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We all know the US is a technically bankrupt nation. What will happen when it becomes officially bankrupt? Can The US economy claim Chapter 12?

Rumours fly about 'october surprises' (McCain endorses Obama?) and even Biden mouthed off about some serious test awaiting Obama in January. The mess Obama will have to deal with is primarily the economy.

The team at Global Europe Anticipation Bulletin are predicting the US will default by summer 2009 and it looks increasingly like the only way to 'start fresh'. Change you can believe in is gonna be a lot different to the hopefull, glowing love fest most people think Obama heralds.

I want to know what this means; how does it affect not just the local (US) economy but the global system: what does it mean for China and Japan, the largest holders of US debt: how does it affect Dubai/Kuwait/Emirates/Saudi Arabia who's economies are stuffed full of US dollars: what's the knock-on effect for other currencies ....

Answers/thoughts please.

What happens when you lend your food & rent money to your buddy, then he tells you he's NOT going to pay you back EVER?

Let's just say it ain't good!

Though the US may default, it looks like others will proceed the US. Will their fall give us warning, will it be all default at once or dominos?
With an economy in flames how will Obama provide anything he's promised?

Fishman wrote:Though the US may default, it looks like others will proceed the US. Will their fall give us warning, will it be all default at once or dominos?
With an economy in flames how will Obama provide anything he's promised?

He can't, no one can. But that is normal. All politicians lie and promise shit they can't deliver.

If obama loses though, we are looking at a civil war.

US is not going to default without trying to monetarize its debt.

This is the song The Fed is singing -

Print-print-prinitiringing, print-print-prinititiring

Printing is the only way, the only way for meeee
Now print!
Print!

Print-print-prinitiringing, print-print-prinititiring
...


U.S. Commercial Paper Rates Rise Even as Fed Starts Buying Debt

By Bryan Keogh

Oct. 27 (Bloomberg) -- Yields on commercial paper rose as the Federal Reserve began its unprecedented program of buying the debt directly from companies at lower rates, part of the central bank's efforts to unfreeze credit markets.

pogoliamo wrote:US is not going to default without trying to monetarize its debt.

+1

"Inflation is the only choice for politicians."- Dr. Stephen Leeb

Europe has 4.7 Trillion in emerging market debt which may be defaulted on in the same way that subprime is dying so the Euro could be toast just like the USD. If Chinese and Arabs and Russians have most reservees in USD and USD crashes then all their savings are toast, even their EURO savings if EURO goes down. So this would be probably all global savings would be worthless. So everybody goes down together.

The meeting in November seems really important. If they can deflate this credit problem or keep the party going they will but they cannot do both at the same time. they seem to want to keep blowing a bigger bubble into a black hole of disappearing debt. Say you got a black hole and you have an ever expanding balloon that grows into that black hole that you are blowing up with your mouth. Now eventually reality catches up with you and you get out of breath. But people are nto taking up debt anymore only the banks are paying off those derivatives. So maybe if the governemtns can expand laons to 1.2 quadrilliont hent he derivatives will be paid off but thn they will have to tax us inot infinity to pay off the debt to pay off the funny money they gave to the bankers and hedge funds.

This is getting less funny all the time. The real economy is crashing.

to borrow from Orlov:
Financial collapse => Commerical collapse=> Cannibalism???

Social collapse
hoarding
civil/race/class wars
starvation/ die off
all cats and dogs get eaten
100% unemployment, for at least a year
possible nuclear wars
chicken ala king,, yum

pogoliamo:

US is not going to default without trying to monetarize its debt.

Of course. But that's what they've been doing for so long now, that it simply won't work anymore. How the heck do you monetise 10+Trillion Dollars of debt.....? You don't. You default.

Karl Denninger:

In short, it wouldn't have done anything because the economy only grows at a rate of about 20 cents for every dollar of debt taken on. That is, it takes five dollars of debt to generate one new dollar of GDP.
The bad news is that once you reach the "$1 for $1" level you are no longer able to finance growth with debt, and it becomes inevitable that you will begin to finance debt with debt.
That, of course generates no GDP at all but precipitously tightens the spiral.

------

The Truth is that once you reach a level where a dollar in debt will not support a dollar in GDP you must inevitably either pay down or default that excess debt. Unfortunately, in this case we must pay down or default approximately 80% of the aggregate public and private debt in the United States in order to return to a standard were $1 in debt will generate $1 in GDP. Defaulting or paying down less will "turn the clock back" to a degree, but does not change the ultimate outcome. Only returning to $1 of debt returning $1 or more of GDP, and holding the total level of debt outstanding at or below that level, results in a stable monetary system.

It's just mathematics.

virgincrude wrote:pogoliamo:

US is not going to default without trying to monetarize its debt.

Of course. But that's what they've been doing for so long now, that it simply won't work anymore. How the heck do you monetise 10+Trillion Dollars of debt.....? You don't. You default.

Er? You print twenty trillion dollars?

virgincrude wrote:We all know the US is a technically bankrupt nation. What will happen when it becomes officially bankrupt? Can The US economy claim Chapter 12?

Answers/thoughts please.

I don't know as your premis is true. To be bankrupt US debts would have to exceed the total assets of the country, both public and private. Add up all the coal, iron ore, oil, farm land, houses timber , highways, railroads, patents, copyrights, navys, shipping fleets, dams and locks, etc.etc.

We may be getting close to having debts that add up to that sum whatever it is but I doubt it. Not that we are in way too deep and major tax increases are before us no matter who wins next week.

You sell Alaska? the US has plenty of stuff lying around it can hoc any time.

Tell your govenor not to open the door when the Repo man comes a-knockin.

We borrow billions every day just to fund the interest payments. 60% of US debt is due in the next year.

We need to borrow to roll it over. Foreign nations who are our creditors are showing an unwillingness to purchase any more US debt.(loan us any more)

When we cannot borrow to roll over the debt, we go into default.

We are then essentially bankrupt.

The debt that we know about out there is over a quadrillion dollars. There is doubtless more, perhaps by orders of magnitude.

We have managed to come up with ways to get into debt far beyond what the underlying assets could be valued at.

Curse Fibonacci for introducing the zero to Europeans, the innovation that allowed us, unenlightened beings that we are, to imagine and calculate sums far beyond the reality around us.

We are drowning in a sea of Fibonacci's zeros.

Cid_Yama wrote:We borrow billions every day just to fund the interest payments. 60% of US debt is due in the next year.

We need to borrow to roll it over. Foreign nations who are our creditors are showing an unwillingness to purchase any more US debt.(loan us any more)

When we cannot borrow to roll over the debt, we go into default.

We are then essentially bankrupt.

"Its not a real problem, its just a temporary liquidity problem."

Wow! So many great posts in this forum, that's why I love it here

To the subject - wouldn't it make sense to expect the US govt treasuries (the last bubble) to go bust before the US goes officially broke?

Cid_Yama wrote:We borrow billions every day just to fund the interest payments. 60% of US debt is due in the next year.

We need to borrow to roll it over. Foreign nations who are our creditors are showing an unwillingness to purchase any more US debt.(loan us any more)
When we cannot borrow to roll over the debt, we go into default.

We are then essentially bankrupt.

Perhaps we will fully explore the value of the navy and airforce as in "Gun boat diplomacy"?

You've got to be able to get your gunboat there.

The Military will be the last to run out of fuel.. If you disagree with that you are a dumbass

Yeah, Yeah and the US is the greatest, most powerful nation in the world. Yada, Yada, Yada.

When the credit line is cut, we'll be lucky to get our troops home.

When the US defaults, the dollar tanks immediately.