So......what exactly happens if the US can't raise the debt ceiling?
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I was actually wondering if someone would get that lol. Thank you!PorkChopXpress said:Made me chuckle.jpblade666 said:
...I'm ok what that.Rednog said:
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Maybe we can tough it out for 3 years and have a lot of taxes. Nah that'd never happen.
To reply to the OP, I think that it's pretty straightforward at first :
What does it mean to dig further down (or raise the ceiling if you'd rather use a prettier expression) ? It means that you owe me 3$, you have to pay me 1$ for the next two days. If the third day you can't pay be my $? Well, I guess there's nothing you can do right ? You don't have a dollar, you're not gonna invent one are you ?
But countries don't work that way, they can't say "we can't pay our debt" because debts are directly owed to the bank, but indirectly they are owed to teachers and cops and Washington officials and the US military forces and helping starving people in Africa? All those people need that money to live (except maybe the officials). So you CANNOT not pay them, so what do you do ? You borrow some more.
Now to go back to our earlier example of you owing me a buck, I'd tell you to piss off, I'm not going to lend you 10$ so you can pay me back the dollar you owe me and then be even further in debt, but countries work that way, cause hey, THEYR COUNTRIZ RITE? THERE NOT GOIN ANIWERE RITE ?
And it could be a sound logic : you'd say we fund you for a few more years and then you'll pay us back because we know that you do get some money every year from taxation so ok, here you go, take you 10$ and pay me back my dollar.
You imagine the rest, every single office comes and has some plans, wether it's going to kill people in foreign countries, or helping the poor get medicare, both of those cost money, choose what you think's right, you'll have to spend anyway.
BUT at some point, countries don't want their governments to be too much in debt and declare a maximum debt amount, TADA, the ceiling is set. Now for the last 10 years, the US has raised it 10 times, mostly to pay for the wars abroad and to cut taxes (statistically mostly on the wealthiest but also on other parts of the population).
But what happens when you CAN'T raise it was the original question ?
Then you default, meaning you go back to your original problem between YOU and ME : you don't have money to pay me, you can't borrow some more to pay me back, what do we do ?
Well, banks have the right to get their money back right ? (even if they already did a thousand times around with all the interests piling up for a century) and a country can't really be illegal right ? So you have to pay.
Here, some shmickitischmack will happen, the federal reserve will probably come in and print some more money or lower the dollar drastically and sell some gold (lowering the dollar example : before 1ounce of gold 100$, after, the dollar is worth less, therefore you need more dollars to buy the same thing right ? So 1 ounce of gold 200$ the federal reserve sells some gold right now and pays of some of the debt with the difference, then raise the dollar and buy the gold back? it's longer and a bit more subtle but basically that's what happens).
So you buy your way out of there, but for a month or two, some people don't get paid.
A debt of 145% of your pib means EVERY SINGLE DOLLAR made in america in ONE WHOLE YEAR should not be spent at all, everyone grows and eats carrots for that time, and all that money is put together to pay back the debt? Oops, that's not enough, you still have 45% remaining? :/
Now what happens after you defaulted and came out of the hole you ask ? Well, banks and China will tell you "remember that time you defaulted, yeah, fun times eh ? Now it means that you're not infallible so we take more risks renting our money to you (to lend = to rent money for a fee and that risk means more expansive margin." Because in finance what is risky is more expansive.
In the long run, having a history of defaulting means you will sink deeper and deeper into the debt. The more you will borrow to buy your way out, the more you'll owe each time. Gradually, you either have to make a BIG raise on taxes or a HUUUUUUUUGE cut on spending. The second one has a tendency to slow the country's growth and in the long term hamper the economy (less cops : more violence in the short term, less teachers, in the long term).
So yeah, all in all, defaulting means ruining the country in the long term.
What does it mean to dig further down (or raise the ceiling if you'd rather use a prettier expression) ? It means that you owe me 3$, you have to pay me 1$ for the next two days. If the third day you can't pay be my $? Well, I guess there's nothing you can do right ? You don't have a dollar, you're not gonna invent one are you ?
But countries don't work that way, they can't say "we can't pay our debt" because debts are directly owed to the bank, but indirectly they are owed to teachers and cops and Washington officials and the US military forces and helping starving people in Africa? All those people need that money to live (except maybe the officials). So you CANNOT not pay them, so what do you do ? You borrow some more.
Now to go back to our earlier example of you owing me a buck, I'd tell you to piss off, I'm not going to lend you 10$ so you can pay me back the dollar you owe me and then be even further in debt, but countries work that way, cause hey, THEYR COUNTRIZ RITE? THERE NOT GOIN ANIWERE RITE ?
And it could be a sound logic : you'd say we fund you for a few more years and then you'll pay us back because we know that you do get some money every year from taxation so ok, here you go, take you 10$ and pay me back my dollar.
You imagine the rest, every single office comes and has some plans, wether it's going to kill people in foreign countries, or helping the poor get medicare, both of those cost money, choose what you think's right, you'll have to spend anyway.
