National debt related question....

[rbixby]

What if through some kind of agreement, all of these nations that are drowning in debt decide to just default on all of them and cancel them all out? I guess I'm not sure what the implications would be if a group of deeply indebted nations just refused to pay, would the Chinese foreclose?

[TexasObserver]

1. That would result in a world wide economic collapse.

[NJGeek]

2. can you elaborate?

what would actually happen?

i think its a really interesting question. guess i should start stocking up on gold coins per glenn beck :)

[TexasObserver]

3. The debt owed by goverments is owed to ordinary citizens, among others.

Government bonds are owned by citizens. If the government defaults, retirees run out of money.

There would be consequences if countries simply default on their debt. Who would ever buy such debt again?

[Terry in Austin]

5. Money is created by debt

It's been that way since the gold/silver standard got replaced by the current system (well, before that, actually).

The short story: debt IS money. Make the debt go away, you make the money go away.

What happens when the money goes away is still an interesting question, though.

B-)


(edited for historical hedge)

[Statistical]

4. Who do you think owns all that debt? Hint: it isn't just the banks.

The largest holder of US debt is Social Security fund so SS goes bye-bye forever.
The second largest holder of US debt is pension funds so 90%+ of those go bankrupt within a few years.
Insurance companies (oop your life insurance policy is now worthless) are another major holder as are local/state governments (oops states go bankrupt too).

What do you think that will do to retirees all over the globe and the spill over into larger economy?

When every retiree loses a massive amount of lifetime disposable income forever what do you think that will do to global economic demand for goods & services? When those companies see demand fall 20%-30% what do you think they will do to their exist workforce?

When 500 million retirees all over the world are forced to work again to avoid starvation what do you think that massive influx of labor will do to global unemployment (already suffering from unprecedented layoffs).

Now that is just one aspect of that massive economic shockwave. Now the govt will step in to save the day right? How are they going to do that without borrowing? Print money. Massive global inflation destroys any remaining wealth American have.

Quick look at 17 largest holders of US govt debt:
http://www.cnbc.com/id/29880401/The_Biggest_Holders_of_US_Government_Debt

[rbixby]

6. Thanks for the replies

I just wonder, has debt financed more wealth and value than actually exists? If that's the case, won't the hens come home to roost eventually and pretty much leave everything in a totally messed up state?