Zone1 Would a "debt default" strengthen the dollar?

[jwoodie]

I know this sounds contrarian, but I think that exposing the boogieman of a "debt default" (i.e., not borrowing more money without spending cuts) would actually strengthen the dollar as investors realize that this would actually be a step towards financial resonsibility. The greatest fear the Democrats have is that they will be called out on their doomsday political threats. If the GOP hangs tough, the Dems will cave in and try to claim they were being responsible statesmen to save America. Alternatively, if the Dems try some budgetary trickery to authorize more borrowing, they will lose all credibility about their claims of reducing the U.S. debt and deficits.

What do you think will happen to the dollar if the debt ceiling is not immediately raised?

 

[jotathought]

Not sure .. but those Democrats, that procrastinated, ignored and punted the debt ceiling problem to Republicans, better step up to the plate and negotiate.

 

[shockedcanadian]

Over time maybe. In the short term I couldn't imagine this outcome strengthening the dollar...

 

[Vrenn]

I know this sounds contrarian, but I think that exposing the boogieman of a "debt default" (i.e., not borrowing more money without spending cuts) would actually strengthen the dollar as investors realize that this would actually be a step towards financial resonsibility. The greatest fear the Democrats have is that they will be called out on their doomsday political threats. If the GOP hangs tough, the Dems will cave in and try to claim they were being responsible statesmen to save America. Alternatively, if the Dems try some budgetary trickery to authorize more borrowing, they will lose all credibility about their claims of reducing the U.S. debt and deficits.

What do you think will happen to the dollar if the debt ceiling is not immediately raised?

The default has never happened before. The Feds are trying to dust off some old laws and policies but this was never supposed to happen. Will it strengthen the dollar? No. Just the opposite. Right now, the US has a good credit score and the percentage it borrows at is low. If you don't know, even a private citizen with poor credit pays more for almost everything. Think on that while everyone in Washington is playing brinkmanship.

 

[Dwell]

Think on that while everyone in Washington is playing brinkmanship.

Good point! Makes you wonder who elected everyone in Washington.

 

[Harpy Eagle]

Alternatively, if the Dems try some budgetary trickery to authorize more borrowing, they will lose all credibility about their claims of reducing the U.S. debt and deficits.

When have the Dems every talked about reducing debt and deficits?

When have the Repubs ever done anything but talk about it?

 

[Sactowndog]

I know this sounds contrarian, but I think that exposing the boogieman of a "debt default" (i.e., not borrowing more money without spending cuts) would actually strengthen the dollar as investors realize that this would actually be a step towards financial resonsibility. The greatest fear the Democrats have is that they will be called out on their doomsday political threats. If the GOP hangs tough, the Dems will cave in and try to claim they were being responsible statesmen to save America. Alternatively, if the Dems try some budgetary trickery to authorize more borrowing, they will lose all credibility about their claims of reducing the U.S. debt and deficits.

What do you think will happen to the dollar if the debt ceiling is not immediately raised?

If the Republicans did it during the normal budgetary process I would agree. It would show a commitment to holding down spending.

This behavior is not that positive behavior. Instead this shows an unwillingness to honor the appropriations of a previous Congress. This behavior makes the United States a very unreliable debtor.

The intent of the Freedom Caucus, at the behest of Trump, is to sew chaos. Chaos caused people to fear and to historically turn to a strongman which Trump fancies himself. In Trump’s and their mind, creating the chaos under Biden will help return Trump to office. That intent is their whole intent.

It’s obvious reducing the deficit is not their intent. They want to increase military spending which is over half of the discretionary budget. They refuse to raise revenue. The last time we actually had a surplus under Clinton, cutting spending and raising revenue was part of the blue print. If they were serious they would follow the same blue print.

This action is about chaos full stop.

 

[Orangecat]

I know this sounds contrarian, but I think that exposing the boogieman of a "debt default" (i.e., not borrowing more money without spending cuts) would actually strengthen the dollar as investors realize that this would actually be a step towards financial resonsibility. The greatest fear the Democrats have is that they will be called out on their doomsday political threats. If the GOP hangs tough, the Dems will cave in and try to claim they were being responsible statesmen to save America. Alternatively, if the Dems try some budgetary trickery to authorize more borrowing, they will lose all credibility about their claims of reducing the U.S. debt and deficits.

What do you think will happen to the dollar if the debt ceiling is not immediately raised?

Interesting scenario. If you keep printing dollars, their value declines. It stands to reason that turning off that printing press would stabilize value.

 

[Sactowndog]

When have the Dems every talked about reducing debt and deficits?

When have the Repubs ever done anything but talk about it?

The budget was in a surplus under Clinton.

Obama lowered the deficit handed to him by Bush and put in place the sequester.

GW blew apart the surplus and ballooned the debt.

Republicans killed the sequester under Trump and skyrocketed the debt.

Most of the increase in the deficit since the 80’s has been the result of Republican Presidents

 

[Captain Caveman]

I know this sounds contrarian, but I think that exposing the boogieman of a "debt default" (i.e., not borrowing more money without spending cuts) would actually strengthen the dollar as investors realize that this would actually be a step towards financial resonsibility. The greatest fear the Democrats have is that they will be called out on their doomsday political threats. If the GOP hangs tough, the Dems will cave in and try to claim they were being responsible statesmen to save America. Alternatively, if the Dems try some budgetary trickery to authorize more borrowing, they will lose all credibility about their claims of reducing the U.S. debt and deficits.