BUT at some point, countries don't want their governments to be too much in debt and declare a maximum debt amount, TADA, the ceiling is set. Now for the last 10 years, the US has raised it 10 times, mostly to pay for the wars abroad and to cut taxes (statistically mostly on the wealthiest but also on other parts of the population).
But what happens when you CAN'T raise it was the original question ?
Then you default, meaning you go back to your original problem between YOU and ME : you don't have money to pay me, you can't borrow some more to pay me back, what do we do ?
Well, banks have the right to get their money back right ? (even if they already did a thousand times around with all the interests piling up for a century) and a country can't really be illegal right ? So you have to pay.
Here, some shmickitischmack will happen, the federal reserve will probably come in and print some more money or lower the dollar drastically and sell some gold (lowering the dollar example : before 1ounce of gold 100$, after, the dollar is worth less, therefore you need more dollars to buy the same thing right ? So 1 ounce of gold 200$ the federal reserve sells some gold right now and pays of some of the debt with the difference, then raise the dollar and buy the gold back? it's longer and a bit more subtle but basically that's what happens).
So you buy your way out of there, but for a month or two, some people don't get paid.
A debt of 145% of your pib means EVERY SINGLE DOLLAR made in america in ONE WHOLE YEAR should not be spent at all, everyone grows and eats carrots for that time, and all that money is put together to pay back the debt? Oops, that's not enough, you still have 45% remaining? :/
Now what happens after you defaulted and came out of the hole you ask ? Well, banks and China will tell you "remember that time you defaulted, yeah, fun times eh ? Now it means that you're not infallible so we take more risks renting our money to you (to lend = to rent money for a fee
and that risk means more expansive margin." Because in finance what is risky is more expansive.In the long run, having a history of defaulting means you will sink deeper and deeper into the debt. The more you will borrow to buy your way out, the more you'll owe each time. Gradually, you either have to make a BIG raise on taxes or a HUUUUUUUUGE cut on spending. The second one has a tendency to slow the country's growth and in the long term hamper the economy (less cops : more violence in the short term, less teachers, in the long term).
So yeah, all in all, defaulting means ruining the country in the long term.
The problem I have with doing that is, the "problems at home," of which there are a crap-ton, will never be totally resolved. So the question becomes, when do we branch out again?Rednog said:
Add to that the fact that the poorest of the poor in our country live better than most of the world's middle 50% or whatever, and our own problems don't seem so terrible. They are bad for us, sure. But there is always someone worse off.
But as far as the debt ceiling goes? I can't help but wonder if defaulting wouldn't be the best thing. Just start over. But then that causes a whole host of problems, and we don't need any more unemployment than we already do.
It is a mess any way you look at it, really.
Your money is a lie. The debt is a lie. All of the financial systems that have ever been made are fake and are designed to fail, even if you think they aren't supposed to. Money, or currency to be more precise, is nothing more than a system to control people. Period. America had over 50% of the world's wealth after World War 2, it had its "golden age" and now we will crumble just like every other nation that has ever existed on this planet. The Aztec's fell, the Roman Empire fell and America will fall as well; and just like America, every other country will fall at one point or another.
YOUR money doesn't mean a damned thing. THEIR money on the other hand...
YOUR money doesn't mean a damned thing. THEIR money on the other hand...
Economic instability aside, I like that our government is coming to a standstill because
"Whenever you have an efficient government you have a dictatorship." ~ Harry S. Truman
"Whenever you have an efficient government you have a dictatorship." ~ Harry S. Truman
not true. we have a good deal of homeless. many of them die of starvation or exposure. Our poorest don't live better than the world's middle 50%. our middle 50% prolly live better than the worlds top 70% or 80%, so I agree with ur point as well, but there are a lot more and a lot poorer people in the US than most realize.frizzlebyte said:
As for starting over, we can't. The world will want their money back. also, being the reserve currency if we default it causes a global economic crisis. And we're way to dependent on imports to restart without money.
I think retreating heavily needs to be done until we rebuild our economy, especially the manufacturing sector. Not fix our problems, but just rebuild our economy and start reducing debt. Then we can go back out again.
The debt ceiling is a threshold we set to essentially say "When we get this much in debt, we must take significant action to get ourselves out." According to the handy-dandy political science class I took last semester, there are two situations in which it is "acceptable" to run a deficit--in other words, continue to spend more than we make (which eventually results in the need to raise the debt ceiling). Those situations are times of war, and times of economic distress.Saucycardog said:
Lucky for us, both of those are going on at the moment, so politicians can continue to laze about and stubbornly stick to their guns without any intent to compromise and still have an excuse. However, since the news media and general public are becoming increasingly worried about our nation debt, they can no longer ignore the problem without looking like the business end of a horse's posterior. So hopefully more news like this will be coming up soon, warming the politicians up to the idea of actually LISTENING to each other rather than just talking at each other.
A better question is what happens if we raise it. The answer is the same thing thats happening right now. Recession and debt.
We need to cut spending and increase the taxpayer base, to reduce the deficit, not raise the amount of deficit we can have.
