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Ted Cruz

7 (6.5%)

Rick Santorum

16 (14.8%)

Michelle Bachmann

13 (12%)

Chris Christie

23 (21.3%)

Rand Paul

49 (45.4%)

Total Members Voted: 107

[Tomcost]

Yeah, lack of support to a form of currency is bad, will make everybody try to migrate to another currency, as as every currency depends on the dolar, they will begin hoarding precious metals. And yes, there will be a recession and all that, but I really doubt that it will be so bad as some people say. After all, capitalism ensures that after a recession always comes a recuperation. The whole world has been always in this kind of cycle. Heck, my country went into default 12 years ago, and we came out from that, and not thanks to the goverment.

Well, I don't mean that there won't be a crisis, but I don't think that it would be as bad as some people portray it to be.

[Max White]

In the end we will always recover, but things can get pretty brutal in the mean time. It seems doubtful that we will ever hit the same lows at the Great Depression, simply because despite what many people seem to think, the solid bedrock of our modern capitalist system is technology, and that has advanced irreversibly, but that doesn't mean things can't get bad.

Don't expect things to be going Grapes of Wrath yet.

[kaian-a-coel]

Don't expect things to be going Grapes of Wrath yet.

Oh god this damn book... I had to study it in class, and that was boring. The book itself is meh, the history lesson is fascinating, and the twelve hours on the christian metaphors are lethal.

[Tomcost]

So, basically, it would be stronger that other "minor" crises. With a possible rearrangement of the worldwide used currency, and a back to precious metals as a way to save money for some time until another for of currency ends up being reliable enough to be used.

And, logically, this crisis would bring lots of unemployment and a recession. Hmm.

Well, except for the part in which we exchange green papers for another kind of paper (after temporarily hoarding a yellowish shinny metal, but that's not new at all), it seems pretty much like any other crisis.

[Dutchling]

So what is actually happening in the US right now? I imagine it looks a little like this:

Spoiler (click to show/hide)

But honestly I have no idea :v.

[Max White]

So, basically, it would be stronger that other "minor" crises. With a possible rearrangement of the worldwide used currency, and a back to precious metals as a way to save money for some time until another for of currency ends up being reliable enough to be used.

And, logically, this crisis would bring lots of unemployment and a recession. Hmm.

Well, except for the part in which we exchange green papers for another kind of paper (after temporarily hoarding a yellowish shinny metal, but that's not new at all), it seems pretty much like any other crisis.

Exchanging greens for another currency isn't great news in the long term for the US. You see when other people need to pay for things they have to actually create wealth to pay for it. You need to produce food or minerals or consumer goods or something, and trade that for what you want. You could try and print more money, but if you do the other money you already have is less valuable and you don't actually get anywhere.
But the US is special, its debts are in its own currency, meaning if it prints more and devalues its own currency, the debt is devalued along with it and the debtor (China) doesn't get paid back the real value they handed out. As such they have an interest in keeping the currency strong, and they do this by making demand for the US dollar, by buying it. So while the US prints more money, China procures it on the backs on an exploited workforce. The US never has to work again, it can just print forever! Right?
Not exactly, because China likes to use the money it bought to do things. This floods markets with poisonous US dollars that will drop once the states defaults. This is why some places like Mexico have measures in place to try and reduce US currency in their economy. They have had an exchange cap since 2010. In the end accounting tricks are only smoke and mirrors, and there are no free rides. When confidence starts to fade the US economy suffers, problems come up, and things turn sour.
All this is pretty standard and expected, and recoverable.

But then what? What does the US do without the power of a reserve currency? How do you even rebuild from that without the infrastructure in place? The solution might be to take what they have and dump it into health, education, infrastructure, what ever is hard to move around electronically, and then bite the bullet and go bankrupt,

[mainiac]

The US defaulting, even a little, would not be a "minor" crises in any sense.

The US defaulting on it's debts would be a great depression scale crisis.

To put it at it's very, very surface:businesses use treasury notes to provide collateral for a variety of risks.  It doesn't take many to cover a lot because they are very, very safe.  But a default, even a very short one, would fuck up all those arrangements.  So Trillions (as in millions of millions as in enough money that the biggest amount you are imagining) of dollars of contracts would suddenly be in jeopardy.

