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The Consequences of Federal Default

Discussion in 'Off-Topic' started by KMRblue1027, Oct 8, 2013.

  1. KMRblue1027

    KMRblue1027 The Crown!

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    Since time actually seems to be running out on passing a budget, we been in a shutdown for over a week now what exactly would happen if the US defaulted? I can't really find a good either historical or predictive model. Anyone with an economics or law background care to chime in?
     
  2. galdre

    galdre Emperor

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    Most of the top 1% would profit, and the masses would suffer.

    So pretty much business as usual.
     
  3. Antilogic

    Antilogic --

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    First, just to be clear--the Congress could still raise the debt ceiling while keeping the government shut down, or pass a budget so draconian that it brings the deficit immediately to zero. In both cases, no default would occur.

    Most experts say the consequences are unpredictable but bad. Many nations have explicit clauses written into their bonds that say what happens in the case of default. The US treasury bonds do not have this language because it was never perceived to be necessary. As I understand the structure of the current payment system, it's impossible as of right now to prioritize particular payments out of the treasury.

    So TL/DR is that particular payments are not, as of right now, guaranteed or prioritized over others, and there's no way to actually do that before the deadline.
     
  4. Tahuti

    Tahuti Writing Deity

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    You can't predict what will happen. That's a fools endeavour. Even historical defaults are not necessary comparable with what might be happening soon.

    However, the real weakness is not default. The real weakness is prolonged government shutdown. If the Federal government becomes a useless husk that costs the states only money, it may become tempting to secede. It probably won't come that far, but this is an obvious weakness.
     
  5. bhsup

    bhsup Deity

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    Solution.
     
  6. KMRblue1027

    KMRblue1027 The Crown!

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    A one way ticket to a depression?
     
  7. Antilogic

    Antilogic --

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    Nah, we'll just end the special preferences for capital gains and carried interest and tax them at the regular income tax rate. Then jack the top marginal rate up to 90% like it was under that evil commie Eisenhower. We'll be able to pay down that debt real quick and have more than enough to spare for investment.
     
  8. KMRblue1027

    KMRblue1027 The Crown!

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    If only... If only...
     
  9. bhsup

    bhsup Deity

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    If we can come out of the depression with a functioning economy, government and budget that is actually paying off our debt and not adding to our deficit anymore? Yes, that's worth a depression.
     
  10. Antilogic

    Antilogic --

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    I'm certain the average rich guy on Wall Street would be quite depressed the gravy train came to such an abrupt end.
     
  11. KMRblue1027

    KMRblue1027 The Crown!

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    Considering the current political climate, a major depression probably would be the end of the United States. Is that your plan?
     
  12. Antilogic

    Antilogic --

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    Or it could inaugurate two decades of evil Rooseveltian socialistic progressivism. So yeah, end of the country according to the teahadists.
     
  13. KMRblue1027

    KMRblue1027 The Crown!

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    I'm not sure if that could happen this time though. Was the US as fractured during the 20s, and the whole mass media system begs the question of who's side they are on?
     
  14. illram

    illram Deity

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    Well one of the consequences would be a fascinating political and legal dilemma. Does the President ignore Congressional inaction and continue borrowing the money anyway?
     
  15. Cutlass

    Cutlass The Man Who Wasn't There.

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    We could accomplish the same thing without a depression. All we need to do is toss all the Teahadists in Gitmo as illegal enemy combatants out of office.
     
  16. DinoDoc

    DinoDoc Deity

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    Which Teahadist scum is being quoted here?:
    Additional quote from the scumbag:
     
  17. Murky

    Murky Deity

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    I think people like Sen Cruz are far more dangerous than most realize.
     
  18. KMRblue1027

    KMRblue1027 The Crown!

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    It's Obama and you can clearly put together logically that 2006 is very different from 2013. We should have had a surplus throughout the entire Bush Administration and Obama was arguing for repelling tax cuts not cutting spending. If taxes could be raised back to Clinton Era levels and the Capital gains loophole nonsense was gone we wouldn't have this problem would we?
     
  19. Kyriakos

    Kyriakos Alien spiral maker

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    Considering that the US, only ten years ago, or at most 12, at that all-important 2001, was still a massive economic force (despite being infested with a lot of problems like other western countries) and that now almost complete erosion has manifested (including a rather frightening social break-up on very alienating lines, often even of the entirely racial type) i wouldn't be hopeful it can recover, and pull the rest of the west to recovery too.

    In fact it seems that the opposite will happen, and possibly even soon. I do hope, though, that things will not get hellish. Like i said, i do not like at all how they are already looking, though, and there is nothing to signify a reverse of the collapse.
     
  20. downtown

    downtown Crafternoon Delight

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    We are not even CLOSE to that level.

    A shutdown is a huge pain in the butt. It puts people out of work, is devastating for the economies in Maryland and Virginia, and can have long-term repercussions...but it also doesn't impact the day to day lives of a LOT of Americans. Defaulting on our credit obligations absolutely will.
     

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