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View Full Version : seeking rpf opinions on fear article "What if the government defaults?"




tnvoter
07-24-2011, 05:03 PM
http://www.slate.com/id/2299460/

"Economic chaos: Massive unemployment, no credit, depleted savings, long lines at ATMs."

small excerpt:

"But the consequences of any default would, ironically, actually increase the size of the government relative to the U.S. economy—the very outcome that Republican intransigents claim to be trying to avoid.
The reason is simple: A government default would destroy the credit system as we know it. The fundamental benchmark interest rates in modern financial markets are the so-called risk-free rates on government bonds. Removing this pillar of the system—or creating a high degree of risk around U.S. Treasurys—would disrupt many private contracts and all kinds of transactions. In addition, many people and firms hold their rainy day money in the form of U.S. Treasurys. The money-market funds that are perceived to be the safest, for example, are those that hold only U.S. government debt. If the U.S. government defaults, all of them will "break the buck," meaning they will be unable to maintain the principal value of the money that has been placed with them."

Sam I am
07-24-2011, 05:06 PM
U know how banks over invested in the late 20s, and then all of that investment became useless?

acptulsa
07-24-2011, 05:27 PM
Sounds more like an argument against the Fed than an argument for more government borrowing to me. But then, I don't believe it. Banks would unquestionably use this as an excuse to hike interest rates on loans where they could without violating the law. But then, what else is new?

So, why is Slate the only one raising this spectre when every other talking head in the world is only talking about who won't get their August checks? Could it be because this is pure speculation, and tenuous speculation at best?

Agorism
07-24-2011, 05:46 PM
We've been over the debt limit since may though.

Even if Obama did follow the debt ceiling, interest on the debt is only 200 billion\year. We could still afford that if it was a priority