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To: Razzz42; funfan; goodnesswins
Throughout history, governments default and then reschedule debt. Means other governments/countries avoid doing business with the defaulter until it is shown they have debt under control

The USA is not your average Argentina or Russia. The latter could default on their debts and all that happens is that they don't get new ones. Nobody wanted their currency to begin with, so the fallout is limited to their national borders. Your scenario works fine with them.

However the US dollar is the world's currency. The default will drop its value like a stone. Why countries and people buy US debt? Because it pays interest and preserves wealth (well, that's how it is supposed to be anyhow.) If the country defaults there is no interest any more; and what do you do with your worthless paper now? You try to sell it. But nobody is buying. It's like buying and selling sand in the middle of Sahara desert. Now someone (namely, me) shows up on the market and wants to pay this "sand" for some real goods - food, oil, or whatever. Will you sell me your stuff for these worthless exchange tokens?

The world will of course immediately stop trading in USD, and will switch to alternatives overnight. What that means to the USA is that we can't buy anything for our USD - oil, fruits, services, and of course our Chinese toys. China will still sell them, but for RMB - and the exchange rate will be set by Bejing; likely to be on par with Weimar or Zimbabwe currencies.

That makes sense because what you want in a fair trade is a fair exchange of value. Someone in China worked for a month and dug up this much ore. You (simplifying here) need to work also for about a month to make a fair offer. Since the USD will be representing pure paper and no labor, the owner of real goods will want something of a known exchange (or direct) value in return.

This all means that the USA will stop in its tracks where foreign trade is concerned. And primarily this is about fuels because America can't exist without them. The reserves will not last, and they will probably not be offered to the public. Once the transportation industry stops, hunger sets in. Once hunger is in, the government loses control. What happens after that we saw in the movies.

27 posted on 01/11/2011 11:03:25 PM PST by Greysard
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To: Greysard

Not good. So what should the US do I really do not have much faith in our congress or our Treasury Secretary


30 posted on 01/11/2011 11:44:20 PM PST by funfan
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To: Greysard

If the Govt cut spending would you still have to raise the debt ceiling?


45 posted on 01/12/2011 9:16:25 AM PST by HenpeckedCon (What pi$$es me off the most is that POS commie will get a State Funeral!)
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