In this particular case, yours and my -- that is our -- "drunken neighbor" has been pissing away our money and we all live in the same house.
In the event of default, among other things, interest rates on the national debt will go up...meaning that commercial interest rates will go up...and all prices will follow...and we'll have to deal with rampant inflation along with a continuing recession.
Actually, the debt isn't impossible -- it can be dealt with. But it's going to require a.) spending cuts and b.) a growing economy. The U.S. economy is a powerful machine -- if it's allowed to function.
“In the event of default, among other things, interest rates on the national debt will go up..”
How do you figure? If we default we’ve said “you aren’t getting paid.” Who cares about the interest rate if you’re not going to pay it back?
“..and we’ll have to deal with rampant inflation along with a continuing recession.”
We’ll have really rampant inflation when the Fed effectively destroys the currency by monetizing the debt. As they’re doing right now.
As for the recession, take a look at Iceland. They essentially defaulted on their national debt. They got slammed as a result. Big time. But they’re doing better now.
“Actually, the debt isn’t impossible — it can be dealt with. But it’s going to require a.) spending cuts and b.) a growing economy. The U.S. economy is a powerful machine — if it’s allowed to function.”
I beg to differ. The per capita debt AS IT STANDS RIGHT NOW is probably manageable. The problem is not so much that amount as the unfunded entitlements that will come later such as social security that continue to increase and are politically unresolvable.
Also your assumption is that spending will someday be cut and that we’ll have a growing economy. What leads you to believe that either of those will happen let alone both?
For the sake of argument let’s assume that our beloved gop some how wins both houses of congress and the presidency. What in the history of the last 20 years would lead you to believe that they have any more intention of doing the right thing in the fiscal sense than the ‘rats do?
Ultimately default is less of an “if” as it is a when and how.