What do you think will happen to the dollar if the debt ceiling is not immediately raised?

If a country defaults on it's national debt, it's currency will devalue and I suggest you don't keep your savings in one bank account, put it in several and even look at having it invested abroad. House prices will fall and unemployment increases. Then the country's credit rating will be impacted on, so other countries will be reluctant to deal with them, and if they do, they will want higher interest terms.

 

[candycorn]

Would a "debt default" strengthen the dollar?​

no

 

[WinterBorn]

If the Republicans did it during the normal budgetary process I would agree. It would show a commitment to holding down spending.

This behavior is not that positive behavior. Instead this shows an unwillingness to honor the appropriations of a previous Congress. This behavior makes the United States a very unreliable debtor.

The intent of the Freedom Caucus, at the behest of Trump, is to sew chaos. Chaos caused people to fear and to historically turn to a strongman which Trump fancies himself. In Trump’s and their mind, creating the chaos under Biden will help return Trump to office. That intent is their whole intent.

It’s obvious reducing the deficit is not their intent. They want to increase military spending which is over half of the discretionary budget. They refuse to raise revenue. The last time we actually had a surplus under Clinton, cutting spending and raising revenue was part of the blue print. If they were serious they would follow the same blue print.

This action is about chaos full stop.

The fact that neither party wants to actually do anything when the budgetary process is going on speaks volumes. But the party not in the White House always tries to sound sanctimonious, while they are guilty of the same idiocy.

Screw the ridiculous stuff we hear about from them. Balance the damned budget.

 

[multivita-man]

When have the Dems every talked about reducing debt and deficits?

When have the Repubs ever done anything but talk about it?

Yep, neither side is being serious about this. Dems are addicted to transfer payments and Republicans are addicted to tax cuts for their wealthy donors (some Dems, too, actually).

Sometime back in the 1980s, both parties started believing that (fiscal) gravity wasn't real.

 

[multivita-man]

I can't imagine any scenario in which a default helps the dollar. If they can hammer out some deal to avoid a default that actually leads to fiscal sanity, that probably would help the dollar in the near term. But actually missing the x-date? I can't see how that's anything other than an instant recession, and possibly much worse.

 

[Sactowndog]

The fact that neither party wants to actually do anything when the budgetary process is going on speaks volumes. But the party not in the White House always tries to sound sanctimonious, while they are guilty of the same idiocy.

Screw the ridiculous stuff we hear about from them. Balance the damned budget.

I’m all for balancing the budget but it’s much harder now that the Boomers are all retiring. At the moment just reducing the percent of GDP would be nice.

Any authentic person knows to make any cut you have to:
* Reform Entitlements being Medicare and Social Security
* Defense is over half of Discretionary spending so you must cut defense
* get revenue back up to at least 20% of GDP which is where it was under Clinton. It’s back up to 19.1% but was 18% or so under Trump.


If you don’t hear those three things to your point they are only performative.

 

[Sactowndog]

Yep, neither side is being serious about this. Dems are addicted to transfer payments and Republicans are addicted to tax cuts for their wealthy donors (some Dems, too, actually).

Sometime back in the 1980s, both parties started believing that (fiscal) gravity wasn't real.

Well to be fair in 1991 we had a surplus. So the roadmap to getting there is clear. It has been done before.

 

[Sactowndog]

If the Republicans did it during the normal budgetary process I would agree. It would show a commitment to holding down spending.

This behavior is not that positive behavior. Instead this shows an unwillingness to honor the appropriations of a previous Congress. This behavior makes the United States a very unreliable debtor.

The intent of the Freedom Caucus, at the behest of Trump, is to sew chaos. Chaos caused people to fear and to historically turn to a strongman which Trump fancies himself. In Trump’s and their mind, creating the chaos under Biden will help return Trump to office. That intent is their whole intent.

It’s obvious reducing the deficit is not their intent. They want to increase military spending which is over half of the discretionary budget. They refuse to raise revenue. The last time we actually had a surplus under Clinton, cutting spending and raising revenue was part of the blue print. If they were serious they would follow the same blue print.

This action is about chaos full stop.

As predicted….

 

[multivita-man]

Well to be fair in 1991 we had a surplus. So the roadmap to getting there is clear. It has been done before.

We may have had a budget surplus for a particular year here and there but the public debt has increased almost unabated since 2002. This chart only goes up to 2020; it's higher now, closer to 120-130% of GDP with no signs of slowing.

I'm fairly progressive but I don't think we can ignore the fact that we have a growing problem. Occasional spikes in debt are one thing but once a nation starts breaking the 100% barrier, that's a headwind. The debt becomes more costly to service.

https://www.economicshelp.org/wp-content/uploads/2011/08/us-debt-held-by-public-1790-2021-labels.jpg

 

[multivita-man]

As predicted….

Bingo. That is the problem: McCarthy and Biden do not have the same level of control over their factions that Obama and Boehner did. And Boehner's control was slipping and simply appearing to be negotiating with Obama is ultimately what forced him from the Speakership.

McCarthy has even less control - much less. He really can't do much independent negotiating. That's the troubling dynamic we're dealing with and why there's a real possibility of a default.

 

[multivita-man]

This behavior is not that positive behavior. Instead this shows an unwillingness to honor the appropriations of a previous Congress. This behavior makes the United States a very unreliable debtor.

Indeed.