Bernanke is Wrong - Default will help the economy.

[steelhouse]

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. 

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[hugolp]

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

[Rassah]

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....

[JohnDoeZ]

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

[[Coins!]]

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

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.

[GeniuSxBoY]

Congress would be in complete control of the money supply, not the fed and banks.

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.

[JoelKatz]

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.

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."

[MrGaSp]

Congress would be in complete control of the money supply, not the fed and banks.

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.

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

[steelhouse]

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....

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.

[cbeast]

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.

[imperi]

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.

[haydent]

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

[Rassah]

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.

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.

[BitCointransfers]

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/

[FlipPro]

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

[tvbcof]

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.

[cbeast]

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.

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.

S*** happens.

[GideonGono]

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.

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.

[KFed]

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.

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.

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.

[Melbustus]

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?