Wars could cost between 4 and 6 trillion

A false choice. We are not facing bankruptcy. Technically, a sovereign nation cannot bankrupt.

Check your premises on this one, Bill. The US government does not control it's money supply. Private offshore multinational banks do. We sacrificed our monetary sovereignty in 1913 with the Federal Reserve Act.

Therefore, we can go bankrupt and we are facing it.

I'll grant you this, if we were a sovereign nation that controlled it's money supply directly, we couldn't go bankrupt. What would happen instead is hyperinflation. Wars and empires always lead to overspending and eventually a destruction of currency.
 
True that. I note that social services spending exceeds defense spending.

That depends on how you are counting.

Here's something to chew on that is a little more realistic.

http://www.warresisters.org/pages/piechart.htm

Here is how that compares to the rest of the world.

http://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures

No empire, eh?

Stop the wars, cut military spending by 66% (we'd still spend more then China), slash the associated police state (homeland security) spending and save over a trillion dollars a year.

Cut those taxes and let people put them into the economy and create jobs that actually produce things of value. Live in peace and build wealth.
 
Check your premises on this one, Bill. The US government does not control it's money supply. Private offshore multinational banks do. We sacrificed our monetary sovereignty in 1913 with the Federal Reserve Act.

Therefore, we can go bankrupt and we are facing it.

I'll grant you this, if we were a sovereign nation that controlled it's money supply directly, we couldn't go bankrupt. What would happen instead is hyperinflation. Wars and empires always lead to overspending and eventually a destruction of currency.

Sovereign nations cannot go bankrupt. To 'go bankrupt' is to cease operations, to cease to exist as an entity. That means no more government services of any kind. No governance, no military, no services of any kind. That won't happen under any circumstances - even foreign invasion and conquest.

The USA can reach the point where it can no longer service the interest on its external debt. That is the point where a company or individual 'declares bankruptcy' and seeks relief from creditors. That won't ever happen to the USA either, so even in that context the USA won't/can't go bankrupt.

That is not to say our national debt is a good thing, or that our deficit spending will lead us to any good end.

In at least one sense, owing a tremendous amount of money to foreign governments means they will do anything to keep us propped up and running, just so that we can service our debt to them. Our currency is backed by no physical assets; no foreign nation/creditor could lay claim on our national forests or move into the White House for failure to pay.
 
Sovereign nations cannot go bankrupt. To 'go bankrupt' is to cease operations, to cease to exist as an entity. That means no more government services of any kind. No governance, no military, no services of any kind. That won't happen under any circumstances - even foreign invasion and conquest.

The USA can reach the point where it can no longer service the interest on its external debt. That is the point where a company or individual 'declares bankruptcy' and seeks relief from creditors. That won't ever happen to the USA either, so even in that context the USA won't/can't go bankrupt.

That is not to say our national debt is a good thing, or that our deficit spending will lead us to any good end.

In at least one sense, owing a tremendous amount of money to foreign governments means they will do anything to keep us propped up and running, just so that we can service our debt to them. Our currency is backed by no physical assets; no foreign nation/creditor could lay claim on our national forests or move into the White House for failure to pay.

I'm not saying that I agree with this or disagree, but let's carry this line of reasoning through.

If a sovereign nation cannot go bankrupt, how much does our debt matter? How much do these obligations really bind us?

And now, for a slightly different tack. Does this even apply to the US because we do not control our money supply?
 
I'm not saying that I agree with this or disagree, but let's carry this line of reasoning through.

If a sovereign nation cannot go bankrupt, how much does our debt matter? How much do these obligations really bind us?

This is a good question. Many have pondered what it means to be the USA and be in so much debt to foreign nations. Consider that our debt is such that we cannot simply become insolvent without making the rest of the world insolvent too. Unlike Greece, if we go down, there can't be any serious speculation that all other nations would not fall immediately as well. It's serious 'game over' type stuff, a scenario no one wants to contemplate. And as such, any intelligent nation will do ANYTHING they can to keep that from ever happening.

I think it matters only to the extent that we do not actually stop servicing our debts. Even if it means devaluing our currency by simply printing more money to pay the debts with - others have little choice but to accept it. However, it's a MAD situation; if we ever actually stopped servicing our debt, we destroy all economies simultaneously; so it's a weapon that can only be used once.

And now, for a slightly different tack. Does this even apply to the US because we do not control our money supply?

Well, let me propose the alternative. Let's say we do go bankrupt. Then what? How would you envision this unfolding? Would a conglomerate of foreign nations/debt-holders 'take over' our government, assume day-to-day operations of the nation, forcibly remove physical assets or appropriate them for themselves? In what way could this happen?

I have yet to hear a plausible scenario from anyone who posited that the USA *can* go bankrupt as to how this would physically play out. What happens if we go bankrupt? Someone explain the mechanics of what happens in real terms to me! I have asked many - never gotten an answer except that some insist that yes, we *can* go bankrupt; but never what would happen if we did. If there is no 'there' there, then it doesn't exist.
 
