Why SHOULDN'T USA just default on its trillions in debt or at least part of it?...

Why SHOULDN'T USA just default on its trillions in debt or at least part of it?? Lets just get it over with and start again.

ps Im not USA citizen Aussie shitpostyers here but I mean 'WE' as in we're all in this boat brothers

Treasury bills in a given country are the highest ranking, most secure debt in that country. When US tbills get downgraded by credit agencies, it fucks the rating of ALL bonds in the US. This happened recently based just on the US budget deficit, without even a default would would fuck ratings extra hard. So what? So every US company Corp bond gets downgraded lower than tbills. So what again? So that lowers the value of the bond. Lower ranked debt has to pay higher interest. So what again??? Well lots corporations balance sheets are fucked including banks AND other countries who own all kinds of US bonds including Australia and China and lots of rich people who can afford to start wars with a few phone calls. So yeah it's bad

Just bear with my logic. its odd.
So its better to have $trillions owed to someone with the thought they might get it back. (actually who does own that debt)
Then to have them not ever get it back.
OR should I not even think about debt in this way?
p.s I'm not anti/pro FIAT or GOLD just pro markets and capitalism.

Since the USA is constantly running a budget deficit, they are basically constantly borrowing. So while defaulting on the existing debt would eliminate trillions, it also means they will not be able to borrow more (well, at reasonable interest rates anyway). And if they can't borrow more, they basically fall apart and likely cease to be a country.

A) The value of the dollar would plummet

B) A run on the banks, banks would fail

C) Whales would leave the country

D) US Govt would never be able to issue bonds or accept foreign loans again

So basically the end of America.

It's a pretty fucked situation currently, but as long as we keep paying on the debt and work to curb it we can save the ship.

Print money

>US Govt would never be able to issue bonds or accept foreign loans again
That's bullshit and you know it, as long as you have a solid basis to promise repayment (such as half a continent and taxation rights on all the economic activity in it) you will be loaned money.

>why are you lending to them, they already defaulted once!
>yeah but that happened once in history and the new regime promised never to do it again, besides they're not going to start missing payments right after defaulting, it should be safe to lend to them for a few years...
and so the cycle begins anew

OP here, more odd logic from me.
Sell a load of USA gold to China if they're in the mood for buying gold. would this help pay some debt?

Usa owes china like 1200 billion dollars worth of debt

China should just ask for it back in the payment of gold desu

>he thinks fork knox did not sell all their gold ages ago

Thats what Im getting at, yes. Put the geo political differences aside and swallow some pride on ALL sides and sort this issue .THEN we can start all over again. thats my odd logic.

I don't know really, Im just saying.

>go bankrupt
>lose all credibility
>shit's fucked

credibility is not just a economic issue USA has been very succesful economically over the decades. It just now the doubts have taken the stage. yes/no

Sovereign debt (normally) can't be defaulted on because a country can always print more money. What you see happening in Europe is an anomaly because EU countries have given up some of their "sovereign country"-ness in the pact.

OK does that mean the debt of say ,Greece, is not seen as sovereign debt as much as it was BEFORE they joined the EU

the alternative to my post could be a deal to negotiate a different payment plan at different rates etc is this what they are doing now maybe?

It could.

That's some real Die Hard 3 lore about how much gold the US really has.

It's possible the reason we keep pushing the debt so high is many people in Washington know we are sitting on Trillions in gold bars.

There's no reason to default. The Fed can just print more money to pay off some of the debt or the federal government can increase taxes.

Another thing

Government debt is a good deal for the US as long as we can inflate our way out of it

>we can save the ship
The SS America?
The country is basically backed by a powerful military and all economic crashes end in war. It's gonna be a mess, but then it will be OK if enough people die.

Thats the old saying "Need a good war to fix the economy"
wWll a currency war suffice?

# will a currency war suffice

A lot of the debt is owned by US government agencies (like Social Security). Stealing from that fund (instead of borrowing from it) is an easy way to piss off ALL US citizens. Mutual funds (and, consequently, US citizens especially in retirement funds) own another big chunk of the debt.

Friendly nations also own a decent amount of our debt. We generally don't want to turn them into unfriendly nations.

What happens if the US defaults on its debt? It pisses off its skilled labor who will want to go to a different country that won't just steal their money. It also pisses off "friendly" nations who could entice the US's skilled labor to immigrate in retaliation (and also stop supporting the US in wars).

In short, probably a bad idea.

Another odd piece of logic:
>Fiat currency is despised by Socialists
>Gold backed currency is their choice.
>Both GOLD and FIAT are embraced by capitalists equally

It has nothing to do with how Greece's debt is seen. The cold hard fact is that Greece is not legally allowed to print money to cover its debts.

ok yes, i see what you mean.

Debt isn't bad

because that owed debt is the only real deterrent to a future end of world conflict with belligerent china as resources become scarce and populations grow

Do you favor GOLD or FIAT back currency? Just out of curiosity

The US dollar and Treasury debt are the center of the global financial and economic system.

The huge US debt is an intentional policy decision. In 1944, Bretton Woods set up the dollar as the global reserve currency, where every other currency was fixed to the dollar and the dollar's value was fixed to gold. This stabilized the world economy by backing the value of non-dollar currencies which were fucked by the war. However, Bretton Woods was unsustainable in the long run because 1) using the dollar meant the whole setup depended on the US sustaining a permanent trade surplus, and 2) the gold standard is a terrible outdated idea.

