first damn thing about economics or finance. Please stop offering an opinion on this topic lest you spread your stupidity among the masses.

He knows what he's talking about. Maybe you should do more homework on the subject instead of immediately going into attack mode.

 

[MaggieMae]

With this level of debt and with this trouble our economy is in the question "will we go bust" turns into "when will we go bust".

What will happen then? I'm too scared to even try to predict.

The same doomsday scenario has been "predicted" for at least the last eight decades, and it ain't happened yet.

A couple of Winston Churchill quotes:

“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.”

"You can always count on Americans to do the right thing—after they’ve tried everything else."

And they were right. Any study of the history of the world would show that they were.

Should I conclude from your quotes that you think overspending is the wrong thing?

I've never said otherwise. But there's a difference between "over" spending and "necessary" spending. I think TARP was an absolute necessity. I'm still on the fence over whether or not the health care thing will pay for itself as hoped.

What I'm suggesting by quoting feel-good platitudes is that America is resilient. We've weathered high interest rates before (and frankly, I was in my prime at the time and really didn't feel the effect). We've suffered higher income tax brackets and somehow not wound up in shacks. Our financial situation always manages to balance itself out with the least amount of suffering (with the exception of the Great Depression). THE SKY IS FALLING predictions are nonsense. I continue to have much greater faith in my country, apparently, than do many of the so-called "patriots" out there.

 

[mayya555]

Guess what?

The US is the wealthiest nation on earth

We are not going "bust"

The day will come when the piper has to be paid and if we don't drastically curtail our spending it will be an ugly day. We could go bust quite easily actually. All it would take is for China to recall their debt and/or refuse to buy anymore. We'd be bankrupt just like that. The only other option would be to massively print more money which would send us into hyperinflation and that would be just as bad, maybe worse. See Zimbabwe.

You sound like people I knew before 9-11 who said the USA would never get attacked on our own soil.

China is not going to call in our debt when it exports just under $300 billion in goods to us annually.

I assure you, that once they'll get overheated and the crisis will hit their economy and thus they'll be unable to purchase more of our bonds, you'll see how wrong you were.

 

[MaggieMae]

The day will come when the piper has to be paid and if we don't drastically curtail our spending it will be an ugly day. We could go bust quite easily actually. All it would take is for China to recall their debt and/or refuse to buy anymore. We'd be bankrupt just like that. The only other option would be to massively print more money which would send us into hyperinflation and that would be just as bad, maybe worse. See Zimbabwe.

You sound like people I knew before 9-11 who said the USA would never get attacked on our own soil.

China is not going to call in our debt when it exports just under $300 billion in goods to us annually.

I assure you, that once they'll get overheated and the crisis will hit their economy and thus they'll be unable to purchase more of our bonds, you'll see how wrong you were.

Our bad economy has already hit their economy, but China will still not be in any position to simply dump US debt in even the distant future.

To begin with, it holds more than $1 trillion in U.S. assets, mainly in U.S. Treasuries. No other country or entity in the world could absorb those assets if China wanted to sell them, and with China's currency value pegged to the dollar, any massive sale would lead to a steep decline in the Chinese currency and economy. China's holding of U.S. debt is leverage only in a theoretical world where it could dump its U.S. assets or stop buying more. What's more, even a hobbled America is the world's largest economy and the most significant market for Chinese goods. In 2009, a supposedly bad year, Chinese exports to the U.S. were approximately $300 billion, about the same as in 2007. That is a vast source of income for China — and one that no other part of the world can provide.

The U.S., meanwhile, has been a source of billions of dollars in direct investment in China, from thousands of American companies big and small. While it's true that China doesn't need any one of these companies as much as each one needs China, China needs all of them and depends on them for everything from brand-name goods to know-how and capital. Beijing can't just snap its fingers and go it alone; its domestic economy is far too entwined with that of the U.S., its companies, its capital and its consumers.

Read more: Why China Needs The U.S. -- And Vice Versa - TIME

 

[Flopper]

Guess what?

