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[–]nygal 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (1 child)

Wow.

Americans scream that there would be no downsides if the USA defaulted on the debt, but wouldn't China and Japan be angry about not getting their money back?

Will businesses and Americans who bought US bonds be upset about being ripped off? Wouldn't companies who get fleeced need to lay off workers and shut down?

Wouldn't banks that bought worthless US bonds be able to pay back bank customers?

Would anyone be willing to loan the US government money again if the government defaulted? Where would the government get the funds to pay for Social Security and wars without huge tax hikes?

Couldn't a massive economic collapse caused by the US government defaulting on loans result in riots, chaos, bankruptcies, electrical and water failure, starvation, civil war, martial law, concentration camps, and WWIII?

Think.

[–]er5bhneabherg 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (0 children)

Yes everyone loses. Debt holders do not get repaid, the idea that China would start a war to get it back is uneconomical. But workers do lose their jobs, because debt is not a static thing, it always needs to be borrowed to maintain a modern business. Once it pops, the money to pay people is just.. gone. Then services and logistics go with it.

Maybe no one here is interested, but CFR partnered with Vice to make a fascinating video about the 2008 crisis and floating of debt to absorb the "toxic assets", which was eventually repaid, in the form of a weak profit on a non-guaranteed stock grant. Weak politics but it could have been worse.