Author Topic: US National Debt: What happens when we can't pay our bills? (Read 2154 times)

Not the 10th Man · « **on:** May 12, 2011, 01:58:43 PM »

Hey y'all...

Hope you don't mind a quick question- You see, I'm not much of a money guy, except when I'm between paychecks and watching every penny, but....I'm not at all savvy with the wiley ways of Gummint spending.

So...like the title of my post says....what happens when the US can't borrow any more, and can't make payments? Typically, I'm pretty decent at drawing analogies, and making connections, but in this case...I'm a bit confused.

I know if I quit making truck payments, my truck would be towed away. I also know if I quit making house payments, my family would quickly become homeless. If I declared bankruptcy, I would anger alot of folks I owe money to, and I'd have to give up everything I owned that wasn't deemed critical to my survival. The folks I owe money to...as I understand it, would just have to eat the bill...Sorry 'bout that!

So, on a National level, when we max out our credit card, and China wants their money back...what then?

Do the politicians just sign the deed to the farm, and all of us within it to China, and tell us little people to take a crash course in Mandarin?

Do 50 million Chinese movers come in, and re-possess our appliances, our furniture, and our vehicles?

Maybe call an international version of those debt reduction services, that can "slash the money owed by up to 85%!"

Awright...so maybe I'm a little bit tongue in cheek here...but seriously...what happens when the International community closes their billfolds, and basically demands payment that we can't afford to make?

I try like hell to live within my means and pay everything I owe in a timely fashion. I wish the politicians would do the same.

Here's a link for reference: http://www.usdebtclock.org/

Junior1942 · « **Reply #1 on:** May 12, 2011, 02:10:40 PM »

The answer is simple. We print $50 trillion and pay our debts with it. I can't do it, and you can't do it, but the USA can and probably will. And I didn't say I approve!

Gary G · « **Reply #2 on:** May 12, 2011, 02:35:36 PM »

Junior is correct. There are two ways to default on your obligations. Outright default which is what is best for the people, but not the government. Or, debase the currency and pay the debt with devalued dollars, which is what they will do. In fact they are already doing that with the quantitative easing; the federal reserve buying the bonds (debt) with printed money. It is supply and demand. When you increase the supply of something, each unit becomes worth less. That is why your food and gas prices are going up. It takes more worthless dollars to buy something than it did before. This robs the people of their living standard while keeping the government in business. When we can no longer sell our debt to foreigners, the Fed will buy it all. Soon the end will come in the form of a currency crises. It took Rome 200 years to devalue their currency to zero and they were no more. We are only 97% of the way there. It should not take too much longer. The old people in Weimar bartered their furniture for bread. When they had nothing left, they stuck their head in a gas oven.

An outright default would mean that the government would not be able to borrow. They would have to live on what they have coming in. Our money would retain it's value and might appreciate when productivity returns after a depression.

Lost Farmboy · « **Reply #3 on:** May 12, 2011, 02:43:56 PM »

It is not true that the government just prints money. The Federal Reserve is a private organization. When the Fed prints money they barrow it to the government at interest. We the tax payers are still on the hook for the old debt and the new debt. Our money is devalued in the process. Eventually the Federal Reserve will demand payments we can't make. They are banks and will try to reposes all we think we own. This is already happening in Iceland and Greece. Some of us are still Americans and will not roll over the the criminals in the Federal Reserve. I think it will start the bloodiest civil war in the history of the world.

Gary G · « **Reply #4 on:** May 12, 2011, 03:32:20 PM »

Quote from: Lost Farmboy on May 12, 2011, 02:43:56 PM

It is not true that the government just prints money. The Federal Reserve is a private organization. When the Fed prints money they barrow it to the government at interest. We the tax payers are still on the hook for the old debt and the new debt. Our money is devalued in the process. Eventually the Federal Reserve will demand payments we can't make. They are banks and will try to reposes all we think we own. This is already happening in Iceland and Greece. Some of us are still Americans and will not roll over the the criminals in the Federal Reserve. I think it will start the bloodiest civil war in the history of the world.

Actually the Fed receives bonds for money given the treasury. When those bonds mature, rather than receiving payment, they roll them over into even more bonds. Thus, it is an operation of ever expanding debt. As the money devalues, bonds (which are future money) devalue as well. The Fed's balance sheet will become more worthless. They also hold MBS securities, that they took from the banks to give them money, which are probably worthless. This money is currently residing as deposits at the Federal reserve. When this money finally is loaned at a 10 to 1 fractional reserve by the banks, price inflation will accelerate probably leading to hyperinflation.

There is no provision whereby the Fed can demand payment from private individuals. They have no contract with us; only with member banks and the treasury. In fact profits they make on their portfolio are returned to the treasury minus operating costs.

