Would a default hurt a millionaire more then an hourly worker?

[mdmc]

I assume it would, therefore there is no real risk of default. The rich really won't want to suffer this pain just to make Obama look bad, imho.

[franmarz]

1. The rich would suffer also in a default

I dont think they would suffer as much as us peasants, however they could claim losses at the end of the year where WE could not

[mdmc]

2. let me put it this way

I am poor.
My parents are middle class.

When the housing bubble hit, I lost about $12.oo in my 401k. My parents lost over $70ooo in stock + housing value. If the housing bubble hit me in other ways (expensive gas, food, credit rates) I didn't realize it.

Would the debt default be the same? In other words,
Would the poor barely know it happened?
The middle class lose a big chuck of savings.
The rich lose a major chunk, at least of percentage, of what they have been able to horde.

Is this how it would go down?

And thank you for the reply franmarz.. Peace and low stress and enjoy your day.

[jwirr]

11. Depends, if the social safety need is destroyed with it then the poor

are in great danger of starving to death. There is a difference to a 401K and social security, food stamps, medical programs. The 401K is savings you are planning to use later. The others are supporting many people now and they have no alternative.

While the rich might he hurt they have had ample time to readjust their portfolios to the threat of tbagger defaults. The poor have no such opportunity. We will be homeless, hungry and sick with little option for help from elsewhere.

I also think a default is much different than the housing bubble which did not effect all of us. A default will effect every single person in the USA if not the world.

[elocs]

3. The point is that the rich do not want to suffer at all & will do what's needed to avoid it.

Ultimately, the Republicans' masters, and sadly the masters of many Democrats as well, will give the order to raise the debt ceiling.

There will be no default, but as Democrats we may well feel betrayed by the end result because evidently there are no cherished Democratic values or ideals or programs that our own will not sacrifice on the altar of compromise and greed.

[mdmc]

5. thank you for the reply

I feel that The Powers That Be would never allow "the shiny beacon on the hill" to be tainted by default. So then the only question that remains is how much The Powers That Be will screw the poor and working people of America in order to avoid a default that they themselves do not desire.

[JoePhilly]

4. The middle class would be wiped out.

That's the bottom line.

Let's imagine you have 1 million dollars in the bank, and you lost half of it. You'll be fine.

Let's imagine you make 40k. And your job goes away. You'll lose everything.

Or try this. You have 4 homes. You lose 3. ... you still have one.

You have 1 house. You lose it. Then what?

btw ... the super rich are al ready GLOBAL humans, they aren't American anymore. They have money and assets scattered across the globe.

[mdmc]

6. So what would happen to the hourly worker not making a living wage?

I work with schizophrenics - keeping them safe in community settings and avoiding the expensive inpatient hospital services. I am very skilled at my job and it would be hard to find someone with the education and experience to replace me at my low wage.

Will my job be terminated, therefore causing either higher taxes to house ill people in hospitals or ill people simply no longer being cared for at all?

I mean, we will still be paying for prisons, right? My clients will end up in jail without proper treatment. I doubt the rich want to risk a flood of dangerous desperate people wandering around their gated communities.

What do you think JoePhilly? I am very interested in this speculation. And thank you for your reply.

[jwirr]

12. If the state has enough money to pay you your job is probably safe.

However that is even in question. There was an OP here about a letter signed by the governors to Congress about it. If default happens it will come down to a true supply and demand economy and it will entirely depend on who has money to afford to fulfill their needs.

[JoePhilly]

13. If that's paid for with public money, its probably gone too.

To keep the government running currently, we borrow money, and then pay it back with tax revenues as they come in.

A default will restrict credit, making it harder for everyone to borrow money, including the government.

The crash in 2008, happened in part because financial institutions had been selling each other junk derivatives as if these were top grade investments. When the bottom fell out, all of the financial institutions tightened their lending rules.

Many businesses use credit or revolving debt, to flatten out their cash flow so that they borrow to pay debt, paying down the debt with new income from actual work. When the lending tightened, businesses had to pay bills based almost totally using existing assets. If they had no cash reserves, they had to lay off, sell off, and close doors. Many businesses used a model like this because for a time, having lots of cash laying round seemed like a waste, better to keep the money flowing at near full capacilty all the time. Now, businesses are rethinking that model, hording cash, which is part of why the recovery is as slow as it is. No business wants to get caught with as much debt as they used to be willing to carry.

Most state and local governments have been in the same boat. Which is why they've been laying off people like crazy in the last few years.

Since 2008, financial institutions have slowly been lending more money again. But very slowly. Which slows any recovery.

If we default, lending is very likely to tighten again, perhaps even more severely than last time. Business and government will again be unable to pay its bills using revolving credit.

So, with all this said (and take it for what it is, a perspective from an anonymous person on the web), I think that an hourly worker with no existing assets will be at high risk. Here's another example, 2 true stories. The three guys I mention here are all in their 40s.

1) I have one friend who had a very small furniture moving business. And he hired one of our other friends as an hourly worker. When the economy started to fail, my friend who owned the business had to lay off the hourly guy. The hourly guy moved out of his apartment and back in with his parents. As the economy tanked, the guy who owned the business had to close it down, sold his 2 trucks to a furniture store, and he now works hourly for the furniture store, delivering the furniture. When he closed his business, he had to also sell his home, and move into something much, much smaller.

2) Another friend has been working in high tech for 20 years. He'd been contributing to a 401k for all of that time. Not rich, definitely not poor. When the economy tanked, he got laid off. He was able to dip into his 401k to pay the mortgage. It took a while, but he found a new job, and now he's fine. He had enough assets to ride it out. He didn't lose his home, and as the market recovered, his 401k has grown, although it is lower because he had to pull from it for a while.

