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Old 07-18-2002, 11:03 PM   #1
ZeBorgCollective
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Default So what happens when the government defaults on the national debt?

They keep borrowing and borrowing and raising the debt ceiling, what happens when theres no more to borrow? There are only so many US Dollars in existence after all.
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Old 07-18-2002, 11:05 PM   #2
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Government owns the mints . . .

<homer voice> must mint more money <homer voice>

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Old 07-18-2002, 11:05 PM   #3
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Which governments? Russia ? Brazil ? Uganda ? They default all the time.

The US Government will never default. Ever.
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Old 07-18-2002, 11:07 PM   #4
ZeBorgCollective
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The US Government will never default?

Debt increases at 110 million dollars a day, or so I've heard.

National debt at 5.9 trillion and rising.

Minting more money just leads to inflation, or is it deflation?

Anyways, the US dollar would just lose value.

So, do we all die when the US Govt defaults or what?
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Old 07-18-2002, 11:11 PM   #5
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This guy thinks it'll happen, and his reason is a little different from what I've heard elsewhere. He blames it on housing.

Quote:
Most Americans believe that their homes are their last, best retirement insurance. Yet many Americans have mortgaged their homes for 120 percent of value. Their loans are backed with the full faith and credit of the U.S. government through various agencies such as Ginnie Mae, Fannie Mae, Freddie Mac, and the Federal Housing Authority.

The International Forecaster has predicted that ?40 percent of Fannie and Freddie?s loans are going to come back and haunt them. We envision an S&L type bailout of $2.4 trillion down the road. This will be the biggest financial disaster in history.?

The full faith and credit of the U.S. government lie behind these home loans. If the homeowners go broke in an economic crash, they default. If the U.S. government goes broke -- before or after that point -- it defaults, and the holders of U.S. debt ultimately have the right (especially under WTO and globalization) to foreclose on the collateral -- your home loans. In the worst case scenario most of the United States could legally be owned by all of the countries holding U.S. debt -- better described as T-Bills, or U.S. gold, or U.S. stocks.
He better watch out for the black helicopters
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Old 07-18-2002, 11:16 PM   #6
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If everyone mortgaged at 120% of value, they are not making retirement plans..or at least not very good ones.
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Old 07-18-2002, 11:17 PM   #7
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Quote:
So what happens when the government defaults on the national debt?
Constitution 2.0.
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Old 07-18-2002, 11:19 PM   #8
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you dont want to be around if it happens.
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Old 07-18-2002, 11:23 PM   #9
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Originally posted by: Ameesh
you dont want to be around if it happens.
france has changed govts about 5 times in the past 200 years..it would probably not be an earth shattering event.
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Old 07-18-2002, 11:24 PM   #10
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I am pretty sure that Republicans will blame Bill Clinton.
I don't know what will happen, but I am pretty sure it will suck. It could destroy the US as an economic powerhouse. There are a lot of things that depend on the governments ability to repay it's loans.
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Old 07-18-2002, 11:27 PM   #11
TLfromAI
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Don't worry guys I'll pay for it...WTF who stole my $10 trillion dollar bill?? Well nevermind I guess.
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Old 07-18-2002, 11:28 PM   #12
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Actually most the the debt is owed to the US banks and US people. That's what treasury bonds are. It would actually be a REALLY bad thing to get rid of the debt because then one of the most secure investments in the world would go away. Especially now with the way the stock market is bonds are a good stable investment. And like they said earlier they just slowly print money if they have to.

According to my econ teachers we actually never have to pay back the debt. One of the main problems other countries having debt is they first have to get US currency to pay the debt (since the US dollar is the standard), where the US owns it all already so they already have it.
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Old 07-18-2002, 11:29 PM   #13
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There are only so many US Dollars in existence after all.
err... fiat money (as i believe its called) only represents a small percentage of total us currency... basically, it has no bearing at all.
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Old 07-18-2002, 11:42 PM   #14
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Quote:
Originally posted by: SuperTool
I am pretty sure that Republicans will blame Bill Clinton.
I don't know what will happen, but I am pretty sure it will suck. It could destroy the US as an economic powerhouse. There are a lot of things that depend on the governments ability to repay it's loans.


Of course they will, just as Clinton took credit for saving the economy 2 months into office before anything even came off his desk. The economy goes in cycles up and down. Big booms cause big recessions. With the big boom we had for 6 or 7 years it had to be expected that a recession would follow. But it will turn around just like it always does. Then the US will get more money from taxes and so on. The problem now is with the economy slowing down there is less income to tax.