The US is the wealthiest nation on earth

We are not going "bust"

The day will come when the piper has to be paid and if we don't drastically curtail our spending it will be an ugly day. We could go bust quite easily actually. All it would take is for China to recall their debt and/or refuse to buy anymore. We'd be bankrupt just like that. The only other option would be to massively print more money which would send us into hyperinflation and that would be just as bad, maybe worse. See Zimbabwe.

You sound like people I knew before 9-11 who said the USA would never get attacked on our own soil.

You said, “We could go bust quite easily actually. All it would take is for China to recall their debt and/or refuse to buy anymore.” China cannot recall debt. They can sell their T-bills and T-notes on the open market or hold them to maturity. As you said, they can stop buying US debt. But since their share of the US debt is only 7.5%, that would certain not bust the Treasury. In fact the Treasury is not having any trouble selling notes and bills. Last year, some kind of record was set with sales in excess of 560 billion. Demand was so high that rates dropped to zero.

If China dumped all of its US debt on the open market, they would suffer a huge loss. It would drive down the price of treasuries and push rates sky high, but it certainly wouldn’t break the government although we could see more inflation due to higher interest and an end to the recover.

Remember we have a global economy. When the US economy falters, it is felt all over the world particular in countries like China and Japan.

 

[MaggieMae]

Guess what?

The US is the wealthiest nation on earth

We are not going "bust"

The day will come when the piper has to be paid and if we don't drastically curtail our spending it will be an ugly day. We could go bust quite easily actually. All it would take is for China to recall their debt and/or refuse to buy anymore. We'd be bankrupt just like that. The only other option would be to massively print more money which would send us into hyperinflation and that would be just as bad, maybe worse. See Zimbabwe.

You sound like people I knew before 9-11 who said the USA would never get attacked on our own soil.

You said, “We could go bust quite easily actually. All it would take is for China to recall their debt and/or refuse to buy anymore.” China cannot recall debt. They can sell their T-bills and T-notes on the open market or hold them to maturity. As you said, they can stop buying US debt. But since their share of the US debt is only 7.5%, that would certain not bust the Treasury. In fact the Treasury is not having any trouble selling notes and bills. Last year, some kind of record was set with sales in excess of 560 billion. Demand was so high that rates dropped to zero.

If China dumped all of its US debt on the open market, they would suffer a huge loss. It would drive down the price of treasuries and push rates sky high, but it certainly wouldn’t break the government although we could see more inflation due to higher interest and an end to the recover.

Remember we have a global economy. When the US economy falters, it is felt all over the world particular in countries like China and Japan.

And the situation possibly could be critical had the US not gone off the gold standard. Would you agree?

 

[Flopper]

The government can borrow money as long as those that are lending have faith that it will be repaid. There is no other limit. In other words, as long as the world has faith in the United States there will be no problem.

If the ratio between our debt and our GDP is high compared to the rest of the world, investors tend to lose faith and want higher interest which is a factor pushing inflation up. Our ratio is somewhere around 60. Japan's is over 300. But debt to GDP is not the only factor investors consider. Growth potential of the country is also a consideration. Government stability and safety are factors. Since the recession started the demand for treasury bills has skyrocketed driving interest to zero. Finally being a world superpower is a plus.

BTW When I say investor, I am referring to individuals, corporations, commercial banks, and government central banks.

 

[Flopper]

Would things be worse if we were on the gold standard?


I would like to hear someone discuss this. I don't think I am qualified to answer the question.

 

[Political Junky]

The government can borrow money as long as those that are lending have faith that it will be repaid. There is no other limit. In other words, as long as the world has faith in the United States there will be no problem.

If the ratio between our debt and our GDP is high compared to the rest of the world, investors tend to lose faith and want higher interest which is a factor pushing inflation up. Our ratio is somewhere around 60. Japan's is over 300. But debt to GDP is not the only factor investors consider. Growth potential of the country is also a consideration. Government stability and safety are factors. Since the recession started the demand for treasury bills has skyrocketed driving interest to zero. Finally being a world superpower is a plus.

BTW When I say investor, I am referring to individuals, corporations, commercial banks, and government central banks.

Fortunately, the world's opinion of the US has gone up since Obama became President.