My point is that only those with existing assets have a chance to ride out something like this. It will be painful for those with assets, but the economy will recovery at some point, it always does. So they question in, how much do you need to be able to ride it out?

The wealthy have more assets. Their ability to ride out a disaster is greater than those in the middle class or those making only hourly wages.

I think this is also why companies are slower to hire at this time. They are hoarding cash to protect themselves from future economic problems.

[bhikkhu]

18. Retirement accounts would be worthless

...perhaps as the biggest impact. Of course its all speculation, but the most vulnerable part of the economy is not the daily production of labor (which is the foundation of the middle class) but the "stored assets" which are the majority of retirement. They rely heavily on the bond markets, are highly dependent on a stable or growing economy, and leverage "trust" as an inherent value.

[JHB]

7. Take a hit, yes. Suffer? Probably not the right word. n/t

[mdmc]

9. I really believe it is better to be poor throughout life then to be

rich, then poor.

I grew up middle class and now an working poor. I enjoy life and know I have it better then 90% of all humanity. It is only when I think of home ownership, swimming in a pool, affording medical treatment, or going on vacation that I feel the pain of poverty. If I had never known these things the pain would be more tolerable, imho.

[vaberella]

8. Both will suffer. the hourly worker would suffer the most.

Realize very well. On one scale the Republicans are right. Enterprises and the rich that run them are what pays the checks of the hourly worker. You hurt the Enterprise and rich with a default (which is really a big deal and would fuck up the market ultimately gutting a good bit of the enterprise) the hourly worker ends up becoming mass murders (almost serial killer like in execution); ultimately like the post #4, above me said----it would wipe out the already wiped out middle class. All that would be left is people who are below poverty rate---which would actually mean the rich become the middle class and the former (whatever was left of) middle class and poor become a feudalistic society. Doomsday much? Yes, but we're looking at a almost economic collapse with slight recovery but with nations all over the world on the brink of bankruptcy----you melt down the market which is like in control of all these digital numbers and you've got a serious international problem on your hands which could lead to a Somalia---or a predator nation with civil unrest galore---violent one at that. Don't take a default lightly during the time of an economic crisis. This is no joke.

[mdmc]

10. thank you for the reply vaberella - sounds epic

I live in poverty and severe pain.. I must admit I am intrigued by the possibility of the default.. I in no way fear it, most likely out of ignorance and misunderstanding.

[vaberella]

14. I mean the poor are least affected.

It's the so called "middle class." For instance, the person who's living out of their means, but still had a 9-5 job and is keeping their neck above water. These are the people who are seriously going to hurt. The poor understand being poor, they have a relative survival mechanism. The United States would become what was decades earlier---people would be doing jobs that they're grandmother would have taken hoping for the future generation to better. Enter a feudal society for the poor is no big deal, because the reality of their situation is feudal right now. They live through a looking glass.

For instance, the poor doesn't have investments, the poor doesn't have 401Ks, they don't have bonds, and some of the time they don't have a bank account. They go to the check/cashing place, they live pay check to pay check and pay everything in cash. We're looking at them as though they are not dependent on welfare. Those dependent on welfare (solely) or SS, or disability are something else. They will hurt, and they will hurt epically. They're worse off than the supposed middle class. But the poor working menial jobs, but enough to survive, are in essence going to stay around. They'll be fine.

The default can be good or bad. For instance, I look forward to the massive regulatory structure of the market that will take place. Governments are going to put in a lot of precautions to limit the effect of public opinion on the market or the market on public opinion. Because at the moment they are way too intimately entwined. I can see a lot of companies either paying a fine to enter certain aspects in the market ---like a tax. Not to mention them paying serious fees for losses which will lessen the amount of chance an enterprise will take with company revenue or even with their workers 401K's. Eliminating people's retirement money from 401k's will ultimately happen to the point where the resurrection of unions might start.

For example, my sister's job said they will be charging people more on their pay checks to pay into a health insurance pool. But there will be options---you can buy into which ever---but the percentage increases the better the price. This is different from the organization paid health care. Now if my sister's organization unionized---this is something they would bargain for. This is a wonderful causation depending on how long or even if the default occurs. Let's say vote goes through w/o a grand bargain or big fix and you have status quo kept in place.

Grand bargain done as the President laid out with cuts to pharmaceuticals and copays for medicare holders who make more money, cuts on subsidies across the board, particularly ethenol. <----Well then that would be an amazing deal that would actually bring back a middle class.

[customerserviceguy]

15. The millionaire might have been caught flat-footed

by the previous collapse, but he'll be smart enough to have gotten his ass out of the stock market by this point. When the market swoons, he'll be positioned to buy up cheap assets that will go back to their original value after the crisis has passed.

[hughee99]

16. The rich would lose more from the default

than any additional taxes to avoid the default would cost them.

[seabeckind]

17. Seriously?

If you have nothing, there's nothing to lose. If you can't afford to buy a new car, what difference does the interest rate make?

Sure the cost of some things will go up -- they're going up anyway, whether there's a default or not -- in my domain. What do I care if some guy who owns a yacht and doesn't work except to call his broker loses a few million or can't leverage his assets to get a low interest rate for some other money making investments?

Fukem. I'm the guy with nothing being mugged in an alley. Hard to get worked up over it -- all the guy will get will be pocket fuzz.

<on edit> Actually, thinking about it, I will probably lose the $150 I made last year in interest. Or rather I won't make the $150 this year. After I pay for my wife's dental work (crown time) I won't make the $150 anyway.

[moondust]

19. Fat cats might only lose some of their excess wealth.

Probably no real threat to their health or well-being. Don't know about hourly workers living paycheck to paycheck.

[Mimosa]

20. Definitely NOT.

Hourly workers don't have savings and major assets.