If America defaults?

ipri

What actually happens to the man on the street.....how will everyday life be affected?

crazyguy

Nothing will happen as it wont default

ipri

But if it did..I'm interested in how these things work?

crazyguy

well if it defaults then the world will go up in a huge puff of smoke and we will be no more !

ipri

Dont be silly!

ChiefGrasscutter

Well, the US government would have to decide who it pays first, who it pays second and who it doesn't pay.
If I was them I'd default (ie not pay) on some internal social secuity payments. The USA is not going to default on payments of Treasury bond under any circumstances short of the entire world being hit by an asteriod.

Although the current debt limit is fixed by law - it apparantely does not apply to the production of hard coinage. Therefore it seems to me the obvious way out is to mint a special "1 Trillion dollar coin" and promptly deposit said coin at the Fed' -where it would be simply added into the balance held - job done!

FATHEROFTWO_2

The world stockmarket will crash....pension funds will struggle to pay pensions.......worldwide depression...poverty.....riots in the street.

America will be unable to borrow at low rates in the future as they wont be a safe haven any longer......china will become more dominant etc

westendguy

Someone somewhere will make an awful lot of money.

MoneySaverLog

Shorting the US Dollar looks good ;-)

lvader

MoneySaverLog wrote: »

Shorting the US Dollar looks good ;-)

That might not work out that well. The USD is still likely to be seen as a safe haven in volatile markets. Shorting the DOW is likely to be more effective.

Ark_Welder

Stephanie Flanders, 27 July: How to think about the US debt battle

US sovereign CDS's: http://forums.moneysavingexpert.com/showpost.php?p=45649724&postcount=25


If a default occurs then it will be on the bonds that have missed payments, not on everything immediately. Default does not imply 'will never be repaid', bonds that default will eventually have their missed payments made up and be redeemed in full upon maturity. It will be a bumpy journey, but as westendguy says:

Someone somewhere will make an awful lot of money.