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Thread: Hummel: The US Will Default On Its Debt

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    Hummel: The US Will Default On Its Debt

    Faced with this mountain of debt, policy makers will have just two choices: repudiate the debt or engage in hyper inflation to monetize it, Hummel writes. And faced with that choice the Treasury will likely protect the currency and default on Treasuries.
    I shudder to think how our lenders will react if we do this.

    Hummel: The US Will Default On Its Debt
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    Re: Hummel: The US Will Default On Its Debt

    What do you reckon would happen if the US said to China; "you know what? We're not paying you back". And bam, the debt is gone. Seriously, what do you reckon would happen?
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    Re: Hummel: The US Will Default On Its Debt

    No one would ever buy our debt again.

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    Re: Hummel: The US Will Default On Its Debt

    Quote Originally Posted by Metternich View Post
    No one would ever buy our debt again.
    Of course. But i meant, what do you reckon the peoples republic of china would do?
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    Re: Hummel: The US Will Default On Its Debt

    It depends on what we default on, if we defaulted on only a certain quantity of it they would likely just release all that they had and by doing so sink the dollar a la HMS Hood.

    If we defaulted on 'all' of it, in China, the rest of the world would release all that they had and by doing so sink the dollar a la HMS Hood.

    If we defaulted on 'all' of it 'everywhere,' then I can only shudder. Would China attempt to invade Taiwan or something drastic? Likely not. Yet any way you cut the apple, we would be screwed some way or another.

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    Re: Hummel: The US Will Default On Its Debt

    We aren't going to default the debt. All of our creditors seem to strongly disagree, as the United States is still able to borrow money for a very reasonable interest rate.
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    Re: Hummel: The US Will Default On Its Debt

    We are at no risk at all of defaulting on our debt. Yes, we are running up large deficits as a result of the financial crisis and recession, but our debt as a percentage of GDP is still much lower than many other developed nations.

    Worst case scenario, in a decade if its a choice between risking default on our debt or cutting Medicare, they will just cut Medicare.
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    Re: Hummel: The US Will Default On Its Debt

    Quote Originally Posted by SouthernDemocrat View Post
    We are at no risk at all of defaulting on our debt. Yes, we are running up large deficits as a result of the financial crisis and recession, but our debt as a percentage of GDP is still much lower than many other developed nations.

    Worst case scenario, in a decade if its a choice between risking default on our debt or cutting Medicare, they will just cut Medicare.
    Honestly, I don't think it will take a decade to reduce. Once the economy picks back up and the unemployment goes down, the revenue will come in and we will see a large reduction in the deficit.

    I will say this, if a public option isn't put into play, that might not actually be true. Based on the fact that thousands are losing their health care and we are having to pay for said services through emergency rooms which are astronomically expensive, we will be running up health care costs that would probably be able to pay all the industrialized world's health care costs in a decade's time. A public option actually saves us money in the long run and I'm not sure why the conservatives think otherwise.
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    Re: Hummel: The US Will Default On Its Debt

    Quote Originally Posted by SouthernDemocrat View Post
    We are at no risk at all of defaulting on our debt. Yes, we are running up large deficits as a result of the financial crisis and recession, but our debt as a percentage of GDP is still much lower than many other developed nations.

    Worst case scenario, in a decade if its a choice between risking default on our debt or cutting Medicare, they will just cut Medicare.
    Are you sure about your statistics?
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    Re: Hummel: The US Will Default On Its Debt

    Quote Originally Posted by Mercer View Post
    Are you sure about your statistics?
    He is correct. Our debt-to-GDP ratio is historically on the high side for the United States...but other countries have had much higher debt-to-GDP ratios without any financial problems.

    I'm not concerned about the debt we are incurring in the short term due to the financial meltdown. I'm more concerned about our habitually running deficits during good economic times.
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