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article imageOp-Ed: If US debt goes into default, say goodbye to your money

By Paul Wallis     Jul 2, 2011 in Politics
Washington - Think of every cartoon you’ve ever watched where the dumb character goes over a cliff. They usually run madly around in mid-air, and then look down, then fall. As cartoons, that’s funny. As US fiscal policy, not so hilarious.
In this cartoon, the US created the cliff from which it is about to fall if it doesn’t have a sudden outbreak of common sense. The US is the biggest borrower in the world, by a very long way. No other economy comes vaguely close. The US also borrows from the rest of the world, usually from the banks of various types.
Put it this way- You know how shaky the markets got about a possible Greek default? Imagine how they’d react to an actual US default.
The reaction would be based on a pretty good reason, too. The global money-go-round is based on everybody borrowing from everybody else.
As long as debts are paid on time, everyone’s happy and can fund political parties and prove they’ve never understood a word since they were born, as usual. If the debts, particularly on the scale of US debts, aren’t paid, the whole mirage comes crashing down.
With the crash comes another factor- Bye-bye banks, on a scale that would make the bank-nuking effects of the 2008 recession, which trashed over 100 US banks, look like a whisper. The retail banks are big, but not that big. Nor are the big finance companies, which are committed to the point they’re glued to these gigantic national-sized loans because of the revenue torrents they bring.
These institutions are also in debt, and if they don’t get their revenue, they can’t pay their own debts. This is one of those “too big to fail” situations which has developed an alter ego description- “Too big to save”. If the US falls over, nobody’s got the cash to pick it up again. Unlike the Soviet Union, a debt crash would trash enormous amounts of capital around the world. It’d be like going back to Valley Forge for the US economy, literally.
The Treasury is using to put it mildly unusual language in the current circumstances and the world isn’t feeling as blasé as Congress seems to feel about the possibilities.
China, which owns over $1 trillion of US debt in the form of bonds, is particularly interested, and Xinhua has been running a series of articles on the subject. This is a quote from the current article:
The U.S. federal debt ceiling should be raised quickly to avoid a severe shock to the global economy and financial markets, the Washington-based IMF warned on Wednesday in its annual checkup over the economic and financial situation of its largest shareholder.
For “severe shock”, read “ infinite panic”. Washington may not have noticed,(there’s a surprise) but faith in the good judgment of America’s politicians isn’t exactly at an all-time high lately. The abysmal situation which caused the 2008 crash is still fresh in the minds of the market, as is the truly invertebrate lack of results in dealing with the retards still running America’s severely brutalized “economy”.
Nobody believes for a second that America’s Least Talented have a clue how serious the situation can be, if the US does run out of money. The current crop of cereals masquerading as US political movers and shakers have a public image which is more in line with a paedophile ring than a credible management structure. They’ve done everything except go on shooting sprees down Pennsylvania Avenue.
That’s not a great scenario for raising confidence. The world has been baffled by a collection of suits with cheek pouches, which we normally see on Groundhog Day, claiming to be running America and holding press conferences saying they’re not aware of any revenue problems. Were there a lot of redundancies at Disneyland, or something? Are Chip and Dale on UI, like everyone else, or are these guys from a different studio?
Whatever the case, America’s credibility is tarnished enough. It simply couldn’t get any more tarnished. Now it’s a question of sanity and solvency. Will Congress prove it can read and understand simple sentences? Will the House kids make it to Broadway and become big stars? Should the capital be moved to Las Vegas? Is anyone prepared to admit to the existence of Cleveland? Will they ever legalize Michigan?
All these questions and many more will be answered on August 2, 2011, which is the date the US runs out of money. So if you wake up and find out your bank has gone under, and there are riots around the teller machines and grocers burying their tills, don’t be surprised. Just learn how to dig burrows, eat grass and leaves, and you’ll be fine.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
More about us treasury debt ceiling, Imf, us debt default, greek debt crisis, Broadway
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