U.S. Debt Default Bullish for Bitcoin?

[dasein]

On the off-chance the U.S. defaults and triggers a meltdown of the global financial system, wouldn't this be bullish for bitcoin because large amounts of capital will be desperately looking for an alternative financial infrastructure that can operate independently of the banking system?

[notme]

They will redefine the dollar before they will default.

[glendall]

I was wondering about this as well.  The default is due for tomorrow. While everyone expects them to work out a deal, who knows.  The couple of hundred of people who hold power may have more to gain personally by defaulting the whole country than then care for every other American.

If this happens then I would expect an overnight boost in Bitcoin's USD price. No question.  Though it would be a small, steady and gradual boost... not a big spike.

[ruletheworld]

Non-factor.

+1

[theonewhowaskazu]

It seems as if its clearly bullish for Bitcoin just as much as the Cyprus pseudo-default was, only, like, a thousand times bigger.

The more reasons people have to (A) not want to be affected by inflation (B) want to avoid confiscation of wealth and (C) want to transfer wealth around the world quickly/anonymously, the more Bitcoin will be worth. A US default has the capacity to trigger more of both (A) and (B), so clearly it would help the price of Bitcoin.

[gmannn]

I was wondering about this as well.  The default is due for tomorrow. While everyone expects them to work out a deal, who knows.  The couple of hundred of people who hold power may have more to gain personally by defaulting the whole country than then care for every other American.

If this happens then I would expect an overnight boost in Bitcoin's USD price. No question.  Though it would be a small, steady and gradual boost... not a big spike.

Partial gov't shutdown is tomorrow.  The real event to watch for is the debt ceiling limit increase.  If that doesn't happen then default is a possibility but I don't think it will happen.  We will know in two weeks™ when the deadline that the treasury secretary gave actually arrives.

[smoothie]

Bitcoin on its own given our current broken financial system....is bullish.

Debt default has little or nothing to do with it.

[solex]

Debt defaults and bankruptcies are bullish for fiat currencies as these events make fiat more scarce (deflation). If you think about it a fiat currency system can work indefinitely where balanced sovereign budgets are run, corporate and bank bankruptcy is allowed to happen, fractional lending limits and money printing are constrained to real gdp growth, underpinned by real, not massaged statistics.

Of course all the of the above happens in Fiat Fairy Land where unicorns give rides to children and every grown-up still gets government freebies forever.

In the real world it is when obscene levels of credit creation occur, obscenely bankrupt banks and companies are bailed out by obscenely indebted governments using central banks to print obscene amounts of fiat. All of this is bullish for Bitcoin and brings forward the collapse of the fiat systems.

[theonewhowaskazu]

Debt defaults and bankruptcies are bullish for fiat currencies as these events make fiat more scarce (deflation).

This isn't true when it is the  issuing government (as opposed to a private bank) defaulting. It undermines trust in said government which sort of renders the entire currency meaningless.

[Coinseeker]

World events are only bullish for Bitcoin, if the Bitcoin community convinces itself it's bullish and drives up the price on their own manufactured belief, that world events actually affect Bitcoin.  

[solex]

Debt defaults and bankruptcies are bullish for fiat currencies as these events make fiat more scarce (deflation).

This isn't true when it is the  issuing government (as opposed to a private bank) defaulting. It undermines trust in said government which sort of renders the entire currency meaningless.

It is the opposite.
This stalemate is good for the dollar because it shows that a number of politicians are serious about reining in spending. The USG will stop entitlement spending before it stops bond redemptions at maturity and interest payments.  The equity markets are high in recent years only because of money printing. People think that markets crashing because of the stalemate is "bad" whereas it is a pricing in of the necessary economic (painful) medicine which needs to be taken now instead of an (agonizing) Zimbabwe-like currency collapse taken later.

[theonewhowaskazu]

Debt defaults and bankruptcies are bullish for fiat currencies as these events make fiat more scarce (deflation).

This isn't true when it is the  issuing government (as opposed to a private bank) defaulting. It undermines trust in said government which sort of renders the entire currency meaningless.

It is the opposite.
This stalemate is good for the dollar because it shows that a number of politicians are serious about reining in spending. The USG will stop entitlement spending before it stops bond redemptions at maturity and interest payments.  The equity markets are high in recent years only because of money printing. People think that markets crashing because of the stalemate is "bad" whereas it is a pricing in of the necessary economic (painful) medicine which needs to be taken now instead of an (agonizing) Zimbabwe-like currency collapse taken later.

Once in a blue moon you people need to abandon your weird-ass views and  think logically.

The ONLY basis for the  worth placed in the USD is the faith in the US Government.
A default of the US Government undermines faith in the USG, therefore harming the USD.

