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What happens to the US economy and its people if it can’t pay its debts?
By Rose | February 16, 2008
Helping Hand IT asked:
We live in a time of record national and trade deficits. (No doubt due to complete mismanagement and congressional incompetence). What happens to the US economy and its people if it borrows too much money and it can’t pay it back? How does this affect today’s children?
Kiefer
We live in a time of record national and trade deficits. (No doubt due to complete mismanagement and congressional incompetence). What happens to the US economy and its people if it borrows too much money and it can’t pay it back? How does this affect today’s children?
Kiefer
Topics: US Economy | 3 Comments »
February 19th, 2008 at 3:33 am
The bank repossesses the nation, flattens it with a bulldozer, and turns it into one big theme park. Except they’ll still keep a number of the factories active, so Canada can still get its daily supply of acid rain.
February 21st, 2008 at 4:44 am
It isnt a great situation, and I’m not a trained economic professional. However, you have to think about the countries that own our debts. In most situations, the U.S. citizens are major customers of the industries in these countries. So in a practical sense, these countries would be risking their own economies, and the world economy in general, if they were to seriously damage our spending capabilities. Sort of like the economic version of M.U.D. (Mutually Assured Destruction).
February 24th, 2008 at 5:45 am
The U.S. is obliged to pay back it’s debt, and if there was a sudden bond sell off, the U.S. would be forced to either raise rates till people want to buy bonds or the U.S. will have to print money to pay for the bonds (what got Latin America in a jam). More money will be required to buy less goods which would cause inflation. With the new bankrupcy law, people that default will still have to pay so that means more money going to pay off debts and less money to buy stuff. This can lead to a recession or depression. The last time the U.S. savings rate was this low was during the Great Depresssion. A resession/depression with inflation is called stagflation and that’s what Japan recently got out of and what the U.S. suffered in the ’70s.