Bitcoin Forum

Last Friday Bernanke was on the hill claiming if we hit the debt ceiling and default on our debt, it will be disaster for the financial markets.   Mr. Bernanke also mentioned they buy most of the federal debt.  So if we default on the debt, will interest rates rise?  Yes, but for a good reason.

After default, congress tells the fed to buy all treasuries at ZERO percent interest.   Basically it is Bill Stills dream.   Congress would be in complete control of the money supply, not the fed and banks.

What will happen is saving and checking accounts would be higher than the t-bond rate.   Basically treasury debt would cease to exist.  The fed would not receive the 6% profit on the debt interest they bought with nothing. Thus everyone will have to compete on an equal basis for credit. 

And food would be so expensive that you would work only to eat something.

The biggest problem with a default is that the ratings agencies will downgrade US Bonds from AAA to AA, and all the world's funds that are, by their own contracts, required to only keep AAA securities, will have to dump all their holdings on the market. The result will be a very severe crash of the USD. Even high interest rates will be meaningless in the face of a crash like that.

Also, don't forget that our chief exports are military hardware and USD. It's the only reason we as a country can buy so much more than we export. Kill off one of those....

I agree with OP, US defaults is good.
I know that US have experienced default, but not as a globle currency holders.
At least have to tried once to know how its effects on bitcoin market.
Should be interesting ;D

Pretty sure I can grow my own food, and chickens.    Sure, I wouldn't be a beef farmer, but I can barter.

Financial markets don't impact my food, personally.

Omfg. Congress got us in this mess in the first place! Why on EARTH would you consider the above quote a good thing?!?!?!

Congress is what's wrong with the government right now.

We need to fire all of them at the same time. Hire new people and ban corporations from communicating with them.

If only the 14th amendment was a criminal statute: "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned."

And lock them in cells for their terms to ensure no contact. >=D
(just a joke >>)

All it shows is the danger of having fixed contracts.  If the rating drops and they are forced to sell, individuals may again start to buy the old treasuries at 20-25% effective rate.  The old treasuries will still be out there, and pumping out 6% interest every 6 months.  However, if they are forced to sell the price would drop drastically providing a great buying opportunity.

The new debt issued can be done so at 0.1% interest, and the fed would buy 100% of them.   China and Japan would cease to own debt and just hold the cash.  If the United States continues on the path of 10% deficits, Japan and China will be forced to raise prices, buy commodities, and to buy American goods like they are suppose to be doing anyways.

I am much more scared of keeping things the way they are.

I have no fear of the USA going broke. Sure prices will rise and the USD will become the next peso. So what? Simply demand higher remuneration for labor to make up for inflation.

What do you mean, 'so what'? I don't want all my services to cost more (heat, electricity, cell-phone, cable, etc) because of idiotic libertarian ideals.

USA will never default as that would mean government giving up and closing up shop and wars ending. they dont want this instead they want to make it as tough on yo as possible, so say goodbye to social security

I guess maybe I'm just worried that I don't have the guns or ammo to get through a massive economic catastrophe such as that.

RON PAUL TO CONGRESS...


http://www.ronpaul.com/2011-07-19/ron-paul-to-congress-if-debt-is-the-problem-why-do-you-want-more-of-it/

Read this people, not everyone who chooses to use Bitcoin is to be considered a right wing lunatic.

At this point, I believe that a default would help the US economy in the same way a re-boot helps my Windows machine...and is about the only thing which is likely to have any long term effectiveness.  In most cases the machine comes up with the same OS, but at least it is stable for a few weeks.  In other cases the machine comes up running Unix and typically runs well until I no longer wish it to be powered on.

S*** happens.

You don't have any experience with hyperinflation do you? Wages lag way behind prices. You also have to factor in how the govt will respond, most likely with price controls which means massive shortages, rationing and a burgeoning black market with crazy markups.