The US surplus broke down for several reasons. First, the US wanted to bolster West Germany and Japan as part of its Cold War strategy of encouraging strong regional democratic allies and also to make the deutschmark and yen secondary "pillars" to strengthen the overall dollar-centered system. In addition, there was a severe dollar shortage in most of the world as the US had a huge trade surplus and dollars were the only currency worth anything at the time. For all of these reasons, the US systematically bolstered European and Japanese economic development by allowing them to set up protectionist policies, which let them reduce their trade deficits with the US and acquire dollars. And of course, the US was half of world GDP shortly after WWII and obviously the relative size of the American economy would diminish as others recovered. After a couple decades, the United States lost its trade/manufacturing advantage and began consistent trade deficits. Look up the Triffin dilemma: the US both had to provide dollars to everyone else, which ensures deficits, but confidence in a currency depends on maintaining a surplus. It's called a dilemma for a reason. This couldn't last and the dollar became overvalued.

Speculators began to attack the dollar, and France/Britain started demanding to redeem dollars for gold. The US realized the system couldn't last, leading to the Nixon Shock where the dollar's convertibility to gold was ended. Thus we entered into today's setup of floating exchange rates.

However, the dollar remained at the center of the global financial system as the reserve currency. This is for a number of reasons, including the US's dominance as the world superpower, but one of the most important is that the United States keeps itself more open to capital inflows into its debt than anyone else. The US Treasury market is the deepest and most liquid in the world, and any foreign government can buy a ton of US bonds and all America will do is grumble. In contrast, most other countries will not allow foreign governments to make unlimited purchases of their debt and will actively work to offset these purchases in a way that the US Treasury Department will not.

Why do countries not like foreign purchases of their debt? Because it causes that country's currency to rise, putting them at a trade disadvantage with everyone else. Every other country complains about the dollar being the global reserve currency, but no one aside from the United States is willing to shoulder the burdens of supplying its currency freely to the rest of the world because this lowers your trade competitiveness and therefore creates rising debt and higher unemployment. Japan wants its currency to stay low, and so does China and Germany, so these countries run extremely high current account surpluses while America runs extremely high current account deficits. This is all entirely structural. The US has continued to keep the dollar the global reserve currency because of inertia and the political influence/prestige it gains at the cost of economic growth, and also to provide the dollar as a common good that facilitates world trade and benefits many of its closest allies.

Can this last indefinitely? Probably not. Global reserve status gives prestige, but Americans are getting more sensitive to the costs of a political benefit that is less relevant in a post-Cold War world. As seen from Bernie and Trump, isolationism is entering the American mainstream.

Add to that the rise of fracking and less dependence on foreign oil, and the US gets less benefits from global reserve currency status today than it has ever before.

Japan, Greece, Italy, and Portugal will be the first to default.

ITT : people with no faith in the system yet still believe the system will act appropriately

OK lets see if i am any where near understanding this. if China has a load of US dollars does this make them the chief supporter the US as reserve status?( still buying US debt and not attacking it)

Secondly Is this the next logical phase then .for the USA to(hypothetically) become a manufacturing hub of the world along with other countries, China becomes the consumer of world replacing the USA which was the traditional Consumer (is that correct?) and those items from USA . making the YUAN the reserve then China must maintain the surplus. In the same way the USA did But without the wars.

Watch as the capital flight becomes huge.

Nobody would lend to you leading to a bigger credit crunch than 2008. The whole nation would become like Detroit.

The only winners would be China and Europe.

No, you're nowhere near understanding.

The world needs US dollars more than the US needs the world. China's entire economy relies on a weak yuan exporting against the global reserve currency USD. You could say China has no choice but to support the dollar and buy Treasuries in order for its economy to grow. Also, if China ever tried dumping its Treasuries it would decimate the value of its own FX reserves.

The yuan will never be a reserve currency because by definition that requires China to be completely open to foreign buyers and governments purchasing Chinese debt in order to supply the world with as much yuan as they want. As I explained before, the US is the only country willing to bear that burden and China is the last country to want a strong yuan or foreign buyers for both economic and political reasons. In addition, no one in the market trusts the Chinese since they are authoritarian market manipulators with unreliable property rights and rule of law, so the yuan will never be considered a safe haven asset either.

Running on a budget deficit isn't a bad thing as most of the debt is owed to the country itself. only 8% of debt is owed to China which they are in bonds and they do not impose a threat. The only real problem about running on a budget deficit is that IF one day the dollar isn't trusted anymore and interest rates rise.only then the USA is fucked. other than that they WANT to run in a budget deficit as it does go along with their way of running the country.

I my post I was ,I suppose, swapping the roles of the USA and CHINA.(now I know thats just impossible ) but would that help the worlds economy?( IF China take the responsibility of supplying the world with Yuan AND the USA dollar lowered so they become one of the cheapest source of exports/manufacturing} Chinese manufacturing is treated like the JAPANESE economy of the preWW2 a protected market. Just humor me with these fantstical ideas hhahaha

Then would the USA be able to export all around the world and the Chinese might keep their manufacturing within their own country.
Like not importing US goods but the rest of the world can buy from USA instead of china??
Is that any where in the realms of possibility. Again I AM NOT BEING STUPID ON PURPOSE, JUST TRYING TO COMPREHEND IT ALL.

>China has a load of US dollars

No, this is the most common myth- US citizens, pension funds, mutual funds have the biggest load of US dollars/debt, you default that, you end up screwing most Americans over first before China

How would China and Europe benefit from US collapse when US market creates demand for their manufacturing and services?

OK.! Im the original Poster, I am also ready to retract the 'USA should default' opinion, it was just to stimulate some banter on the topic, generally Im curious to understand WHAT they will do next (like all of us i suppose)

Thats what the musings in this odd fantastical idea here and here