U.S. Bankruptcy: Potential Economic/Social Impacts

[Dorje]

I have no background in economics or anything, but I was wondering how severe the economic/social impacts would be if the U.S. were to go bankrupt. What would be the most likely course of action by the government or other governments in the face of bankruptcy? How would it affect day-to-day living?

 

[Scientific Method]

The U.S.A. will never go bankrupt because if we ever run out of resources, we will simply take if by force from another nation. Neo-Conservatives consider Canada a viable option for invasion in the case of national emergency. For example, Ann Coulter, the token woman mouthpiece for Neo-Cons, has pondered the option of invading Canada. Oil will never be a problem for us as well, since we own the Middle East. And if we need cheap labor, we simply overthrow some third-world nation, install American capitalism there, and then make them work for pennies an hour to produce American goods. So, America will not be having any problems for a long time.

 

[russ_watters]

I was wondering how severe the economic/social impacts would be if the U.S. were to go bankrupt.

It would utterly destroy the world economy.

What would be the most likely course of action by the government or other governments in the face of bankruptcy?

When governments go bankrupt, they just stop paying off their debts. For the US, that would manifest itself by you trying to cash in your government bond and the government saying, sorry, we can't pay you. Because of the implications (such as the instant evaporation of wealth), governments obviously don't like to do that. The US can go quite a long time raising its debt ceiling and using new loans to pay off old loans. Its a bit like credit card debt: if you could get an infinite number of credit cards, you could use new ones to pay off old ones, forever. For the government, the people will allow it because the alternative to more debt is economic collapse. But there are still negative effects: the weak dollar, for one.

 

[chound]

It would utterly destroy the world economy.

Why will the collapse of US economy destroy the world economy?

 

[spender]

Why will the collapse of US economy destroy the world economy?

I was wondering about that dumb statement too. Sounds like this guy thinks USA is the center of the universe.

Maybe he thinks that when USA begins to collapse Bush and his foot soldiers will startWW3, I agree then with him.

 

[chound]

Maybe he thinks that when USA begins to collapse Bush and his foot soldiers will startWW3, I agree then with him.

I think Russ is some secret govt agent who is terribly patriotic and wants to create a phsycological impact on us to submit to USA. LOL. Some other posts too he has written such things.

LOL! If that's going to happen, then won't the combined armies of different nations destroy USA? Countries like Iran, would be raring to go against USA.

I was wondering if we could start a thread on how to defeat USA if there is a WW III.

 

[so-crates]

It would take out quite a bit, and would take sometime for the rest of the world to recover. The key is currency. The U.S. dollar is an internationally recognized form of currency that many governments invest in because it is considered stable. So if the U.S. goes bankrupt, all the reserves of U.S dollars they have turn into play money overnight.

In addition, quite a few countries depend on the huge U.S. consumerism to drive their economies. China, for instance, has is currency tied to the U.S. dollar to keep its exports cheap to U.S. consumers. Without demand from the U.S., a good chunk of Asian industry, particularly in electronics, would shut down.

The U.S is also a huge exporter of agricultural products, so a bankrupt U.S. would drive food prices higher particularly among the industrialized countries.

The economies of the world are no longer isolated and are highly dependent upon each other. The U.S is affected by what goes on everywhere else as much as everywhere else is affected by what happens in the U.S.

 

[plus]

I have no background in economics or anything, but I was wondering how severe the economic/social impacts would be if the U.S. were to go bankrupt. What would be the most likely course of action by the government or other governments in the face of bankruptcy? How would it affect day-to-day living?

In USA: So the US does not pay back any of the treasury bills. The whole banking structure in USA would fall down. There would be widespread looting and robbery as people would not get payed. The stock markets would plummet.
In Asia/ Africa: Given the percentage of China's GDP invested in treasury bills, China may well go bust also. Countries would have a lot of problems for the same reasons. All of the people working in factories exporting to the USA would be out of work.
In middle east: There would be less demand for the oil. But they would be more powerful without the US army breathing down their necks. Maybe they seize the opportunity to invade Isreal.
In Europe: All of the money in the fed notes is lost and people will lose a lot of what is in the stock market, so people can kiss goodbye to a lot of their pensions. Things would be tough, but not too bad.

 

[jammieg]

People would still go to work and school and get married and live and play, but gradually bit by bit people would have to make due with less of the abundance and convienance we have and all the laws and regulation built up to keep order would gradually be replaced by honor systems and outlaws, but trust me it's not that bad at all going without electricity, sometimes I don't pay my electric bill just so I can experience the joys of the dark age. That's why I don't understand the National Debt, it seems like just another gimmick to try and prod people to work harder, but the harder people work the larger it grows, what are we building a pyramid?

 

[russ_watters]

Note to spender: I respond to reasonable arguments and questions, but not insults. And I'm thick skinned, but we're not big fans of personal attacks here. Watch your tone.

Why will the collapse of US economy destroy the world economy?

so-crates hit most of it: the collapse of the dollar would instantly bankrupt something like 3/4 (guess) of the governments of the world and heavily damage most of the rest of them. But also, being the biggest economy in the world, and one with a pretty big trade deficit, if we stop buying Hondas and Hyundais, it would be a real kick in the groin for the Japanese and Korean (Hyundai is Korean, right?) economies, etc, etc, etc.

 

[Tom McCurdy]

Without the US buying everything the world loses a huge market for any thing they want to sell...

 

[Astronuc]

Russ, Hyundai is Korean.

The original question is not simple to answer, simply because the system would not allow the US to go 'bankrupt' in the sense that an individual or corporation would go bankrupt. The government could simply print more many, but that would have a destabilizing effect of hyperinflation, along the lines of Germany after WWI.

There certainly is the issue of the government meeting its obligations, e.g. paying debt and interest. There might be some austerity measures in place, and this could cause hardship for some/many (hard to say).

If the US was headed toward something similar to bankruptcy, the 'global' economy could restructure itself.

 

[PhilosophyofPhysics]

heh, don't be so anti-american that it blinds you. it's common sense that if the usa's economy collaspses the world would fall into a depression.

 

[Pengwuino]

heh, don't be so anti-american that it blinds you. it's common sense that if the usa's economy collaspses the world would fall into a depression.

Nothign like having a GDP comparible to most continents. One guy said something really funny that was true... yet its really funny when you look at it. He goes "The US is not a world player anymore, Europe has a combined GDP of 2x as much as the US" and although its probably true... doesn't it make for a pretty weak argument when you need to compare an entire continent (not just the countries using the euro) to a single country lol.

 

[Flexor]

The world wouldn't fall apart. Repercussions would be severe, seeing as so many countries initiate trade with the U.S. Eventually, global economy would restructure, and new dependencies would be created. Just because the U.S. is the current largest economical center of the world, doesn't mean it it's the last. Eventually another economical force will surpass the U.S.

 

[Pengwuino]

I think when mos tpeople say something to the effect of the world falling apart, its assumed things would restructure themselves after a few decades. And that idea that 'eventually' another economic force will surpass the US is only a possibility. The US coudl very well stay the worlds leading economic power for the next thousand years, who knows. Russia might on a whim nuke everyone except the US lol who knows. I think eventually the US will fight off this EU conspiracy (conspiracy as in people joining together to subvert someone; not conspiracy as in people joining together to do something illegal... even though that's actually partily debateable) by initiating into somethign similar with Japan and Taiwain and South Korea.