Better keep your pot dealers number safe. He'll probably be your grocer when the fiat empire comes tumbling down.

NO ONE DOES. If some sort of armageddon comes and we're forced to try and defend our properties, all your firearms will mean very little to someone with molotov cocktails or whatever IED they can manage to construct. I'm not overly impressed with the current state of affairs to put it lightly but lets not get suicidal here.

The fed should conjure up another $15 trillion (sidenote: can you imagine being the guy sitting at the terminal typing in that amount of money to just create?), ship it to treasury, and call it a day. National debt eliminated. At the same time this happens, a balanced-budget (or at least no deficits beyond X% of GDP for X time allowed) amendment should be passed. We'd experience an immediate, one-time inflation of 100%, and that would be that. Any takers?

Throw in a blank check for each person to help pay for personal debts accrued from previous usury and then re-issue money in cryptocurrency and you would have a New Deal 2.0.

You guys.

It's all a big fucking show.

America's biggest export is entertainment, people eat this shit up because it's sooo Tasty! xD

America's biggest export is jobs and money.

Huge inflation and historically high unemployment are not a good combination.  When someone "opts out" of the labor market they need to "opt in" to the crime market if they wish to feed their children on rapidly diminishing savings.  Perhaps not the optimal strategy when the goal is social stability.

Social stability is one of the prime reasons businesses and employees alike aren't itching to relocate to e.g. Chad or Somalia.

I have no illusions as to being one of the "fittest" when it comes to physical prowess or ruthlessness based survival.  When the cries of "eat the rich" are the only thing you hear I will be elsewhere.

Why do you reference yourself in your posts? It's not as cool as you think it is.

Default and reaching the debt limit are two separate and distinct happenings.  If spending is reduced, a default can easily be avoided. The conflation of the two is intentional because Washington would rather do anything than cut spending.  They have to purchase the loyalty of those that keep them in power.

A.  When has the US defaulted before?
B.  People looking forward to a default are ignorant enough but one's thinking that it is going to help their 'bottom line' in the world of BTC transcend into a new realm of... we'll I don't even know the words for it.

They can be swayed.  I'd say many of them can feel the change in the way the wind is blowing.  In terms of political changes of 'allegiance' Look at Dominique Strauss-Kahn, he changed his tune and they promptly politically assassinated him.

How about solving the real problem?  The Global Depression that we are in.  You solve that problem and the debt problem will follow.  As history has shown the more they cut the budget, the bigger the deficit will be.

Something like that.

As part of my plan I'd have a government chartered bank to buy up ALL outstanding Student Loan Debt and refinance it through this bank at 2% interest fixed, this money would pay for the overhead of the bank and add a little back to the Treasury.  The private banks have turned higher education into a cash cow of securities with no risk and all reward. Then restructure individual bankruptcy law to roll back the changes made in 2005 and then go further to make it actually much easier to declare bankruptcy for the duration of the Depression we are in (maybe a 3 year window or until the Depression is over).

You're assuming that cutting spending now will lower the deficit and the overall debt.  This is false.

If you cut the budget in a Depression (which is what we are in) it will lead to bigger deficits.  This might not seem logical at first, but that is the historical reality from the Great Depression, to modern Greece, to pre-Hitler Germany, to recently where all the states that cut spending in the previous year have bigger deficits this year.

The key is understanding why that is and learning that the people proposing that solution that know it won't work (see: IMF) are using it as a tool to turn your country into a fire-sale ripe for a frenzied rape of privatization.

You folks better get sophisticated enough to wake up to this soon because I fear that the IMF monster that we've created will be coming back for us in the near future.

The amount of dollars your services cost isn't what matters.  What matters is how long you have to work to make that money.