It took hundreds of billions of insolvent contracts to create the Great Recession.  It has lasted for five years and has reduced world economic output greatly, causing unrest all over the world.  While a default doesn't immediately create those problems (due to very technical stuff) if things go south, we are talking about a problem of tens of trillions of dollars in scope.

You talking about the effects of exchange rate is like sitting on the bow of the titanic and talking about how the iceberg up ahead isn't much of a problem because the heat absorption from the titanic won't kill you.

To put it another way, it's like Y2K for the financial system.  If it's fixed, people will wonder what all the fuss was about.  But if it isn't fixed the result could be utter disaster.

Edit: Which is not to say that the reserve currency thing isn't a real danger.  It's much more likely to happen then the end of the world scenario.  But the end of the world scenario is the real reason to be concerned.  This is the finance equivalent of nuclear war we are talking about.  It's so bad that everyone always assumed it wasn't going to happen.  Now there are some people who didn't get the memo that you weren't supposed to do that in a position of power.

[Max White]

How does one even fix the current problems? Is there actually enough income to pay off the interest + then some and still keep the nation running? This isn't a rhetorical question, I'm wondering if the US is actually able to ever pay its debt, ever.

[mainiac]

How does one even fix the current problems? Is there actually enough income to pay off the interest + then some and still keep the nation running? This isn't a rhetorical question, I'm wondering if the US is actually able to ever pay its debt, ever.

It's naive to think that a country actually needs, or indeed wants to pay off it's debts.  Debts on the macro scale (trillions of dollars) are a currency of sort.  In fact, that's where paper currency came from, paper denoting that somebody owed you gold for repayment at some point.  Except the gold never got paid back because the currency was more useful.  Now to put the default possibility in context, imagine if all the gold backing that currency disappeared.  Maybe it would be a hiccup, maybe a catastrophe.  But I digress.

Debt existing, per se, isn't a bad thing.  What is bad is that if the debt isn't being managed in a proper way there are macro-economic consequences.  These are more complicated then I want to get into in a forum post (people saying "inflation!" and leaving it at that are ignorant, liars, or both.)  To understand this, I would recommend taking some economics courses.  But suffice to say that in the US current economic situation (debt levels not remotely out of control, depressed demand, our debts issued in a currency controlled by our country), debts aren't a remotely pressing issue for us.  Just look at the interest on our debt to gdp ratio in a historical context.

[Max White]

Well yes, debt is actually very useful, but like you say it needs to be controlled. Is the US debt currently within the range of control?
I'm not the type to save up until I'm 70 to buy a house without taking out a loan, but I would certainly like to know that the expenses incurred are within my means.

[mainiac]

Is the US debt currently within the range of control?

Short answer: Yes.

Slightly less short answer: Yes, especially given the current state of the world economy, which makes national debts very easy for us to service as long as we have our own currency and issue debts in that currency (so unlike spain which was much more responsible than us but like japan which has more debt then us compared to economic output.)

[Sheb]

Shutdown viewed by foreigners.

[mainiac]

Slate is usually contrarian crap but occasionally they get a gem.

[Nadaka]

How does one even fix the current problems? Is there actually enough income to pay off the interest + then some and still keep the nation running? This isn't a rhetorical question, I'm wondering if the US is actually able to ever pay its debt, ever.

The answer to this question is no. There is not enough income to pay off the debt, or even to be able to not require taking on new debt for basic operations of the government. The reasons for this are very simple. Conservatives slashed the tax rates to unsustainable levels and then swore an oath to never allow taxes to rise, no matter the harm it would do to this country. This is called the Norquist pledge after the 13 year old boy Grover Norquist who created the pledge.

However, if we returned to tax rates relatively similar to what we had 40 years ago, then yes. The budget could be balanced and debt could eventually wind down.

[Tomcost]

Shutdown viewed by foreigners.

It looks more like if the media had covered the US crisis from the outside, with the same tone the US media speaks of middle-eastern countries.