Tuesday, September 23, 2008



Even the deepest purse has a bottom, and the point may be approaching where the costs of propping up the world's largest debtor nation (i.e. us) begins to outweigh the benefits.

The national debt is owed, in no small part, to banks in other countries. What would happen if the rest of the world - or even, say, the Chinese - decided they wanted their money back?

I'd make a crack about structural adjustment programs, but the Republicans already pursue those with vigor.


Anonymous said...

Actually if the foreign banks, investment firms, etc. demanded their money back, the U.S. could say tough and not pay. It would send the world into a deep economic depression but the foreign governments could not collect the money owed. They could refuse to but our debt in the future but that might be a good thing. We would be forced to live within our means. In no way do I think the debt will ever be repaid. Nor do I think it would be demanded in collection. We will continue to pay the interest and they will continue to buy our debt. It is somewhat of a fantasy situation but the sum is so large nobody can afford to let the debt be defaulted upon.

Dennis said...

I'll follow you down the rathole for a second: What leverage would the rest of the world have if the US refused to pay its debt to other countries?

Anonymous said...

None actually. The could refuse to but any more debt of course. But short of going to war or possibly claiming U.S. government assets abroad, embassies, bases, etc. they really couldn't do anything. It is just like the situation with our loans to "third world" countries(do not like that term). When several countries in the past defaulted we either renegotiated the debt or absorbed the loss. The problem with the U.S. debt is its size. We are talking about an amount that is more than the GNP of any country in the world. Of course as I said in the first post, any default would cause a world-wide collapse of economies. The debt actually funds many programs. It is bought by governments and companies that use the interest for other projects. Government bonds, how the debt is sold, are big business. The only real way out of the debt problem is to cut our spending. But with people wanting the government to pay for everything from their yachts(luxury tax cuts) to health care, the idea that a politician will refuse to spend the money is fairly absurd. Even the Clinton surplus was the result primarily of the dot-com boom that went bust. The amount owed is so large that the surpluses would have to be huge.

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