We need to cut spending and increase the taxpayer base, to reduce the deficit, not raise the amount of deficit we can have.
Simple:Th3Ch33s3Cak3 said:
Because Americans want top-notch government services, health care, police, firemen, a strong military, etc... but they want bargain-basement tax rates meaning, they want the government to magically provide these things without having to pay for them.
The Government will just start printing money to avoid defaulting while slashing services since they can't get any tax rises through congress.
It won't be the start of the ends days
It won't be the start of the ends days
I'm no expert, what I know is inference or what I have picked up from more knowledgeable people, but some things I do recall:
We won't necessarily 'default' on our debt come early August, as the predicted income is 164 billion, with projected spending at 255 billion. 120 billion or so of expenses is the 'required' payments: debt interest payments, social security, medicare, veteran/troop payments, war costs, and I think one other that escapes me currently. The obvious issue is everything bloody else, be it student loans, highway, public education, etc and the fact that since we have hit our borrowing limit, we're essentially forced to pick half of what we planned to fund come August instead of borrowing the difference.
So in order to avoid so many issues, we need to raise the debt ceiling, for there is no real practical alternative in the near term. And regardless of whatever silly rhetoric you pick, be it the president is god incarnate or the devil himself(and the fact that the President isn't the sole controller of the budget), we have been spending more than we make since Clinton's presidency, this was going to happen irregardless, it just happened right during a recovery, so we're forced to take it more seriously.
But as more towards the effects? If we choose not to pay our debts, the value of the dollar will likely drop, loan availability is going to be lower, and obviously the interest will be increased for whenever we request loans in the future(bad credit, higher interest). Across the world, I can't properly guess or even say how wide spread the effect could be, as there must be dozens of nations that collect loans from the US, not to mention our own foreign aid money that will likely be axed in the event we don't raise the ceiling. Most likely, it would start what economist call a double dip recession.
For more local effects, whatever services and programs that are chosen not to be paid are going to essentially stop, be it public schools(teachers aren't going to work if there is no check) federal road projects could end, and hey, the repubs could finally cut spending to Planned Parenthood. Overall, it would bloody suck with services and projects across the nation being put on hold or cancelled altogether.
As for myself on the issue, I'm bloody tired of politics, and people need to wake up and realize its not a 'this' or 'that' solution set. Taxes are among the lowest in recent decades, and expenses are way higher. If you raise taxes AND cut spending, you end up better off. We can either cut 91 billion in expenses, or raise 91 billion from taxes, or, as some have put forth, raise 30 billion in taxes and cut just 60 billion, or any other combination to meet the gap. However, such dealings and changes to tax code cannot be done so quickly, so to manage for the near term, we need to be able to borrow more, else we cut half of our expenses without warning.
*edit* found more accurate budget numbers n fixed, my bad.
We won't necessarily 'default' on our debt come early August, as the predicted income is 164 billion, with projected spending at 255 billion. 120 billion or so of expenses is the 'required' payments: debt interest payments, social security, medicare, veteran/troop payments, war costs, and I think one other that escapes me currently. The obvious issue is everything bloody else, be it student loans, highway, public education, etc and the fact that since we have hit our borrowing limit, we're essentially forced to pick half of what we planned to fund come August instead of borrowing the difference.
So in order to avoid so many issues, we need to raise the debt ceiling, for there is no real practical alternative in the near term. And regardless of whatever silly rhetoric you pick, be it the president is god incarnate or the devil himself(and the fact that the President isn't the sole controller of the budget), we have been spending more than we make since Clinton's presidency, this was going to happen irregardless, it just happened right during a recovery, so we're forced to take it more seriously.
But as more towards the effects? If we choose not to pay our debts, the value of the dollar will likely drop, loan availability is going to be lower, and obviously the interest will be increased for whenever we request loans in the future(bad credit, higher interest). Across the world, I can't properly guess or even say how wide spread the effect could be, as there must be dozens of nations that collect loans from the US, not to mention our own foreign aid money that will likely be axed in the event we don't raise the ceiling. Most likely, it would start what economist call a double dip recession.
For more local effects, whatever services and programs that are chosen not to be paid are going to essentially stop, be it public schools(teachers aren't going to work if there is no check) federal road projects could end, and hey, the repubs could finally cut spending to Planned Parenthood. Overall, it would bloody suck with services and projects across the nation being put on hold or cancelled altogether.
As for myself on the issue, I'm bloody tired of politics, and people need to wake up and realize its not a 'this' or 'that' solution set. Taxes are among the lowest in recent decades, and expenses are way higher. If you raise taxes AND cut spending, you end up better off. We can either cut 91 billion in expenses, or raise 91 billion from taxes, or, as some have put forth, raise 30 billion in taxes and cut just 60 billion, or any other combination to meet the gap. However, such dealings and changes to tax code cannot be done so quickly, so to manage for the near term, we need to be able to borrow more, else we cut half of our expenses without warning.
*edit* found more accurate budget numbers n fixed, my bad.