Default V. Deal

[RUMMYisFROSTED]

I don't pretend to know the total ramifications of default but I think I can assume that there's near total agreement that they would be pretty horrific. I believe that if default happened and the markets tanked the cap would be lifted tout de suite. While the results would have near-term disastrous consequences, I think we can be pretty assured that the blowback would be near instantaneous, as would the response. I can't see default lasting more than a few days, maybe a few weeks at the outside.

I do, however, have a solid idea of how devastating and long-term the proposed cuts and alterations to SS, Medicare and Medicaid would be. These awful policies would likely be in place for a generation or generations.

So, imho, The Deal is a deal breaker. I'm sure I've missed something so I'd like to hear some thoughts on it.

[PoliticAverse]

1. The long lasting effect of a default (even a short one) would be higher interest rates.

The US actually (inadvertently) briefly defaulted on 120 million of T-bills during the 1979 debt-limit crisis.

See: http://www.npr.org/2011/07/11/137773341/looking-at-when-the-u-s-last-defaulted-on-treasury-bonds
and http://www.cbsnews.com/stories/2011/07/11/politics/washingtonpost/main20078437.shtml

for a discussion of the results.

[RUMMYisFROSTED]

6. Longlasting?

When I say short-term I mean 5-10 years.

When I say long-term I mean 11-∞ years.

[ThomWV]

2. I have come to the conclusion that the down side effects will hit a lot faster that earlier thought

Long term its going to absolutly kill is with debt repayment. Our outstanding debt is constantly refinanced and that's currently being done at very low interest rates. Within hours or less of the announcement of a default those low rates will be gone for years. It is the refinancing of current debt at future rates that we will have no way to cope with.

[ljm2002]

3. Default would be seismic ...

... in that it would once and for all end our record as a country who never defaults on its debts; therefore, we will no longer have the reputation that makes U.S. T-bills, etc., be recognized as the absolute safest place to put one's money. Long term, I expect it will be followed by us losing our status as the world's reserve currency, and therefore losing a huge amount of clout in world affairs. Of course we will still have our military, but one might question whether that is a comforting thought...

Of course Social Security, Medicare and Medicaid should never have been on the table to begin with. We should have been cutting defense spending, drawing back on the obscenely expensive, immoral and unwinnable wars, and taxing the rich and the corporations at higher levels than the current historically low levels.

But that would require logic and sanity, qualities that are in short supply in Washington, D.C., especially in the ranks of the Republicans and their Tea Bagger contingent.

I'm less worried about becoming a second rate power in the world than I am about what will happen as we slide on down the tubes -- in other words, I'm very fearful of the death throes of empire. Externally, aggression and war seems likely; internally, fascism seems almost inevitable. I hope I am wrong.

[Tierra_y_Libertad]

4. Hobson's choice. Would you like Arsenic or Strychnine in your coffee?

[RUMMYisFROSTED]

5. I'd prolly go for the arsenic.

It's the worst of two decisions.

I could have called it Barack V. Bachman! :think: