Complete US Government Financial Collapse

[EatSpam]

Originally posted by: spidey07
I believe so. But I'm not up on global economics.

But if you look at our GDP (I don't recall where it stands as a percentage of the world) and from your statement that would have to be negative or zero (otherwise the gubment would have money) that is what would cause the problem.

people need the goods we produce.

We produce goods? Hahahahhahahahahhahahahhahahah! I look around the basement and everything is made in fvcking China, except for a few tools that I was lucky enough to find "Made in USA."

 

[sandorski]

Originally posted by: AccruedExpenditure

Originally posted by: JS80

Originally posted by: sandorski
I suspect that before the US Government declared Bankruptcy, a Global Financial crisis would occur first pushing the US over the edge into Bankruptcy. As it is now the US is already leaning on Foreign Investment more than what most Investors would tolerate from other Economies. Mainly due to the US's unique position in the World Economy. If a crisis were severe enough, those pouring Investments into the US may not be able to continue, Investing mainly into their Home Countries in an attempt to prop up Domestic Economies instead.

The best policy would be one of decreasing US reliance on Foreign Capital. Any Policies based upon the assumption that Others will continue tolerating the US situation indefinitely are doomed to failure.

You should read up on Macro-Economics.

Fixed... he's right in his diagnosis to the current climate, but incorrect in his prediction

I hope what I stated(not predicted) never happens, but IMO the US is opening itself up for just that sort of event. Not that the US is the only party that needs to take heed.

 

[Finality]

I dont see how defaulting on its debt would be a big deal. Its not that big a deal mainly Bond holders in this case Federal Banks would be screwed out of all there foreign reserve.

It would cause major jitters throughout the financial market but I suspect the Fed would do something just like when the LTCM had issues with all that Russian debt.

US Fed govt debt is considered pretty much bulletproof.

Now if your talking about insolvency thats a different story. In the US you'd see GDP collapse by at least 20% within the first few months of the collapse. I doubt that would happen though. The govt can always issue more debt though the question comes down to what interest you are willing to pay. Right now while all Federal foreign banks are gobbling up its not a big deal, they will buy up the debt regardless of interest rate.

 

[Finality]

I forgot to add that if the US govt defaulted on foreign bonds then we'd see an immediate tumble in the US Forex rates followed by massive spikes in long term interest rates with small spikes in short term ones. That would definetly cause a recession in the US economy, we're talking a stagnant housing market lack of business investement and massive consumer debt increaseses.

Basically it could wipe out peoples retirement money ie their houses. Basically the US should never default on its debt. About 9-10 years ago it wasn't a big deal but these days foreign federal banks are the only ones dumb enough to buy LT us debt at these rates. They are the ones basically responsible for the buyoant housing market cheap debt = more affordable monthly payments = higher real income if you can lower your payments = stronger economy.

 

[CPA]

Originally posted by: joecool
the end of life as we know it ... seriously!

 

[CPA]

Originally posted by: BigJ

Originally posted by: flashbacck
That wouldn't happen overnight. It'd probably take decades and might be seen in the form of a global recession.

What about if all the people/countries the US Government owes money to all called in the loans at once?

Well this wouldn't happen - one because the amount of debt owed to us is greater than we owe.

 

[CPA]

Originally posted by: JS80

Originally posted by: BigJ

Originally posted by: JS80

Originally posted by: BigJ

Originally posted by: So
Global economy would definitely crumble, the population of the US itself would probably be okay, and the administration would likely lose power, but the biggest result would probably be political and military chaos throughout the world. Asia would probably be hit the hardest, as the US would not be able to project its power to defend asia from chinese aggression, leading to bloody, bloody wars.

Now this is a start to what I was looking for.

Can you elaborate at all on your post? It was my opinion that the Asian and European economies would be hurt enormously, but in what ways would they be hurt?

How would the political climate of the world after the fallout affect the economies of the world?

In order for your original scenario to happen, the US economy must enter into deep recession, and GDP growth would have to be negative. In this case, all economies of the world would be negatively affected; Asia, Europe, South America, etc., all trade partners would see a drastic slowdown in their output and/or inventories would build up because orders from the US would decline or cease. If the economy continues down this route, businesses will start to default on their loans and go bankrupt. Financial institutions start to fail. Mind you this will not only be happening in the US but all over the world. World stock and debt markets will fail and world wealth will be erased.

At this point countries will start to point blame on each other (*ahem blame the US*) and probably start some kind of war. After that I can't really say what would happen.

Simply put, failure of the US economy would simultaneously lead to a failure in the world's economy.

Thank you.

What this question was spurred by was a comment made in one of my classes by a student. He proposed that there would be a slight recession in the world economy, but that within 5 years, the global economy would return to a healthy state.

