What would be the global economic effects if the US were forced to...

[FormerRepublican]

...default on the national debt?

As I watch Bush's ballooning of the national debt in horror, it makes my mind wander to all the potential effects of his borrow-and-spend ways. I have the usual grasp of serious economics - which is pretty much how to handle my own budget, and the niggling sense that something is seriously wrong in our economy that doesn't look good for our long term economic prospects. So for those of you more knowledgeable about dicy and deep economics, what do you think could happen to the global economy if the US actually defaulted?

Would our children be better or worse off? What impact would it have on globalization? Would global deaths from starvation and disease increase dramatically, or barely be affected? Would we end up in another world war as a result?

What are your thoughts on this?

[Nomen Tuum]

1. The IMF would serve up its' special RX

We're talking about the International Monetary Fund, and not Peter Graves' gang here.

The IMF would step in and ORDER dramatic spending cuts and tax increases.

Did you expect Social Security and Medicare in your old age? Forget it, the IMF would eliminate it.

Food Stamps and all other welfare assistance? Forget it, it's gone. Go to the churches.

Money for the arts and education? Forget it, it's gone.

The top IMF priority will be debt repayment and everything else will be ignored until the debt level is stabilized. This is Grover Norquist's wet dream come to life folks and its coming down the track.

[FloridaPat]

2. I think the rest of the world is in better shape than we think it is.

China as a big expanding economy. Europe is doing wonders with the Euro and trade agreements. They are learning to work together. South America is learning to live together. Most other countries can manufacture things. We've lost that ability. I think we would end up in a 3rd world type country while the rest of the world just watches.

Global deaths from starvation and disease will be large once the oil supply starts dropping. However, if the world could get rid of the US consumption, they would have oil for decades.

[APPLE314]

3. WHAT IS OUR MONEY WORTH NOW?

ONLY THE HEAT VALUE IT WOULD HAVE IF YOU BURNED IT.
WE HAVE ALREADY DEFAULTED OUR NATIONAL DEBT WITH A FIAT CURRENCY.

THE GREEKS HAD THE BEST SOLUTION 35 YEARS AGO WHEN THEY DEVALUED THEIR CURRENCY 50%. WHEN THEY DID IT THEY PASSED LAWS THAT CUT ALL BILLS IN HALF, ALL RENTS IN HALF, EVERYTHING WAS DONE 50% ACROSS THE SPECTRUM EXCEPT WHERE THEY INTERFACED WITH THE REST OF THE WORLD. THAT WAY THERE WAS NO EFFECT WITHIN THE COUNTRY EXCEPT FOR A BAD FEELINGS AROUND THE WORLD. BUT, HEY--------- THEY DID IT AND PASSED ALL THE PROBLEMS TO THE WORLD, AND GOT AWAY WITH IT.

THE WORLD WOULD TAKE IT BECAUSE ANY GOOD BUSINESSMAN KNOWS THAT THE FIRST DISCOUNT IS ALWAYS THE BEST ONE. DEVALUING THE CURRENCY IS AN APPROVED METHOD OF DEFAULT.

[Imperialism Inc.]

4. Turn off caps-lock please.

Typing in all caps is considered "shouting", rude and annoying.
Welcome to DU :hi: (and the 'net? :) )

[BillZBubb]

5. What other major nations don't have a "fiat" currency????

We haven't defaulted on anything because of our currency. You are in error.

[Yupster]

6. Teachers and government workers

would be the most screwed of all as their pension plans hold the largest chunks of our national debt.

Does grandma have treasury notes? She'd have her money dissappear too.

On edit, on the other hand, teachers and government workers could have the lost money from the defaulted bonds made up through the general funds of the legislature or the congress, so maybe they'd be just as well off. Where the money would come from would be the legislature's concern. It's not like anyone would lend the government money after they just defaulted their old debt.

[pitohui]

7. your personal budget is not analogous to usa budget

first off, i doubt nuclear countries such as china have purchased shares in your financial success and thus they have nothing invested in seeing you succeed, believe me, the usa is not going to default and leave well-armed investors peeved off and holding an empty bag, as you speculate, in the panic that would follow a nuclear exchange wouldn't be out of the question, when you got nothing left to lose well you got nothing left to lose


second off, you cannot print your own money nor can you really look to ever-increasing technological inventions or development of resources to expand your own finances, whereas usa the world's most productive per capita country already will presumably continue to invent and inovate, thus creating real new wealth, unless you are that rare creative individual, you can't really do that yourself, it takes teams of inventors, researchers, heck, even a blockbuster hollywood movie "takes a village"

if usa defaulted, we would be put on some austerity program such as happens to all other nations that default, your children would starve and if they got ill they would likely be deprived of medicine and die unless we were lucky enough to beg hand-outs, the middle class is eliminated in countries that are put on austerity plans, this is why latin america has had enough of that crap

we are not going to default and now is not the time to be fearful about spending lavishly, big programs like rebuilding/recover of the gulf coast could be a new "new deal" and create incredible future wealth as we develop schemes that will later be used to protect coastal areas elsewhere -- and that is only one example of how spending lavishly on infrastructure and research only saves money in the end

the money going to the war is a wicked waste and i'm angry abt it but it is not going to cause the usa to default

[Kokonoe]

8. I'm no expert, but I would say the rich get richer.

OH SHIT