Here's an interesting article:

http://www.newsweek.com/2010/03/16/the-world-s-strangest-financial-instrument.html

According to the Bureau of Public Debt, there is $8.15 trillion in U.S. government debt owned by the public. In addition, now that the United States has taken control of the failed mortgage giants Fannie Mae and Freddie Mac, the government is formally standing behind the debts of those two entities, which surpass $5 trillion. Now, let's imagine a world in which the U.S. government, lacking the will to tax or cut spending, can't scrape up the cash to stay current on interest payments and can't roll over debt as it matures. That would trigger a huge decline in the value of treasuries and mortgage-backed securities. The balance sheet of every U.S. financial institution—JPMorgan, Goldman, Citi, your neighborhood bank, the Federal Reserve, money-market funds—would be decimated. There wouldn't be a single solvent bank, insurer, or company in the United States. The large multinational banks, which have significant U.S. operations and plenty of this stuff on their books, would likewise be wiped out. Oh, and foreign holders of U.S. debt—see this list topped by China and Japan—would be toast, too.

So the question is, I think, not if the US *will* go bankrupt but if it is even possible at all. I don't think so.
 
I have yet to hear a plausible scenario from anyone who posited that the USA *can* go bankrupt as to how this would physically play out. What happens if we go bankrupt?

The dollar gets replaced as the international trading currency, which hurts. Foreign investment dries up, which hurts even more. Imports probably dry up too, since the currency will probably inflate beyond all measure and no one outside this country will want to take dollars in payment. The government will lose most of its ability to raise money by selling T-bills. Federal monetary guarantees, like the FDIC, will become meaningless, which means much more risk and uncertainty added to the banking and finance systems. That means much tighter credit among other probable changes. That means less dollars in circulation, less dollars available to consumers, which means a big economic hit. Without governmental ability to prop up the banking industry, the next big bubble like we saw a few years ago will mean another 1929 with failing banks left and right, since the government will not be able to meaningfully intervene. A big chunk of the economy and the population will be devastated without government support - think of all the seniors on Medicare and Social Security, all the industries like defense which are integrated with the government. Science too will go quickly, with an associated hit on the university system, with long term effects in pharmaceuticals and the health industry generally. Any of these sections of the budget could be prioritized above the others, but big cuts will have to be made. And it will all be pretty abrupt.

That's just off the top of my head. The government is well entwined with the currency, the economy, and the population. Look what happens in other countries when the government can't meet their obligations.
 
The dollar gets replaced as the international trading currency, which hurts. Foreign investment dries up, which hurts even more. Imports probably dry up too, since the currency will probably inflate beyond all measure and no one outside this country will want to take dollars in payment. The government will lose most of its ability to raise money by selling T-bills. Federal monetary guarantees, like the FDIC, will become meaningless, which means much more risk and uncertainty added to the banking and finance systems. That means much tighter credit among other probable changes. That means less dollars in circulation, less dollars available to consumers, which means a big economic hit. Without governmental ability to prop up the banking industry, the next big bubble like we saw a few years ago will mean another 1929 with failing banks left and right, since the government will not be able to meaningfully intervene. A big chunk of the economy and the population will be devastated without government support - think of all the seniors on Medicare and Social Security, all the industries like defense which are integrated with the government. Science too will go quickly, with an associated hit on the university system, with long term effects in pharmaceuticals and the health industry generally. Any of these sections of the budget could be prioritized above the others, but big cuts will have to be made. And it will all be pretty abrupt.

That's just off the top of my head. The government is well entwined with the currency, the economy, and the population. Look what happens in other countries when the government can't meet their obligations.

So there you go. Devastated economy. Along with (as I mentioned earlier) a devastated economy in every other nation as well.
All of which means what, exactly? How would this happen? Nations we're indebted to would have to 'call' the loans. Why would they do that, knowing they would destroy their own economies? And what's to stop us from just printing more money to pay (devalued) the loan calls?

I don't think it's possible, and your scenario is just 'very bad economy'. There are no assets to seize, nobody invades and takes over; a 'bankrupt' US looks just like a US with a very very bad economy. No change in ownership. Everybody loses; won't happen.
 
I don't think it's possible, and your scenario is just 'very bad economy'. There are no assets to seize, nobody invades and takes over; a 'bankrupt' US looks just like a US with a very very bad economy. No change in ownership. Everybody loses; won't happen.

I never said anything about changes in ownership or asset seizures. Our currency and our t-bills are backed by the "full faith and credit" of the US government. We become "bankrupt", or whatever else you want to call it, when no one believes the government can back those institutions up anymore. It doesn't even have to be a matter of "calling loans in", and most of our debts aren't really "loans" anyway. All it takes is no one being willing to buy t-bills anymore, and not even mature t-bills must be cashed in, they can be traded with a set price. Propping us up in this case would basically involve China or whomever else spending massive amounts of cash to buy what would be worthless t-bills. No one will do so if they think the US won't be able to pay for them in the future. The t-bill price would plummet, and who would buy them?

The modern economy is a fiat economy, backed up my confidence and the expectation of future returns. We become "bankrupt" the minute everyone else thinks we are.
 
A real quick comment and I'll add more later, if the USD loses it's status as the world reserve currency and we go on an international standard currency unit, this would insulate the world from a US debt default/bankruptcy. The rest of the world could dump holdings in US bonds/currency and buy up the new units of real "value" essentially throwing our country under the bus. Since the US consumer can no longer drive other economies as it once did, the implosion of the US market hits diversified countries economies with much less impact.

And this is exactly what other countries are doing right now. They are diversifying out of US holdings in preparation for an international standard currency.
 

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