I certify, as a CPA licensed in the state of California, that your classmate is a douche.

And I certify, as a CPA licensed in the State of Texas, that I agree with the CPA licensed in the State of California.

 

[CPA]

Originally posted by: Atheus

Originally posted by: JS80
Are you kidding? Russia was a closed off COMMUNIST economy that had just began to open it's doors. It ultimately failed because it could not make the transition fast enough to compete with the world economy.

A failure in the US economy will directly negatively affect world markets.

True, and we'd lose some food production, some great universities and research labs, and Google, Intel and AMD of course. But would places like Europe and Asia really collapse? The food production wouldn't disappear overnight and places in Africa and South America would hapily grow us food, and the people (the real assets) of companies and universities would presumably move overseas to work.

Europe has a lot financially invested in America. They would definitely feel that pain. And Africa can't feed themselves, how the heck will they be able to feed us?

 

[Finality]

Originally posted by: CPA

Originally posted by: BigJ

Originally posted by: flashbacck
That wouldn't happen overnight. It'd probably take decades and might be seen in the form of a global recession.

What about if all the people/countries the US Government owes money to all called in the loans at once?

Well this wouldn't happen - one because the amount of debt owed to us is greater than we owe.

Your talking about overall debt because of US VC & companies investing abroad, US govt deb is a different story. It gets very different if you include all foreign investment if thats the case then there is a lot more money pumped into the US through stocks and investments, granted its not debt but a crash in confidence in the dollar would have massive repurcussions. Thats why whacko countries like Iran are pushing for an alternative to dollar traded deals ie oil. Even a sudden move in oil from USD to another currency would have a crazy impact on the dollar. I cant even begin to fathom the effect it would have on US dollar forex rates.

Mmore than 90% is owned by Federal Banks across the world, China is fast approaching on the 1 Trillion figure alone.

 

[everman]

World War 3, almost guaranteed. We're talking about complete financial collapse and devestation of the world financial markets. Everything would be in chaos.

 

[NetGuySC]

Anyone here on the see the predictions of this collaspe this June 6?

Here is the prediction ... Iran starts selling oil in euros ( on March 15 I think ) and China is dumping its vast US currency reserves in favor of the more stable euro. Being that other countries will not be forced to hoarde US cash to buy oil then it will start coming back to the US. The Dollar value plummets as China dumps its reserves and other countries will also dump since they don't have to use it anymore to buy oil.

 

[Finality]

Originally posted by: everman
World War 3, almost guaranteed. We're talking about complete financial collapse and devestation of the world financial markets. Everything would be in chaos.

Tin foil hat anyone?

Originally posted by: NetGuySC
Anyone here on the see the predictions of this collaspe this June 6?

Here is the prediction ... Iran starts selling oil in euros ( on March 15 I think ) and China is dumping its vast US currency reserves in favor of the more stable euro. Being that other countries will not be forced to hoarde US cash to buy oil then it will start coming back to the US. The Dollar value plummets as China dumps its reserves and other countries will also dump since they don't have to use it anymore to buy oil.

Doubtful as much as Iran would like to destablize the US its not a market force sentiment so yes in the long term it could be successful, I'd actually see oil traded against a basket of currency with a petrodollar number floating around.....
BTW Iran is less than 1-2% of the worlds oil production even if they did something stupid and sold in Euros it wouldn't even be felt.

China is not dumping US currency in fact they are buying more now than ever. Ever wonder how that trade defecit with China gets so big? China imports here and buys back US debt. Best system in the buy stuff from China and let them deposit the money straight back with the US.

Generally most transactions are handled in dollars mostly due to stability and a general rise in value trend which has held except for these past 4-5 years which has caused some gitters in the financial investement community. Basically if the greenback wasn't safe anymore then what? The Euro only rose because it was the only really visible currency that didn't have a peg set by the central govt. ie China and Japan do, and most Asian currencies keep buying Greenbacks to keep their currency artificially low to drive exports.

Thats the main reason for low interest rates and thus the US housing boom.

 

[DaWhim]

government got the money printer, why would they default on their loan? instead, they will add 3 extra zeros to every bill they print, so the inflation go up 100 times. this is more realistic and the financial market collapse. then there are countries with hyperinflation like this you can look at.

 

[CaptnKirk]

Well documented by the Nations most reliable News-Source

 

[sandorski]

Originally posted by: CaptnKirk
Well documented by the Nations most reliable News-Source

meh, that'll be nothing compared to June 7, 2006 when Elvis will serve Batboy a burnt cheese omellette at a Truck Stop just outside of Pittsburgh. The Batboy rampage will survive in word of mouth tales for millenia. In some distant time Historians will consider such Tales as silly Myth, but we'll know the Truth. We'll know.