The USG owed value to two people: People who own their currency, backed by the full faith and credit of the US Government, and people who own their bonds, also backed by the full faith and credit of the US Government. If they default on their bonds then clearly the full faith and credit of the US Government is useless, rendering the dollar worthless.

According to your twisted logic, a person's credit rating should go UP when they declare bankruptcy since they now have fewer obligations and thus have more capacity to pay you.

[Foxpup]

I was wondering about this as well.  The default is due for tomorrow.

You're thinking of the shutdown. The debt ceiling will be hit in mid-October, the government will run out of cash a week or two later, but won't technically default until the 31st of October, because that's when the interest on the Treasury bonds is due (some say the government will manage to scrape together enough cash to make the payment and then default on the next interest payment on the 15th of November, but that would require an uncharacteristic degree of competence on the government's part). If the government hasn't raised the debt ceiling by then, reality will ensue.

[solex]

Anyone who thinks "shutdown" = "default/bankruptcy" is drinking the kool-aid of the dumbed down mainstream news channels.

The USG is receiving tax receipts for 60% of its budget, and borrowing 40% to tick over. As long as they don't shut down the IRS then tax receipts will come in. It will not default on its bonds, it can pay those obligations. What is at stake is going cold turkey to a balanced budget. Ideally this should happen over a 10 year period. Not overnight. But doing this overnight is better than allowing the existing borrowing trajectory to continue until the point of systemic failure.

What is at risk of being cut is social security (which is unfunded), medicare (hugely wasteful), defense (currently 40% of the world total military spending), food stamps, continued bank and wall street bailouts, ongoing Fannie and Freddie and FHA bailouts, Frankensteins like the DHS and NSA.

[ArticMine]

Anyone who thinks "shutdown" = "default/bankruptcy" is drinking the kool-aid of the dumbed down mainstream news channels.

The USG is receiving tax receipts for 60% of its budget, and borrowing 40% to tick over. As long as they don't shut down the IRS then tax receipts will come in. It will not default on its bonds, it can pay those obligations. What is at stake is going cold turkey to a balanced budget. Ideally this should happen over a 10 year period. Not overnight. But doing this overnight is better than allowing the existing borrowing trajectory to continue until the point of systemic failure.

What is at risk of being cut is social security (which is unfunded), medicare (hugely wasteful), defense (currently 40% of the world total military spending), food stamps, continued bank and wall street bailouts, ongoing Fannie and Freddie and FHA bailouts, Frankensteins like the DHS and NSA.

One also has to consider the impact of QE ("printing" of USD) by the FED. I mean will the FED keep buying the defaulted US Government obligations?

[solex]

One also has to consider the impact of QE ("printing" of USD) by the FED. I mean will the FED keep buying the defaulted US Government obligations?

That QE printing is exactly the source of money for the 40% deficit spending which is what keeps the USG going. Basically the shutdown is the result of Congress finally ordering the Fed to stop printing.

The USG cannot go bankrupt because it has massive tax revenues which exceed bond obligations (at present). However it has so much committed to other spending plans that pruning those will be an austerity path of Grecian proportions (without any ECB "assistance").

IMHO, in a few days either Boehner or Obama will wimp out and deficit spending will continue as per normal. Dollar debasement to continue, Bitcoin UP.

[theonewhowaskazu]

Basically the shutdown is the result of Congress finally ordering the Fed to stop printing.

Seriously you literally have no clue what you are talking about.

[giantdragon]

I think U.S. govt default (if/when happen) will start new Bitcoin price rally which will result in >$500/BTC.

[Walsoraj]

it is decided. Gov shutting down. No immediate moves in btc...

[David Rabahy]

To me it seems like the US federal government is acting like an addict.  The most deeply seated fear for an addict is they will literally die if they don't get their next fix.  Dispelling that fear always seems impossible.  A short stint of sobriety followed by a devastating binge only reinforces the fear.  The insanity cycle turns tighter and faster until a series of blackouts and then death occurs.  It ain't pretty to watch and the collateral damage is tremendous.

Trillions of dollars of debt, hundreds of trillions of dollars of unfunded liabilities; when (not if) interest rates rise to the point where servicing the debt exceeds income will be an inflection -- pulling back after that takes even greater courage and effort.  The Washington politicians haven't guts to pull back now and won't have it then.

Inflation, i.e. devaluing the dollar, is utterly inevitable.  Defaults are completely predictable.  As always diversifying your investments remains wise.  The only excuse for not including Bitcoin and other forms of wealth preservation, e.g. durable goods, property, gold, rare art, etc., in your portfolio is ignorance.

I am so sorry for the future generations.