A.  1790 and 1933.  There were also several state-level defaults.

B.  I agree.

My employer is based in Australia. If the USD crashes I'm pretty sure I have the option to request payment in AUD. Globalization FTW?  ;D

This would be a bad idea imho.  When the debt becomes due you can just issue new bonds bought by the fed at zero interest.  But, if there is no ceiling increase, Congress could not issue any new bonds as it would increase the debt.  Thus, they would have to cut and as another post said they would choose the program that would give notice by the public, social security.  Social Security is the only government program that sort-of works.  The reason is they government does not spend your money, they just give you cash.  Except for the disability part of the fraud.   Social Security is the only program that will be noticed by the workers.  You could cut medicare and force states like Florida to accept the North Dakota quality of care.

If the bond is say $100 million and when it becomes due issue $100 million in cash, it will not really be the source of the inflation.  The inflation was caused when the bond was first issued, all the new debt minus the debt that is rolled over.

If this makes any sense.  Not increasing the debt ceiling is the same as a balanced budget amendment.

 

1933 was canceling payments of gold but still paying in dollars.  That's different than what a present default would do, it would go from paying T-bills out in dollars to... not paying anything.  For those that say "it doesn't matter anyway, we are bankrupt" then please send me some T-Bills.

1790... I'm having a difficult time finding any information on this that looks legit and can actually give me more than a few sentences on it except for this buffoon:  http://www.swingtradingdaily.com/2011/07/25/who-says-the-u-s-has-never-defaulted/

Who says every time there is a change in gold-backing that qualifies as a default.  Well if you want to define 'default' with as broad a brush as possible then maybe he can shoehorn some of these terms into how he wants but I'm never one for intentionally stretching the language beyond it's definition.  But that also includes those calling what is happening now a 'technical default'.

Do you realize how much spending would have to be reduced to avoid default though?

1) If all discretionary spending was eliminated, including defense, the U.S. would be $50 billion short.
2) Cut 70% of medicare and social security.
3) Or, increase tax revenue by 2/3.

That's just not realistically going to happen, and I'd argue that if any of these things happen, it would mean the end of the U.S. as we know it.  I think that either defaulting or cutting what needs to be cut would send the world into great depression 2.0.

Source: http://money.cnn.com/2011/02/17/news/economy/debt_limit_spending_cuts/index.htm

A HUGE reason expenditures rose and revenues fell is due to the slump in the economy. Tax-paying businesses/individuals are not paying taxes any more, and in turn, the government is now paying out a lot more in unemployment checks and other assistance. If we cut at least something, even if it's not enough, we can hope that once the economy picks up, revenues will as well.

We've heard this Keynesian garbage many times before.  There was a crash in 1922 that was much worse than the one in 1929, but Calvin Coolidge cut the budget. Yes, there was a severe contraction that lasted about 18 months, but then there was a real recovery that lead to the "roaring twenties".  Herbert Hoover and FDR both tried to stimulate the economy and it didn't work.  The New Deal prolonged the great depression by eight years.

Money needs to be put to productive use, but government spending rarely accomplishes that. Borrowing and spending just kicks the can down the road, but the problems get bigger the longer we wait to address them.

Default only occurs if payments on debt are not made.  Other obligations don't count. You say severe cuts aren't realistically going to happen, but they mathematically must happen if the money is not there. Like it or not, we are in Great Depression 2.0 already and the massive deficit spending is akin to living on our credit cards after getting a pay cut.  The longer it takes to face reality, the tougher it will be to deal with.

The odds of default are miniscule.  Geithner, Bernanke, and even the Whitehouse have said they'll pay on bonds even if the debt ceiling isn't raised.  A more likely scenario is a downgrade.  Even if the ceiling is raised, if it's done at the last hour and with no comprehensive budget plan, S&P has already stated they will downgrade.

Even in the case of a downgrade, it's entirely plausible that Treasuries still rally because in a flight to safety, really where else are you gonna go?  Equities on the other hand may get slammed hard.

 

It would rob millions of ordinary Americans (and non-Americans) of a big chunk of their pension.

That's why it would be highly unethical, even if it's true that it's good for the economy as a whole.