The real key here is Greenspan is the one who runs the economy in the country, he has the real power. And Congress controls all the money. So basically the president just gets blamed for a bad economy, a good economy, and spending when really they do NOTHING (except propose ideas). Another thing to remember is the economey runs slow. It takes at LEAST six months to see any effects of measures taken. It usually takes 12 to 16 months to actually get any changes from interest rate changes or tax changes.
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Old 07-18-2002, 11:48 PM   #15
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Besides the fact if any countries ask for repayment then we can just invade them, or nuke them. That will take care of the problem.
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Old 07-18-2002, 11:48 PM   #16
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Quote:
Originally posted by: FelixDeKat
Which governments? Russia ? Brazil ? Uganda ? They default all the time.

The US Government will never default. Ever.
Neither will Rome
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Old 07-18-2002, 11:51 PM   #17
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As long as the US population has faith in the dollar, the government will never, ever fault on the debt. We owe the money to ourselves. The government sells bonds to people and banks, and these bonds are considered debt. The government owes my family probably around $10K in the bonds we own. I just bought a six month, $500 CD from my bank. It is possible that the bank turned around and loaned this money to the government. Am I worried that the government won't have the money to pay me back when it comes time for me to cash out my bonds? Absolutely not.

However, if the government DID default on its debt... if the government just decided not to pay back the money it owed the citizens and the bank, then all faith would be lost in the economy.

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Old 07-18-2002, 11:55 PM   #18
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If you think the government is going to default, simply buy gold. Currency wont be worth much and 401s etc will go bye bye. I personally am not going to buy and krugerands today.
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Old 07-18-2002, 11:57 PM   #19
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Can you imagine if that happened? If the people lost faith in the US economy. That is the only thing backing the dollar. If that happened all the materialistic people in the world would be the rich ones. But just think the morgage on a $500,000 house could be paid off with a candy bar. Then you could turn around and sell the house for something that still has value like gold or cars...hmmmmm.
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Old 07-19-2002, 12:08 AM   #20
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the government cannot default because they print all the money. in fact 2/3rd of all printed bills actually sit in foreign banks, because to back your currency with US dollars is safer than backing it with actual gold, since gold is somewhat limited and its value changed rapidly (or drops fast below $300/oz)
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Old 07-19-2002, 12:14 AM   #21
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Any debts could be pay off... but the dollars might not worth much after that.
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Old 07-19-2002, 12:27 AM   #22
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The national debt for the most part is good, and the government will never ever "go bankrupt."

First off, they can raise taxes to pay off the debt. But they don't have to, all they have to do is refinance their bonds when they mature. Simple as that. Or... they can increase the money supply through FED actions. So there will never be a problem paying off our debt.

Also, the debt is held mostly to the American public and businesses. Thus the goverment owes you money and will pay you back with interest.

The only way running a deficit is bad is if it is not used for public investment. If borrowing is for public investment which causes the economy to grow more in the future, the burden on future generations will be less that if the government had not borrowed at all.
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Old 07-19-2002, 12:32 AM   #23
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Quote:
Originally posted by: mskalak
The national debt for the most part is good, and the government will never ever "go bankrupt."

The only way running a deficit is bad is if it is not used for public investment. If borrowing is for public investment which causes the economy to grow more in the future, the burden on future generations will be less that if the government had not borrowed at all.

It's good to here that people actually understand the way the economy works. Maybe you should run for office. I know you are smarter than 90% of the people in government now. And ALL the ones in my state!
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Old 07-19-2002, 12:36 AM   #24
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me taking money and banking class right now.
what would happen is the interst rates on the US treasury securities would go down to levels comparable to AAA corporate bond or so as investors have lost faith in the supposed default free investments, back while Clinton was in office that almost happened when repulibcans were unwilling to raise the ceiling and we got this ceiling issue right now too.
as US can print up lotta money raising inflation, the debt would worth as not much should they go that route and well just print more money, thats the way to go, but inflation would come back and haunt u..
as for greenspan running the economy, its what everyone in business hopes to believe that he runs the econ, he has no control if ppl believe things are gonna go worse, the low interest rates still hasn't gotten us out of troble, stock market still is plumetting and companies not investing...
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Old 07-19-2002, 12:44 AM   #25
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Thanks Peacekeeper100. Thats what getting a 5 on the AP Macroecon test will do for ya.
And what state is this?? Maybe I'll run for office.



<---- might major in Econ at OSU
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