The Fed was created by bankers for bankers. It allows the banks to take risky practices. If a bank gets into trouble, the Fed backs them. Banks are not like other businesses that must be conservative or risk bankruptcy. It is a moral hazard in itself.

Ron Paul has been on top of this for many years and people just look at him like they don't know what he is saying. However that is changing. With the internet they are becoming more educated.

jimster · « **Reply #5 on:** May 12, 2011, 03:43:19 PM »

The banking and currency reform plan advocated by President Wilson in 1913 was sponsored by the chairmen of the House and Senate Banking and Currency committees, Representative Carter Glass, a Democrat of Virginia and Senator Robert Latham Owen, a Democrat of Oklahoma.

In 1913 in exchange for paying for his Presidential campaign, President Woodrow Wilson signed the Federal Reserve Act handing over the U.S. currency to twelve regional private banks. In 1933 Roosevelt confiscated citizens gold and handed it to these private banks.

The Primary Owners of the Federal Reserve Bank Are:
1. Rothschild's of London and Berlin
2. Lazard Brothers of Paris
3. Israel Moses Seaf of Italy
4. Kuhn, Loeb & Co. of Germany and New York
5. Warburg & Company of Hamburg, Germany
6. Lehman Brothers of New York
7. Goldman, Sachs of New York
8. Rockefeller Brothers of New York
All the primary owners are branches of European establishments. Foreigners, almost entirely Jewish, control the United States Money supply. They literally own exclusive rights to the dollar and simply enter dollars into their banks books to make money which they then lend back to us at a profit. For them money does not grow on trees, it is simply a data entry into their account. Clearly the private ownership of the U.S. Dollar is by far The Greatest Crime of the Century. The owners of this bank have been responsible for instigating all the major wars and depressions in the last 100 years. They own the bank, they own the dollar and they own all the major media channels, the military industrial complex and most politicians, judges and cops.

Henry Ford once said "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning".

There is a lot of info on the fed reserve...mostly bad....

Lost Farmboy · « **Reply #6 on:** May 13, 2011, 02:18:58 AM »

Gary and jimster great post, very informative. I hope people are paying attention.

magooch · « **Reply #7 on:** May 13, 2011, 06:10:46 AM »

How about having the government to stop spending like there is no tomorrow. Wealthy people didn't cause the problem and it isn't theirs alone to fix. It is an absolutely proven fact that lowering taxes brings in more revenue to the government and visa versa.

It cannot be reiterated too often and too loudly; we don't have a taxing problem, we have a spending problem.

us920669 · « **Reply #8 on:** May 13, 2011, 06:55:59 AM »

Trouble is, government debt is past the point of no return. We can either default (never happen) or pay it off with depreciated dollars, like we are. Whether the Chinese will accept this, no one can say - yet. The list of Fed owners is badly outdated. Lehman is kaput and others have been reorganized - it's a pretty cut-throat world. The real owners are all the banks, including the nice folks who keep your checking account, but the big boys call the shots, what we call Wall Street, the same ones who caused the financial crisis - what a coincidence.

There is always going to be a central bank - I think even Ron Paul knows this. The problem is that the way it was set up absolutely requires the discipline of something like the gold standard. Of course, it's never simple. You can have a specie standard or a bullion standard or even an exchange standard, and there are probably other options too, but money just has to stand for something. As it is, Bernanke creates billions with the click of a mouse, and it might actually lead to a Wiemar-style hyper-inflation - definitely not good.

Junior1942 · « **Reply #9 on:** May 13, 2011, 08:50:57 AM »

Quote from: magooch on May 13, 2011, 06:10:46 AM

How about having the government to stop spending like there is no tomorrow. Wealthy people didn't cause the problem and it isn't theirs alone to fix. It is an absolutely proven fact that lowering taxes brings in more revenue to the government and visa versa.

It cannot be reiterated too often and too loudly; we don't have a taxing problem, we have a spending problem.

GWB lowering taxes for the super rich increased government revenue to the poverty level. Another year of it and we'd all be on the barter system.

Gary G · « **Reply #10 on:** May 13, 2011, 09:32:41 AM »

Quote from: Junior1942 on May 13, 2011, 08:50:57 AM

Quote from: magooch on May 13, 2011, 06:10:46 AM
How about having the government to stop spending like there is no tomorrow. Wealthy people didn't cause the problem and it isn't theirs alone to fix. It is an absolutely proven fact that lowering taxes brings in more revenue to the government and visa versa.

It cannot be reiterated too often and too loudly; we don't have a taxing problem, we have a spending problem.
GWB lowering taxes for the super rich increased government revenue to the poverty level. Another year of it and we'd all be on the barter system.

Junior, in the panic of 1919, Coolidge lowered taxes and lowered spending. The result was that we were over a deep depression (as deep as 1929) in about a year. GWB lowered taxes, but increased spending and that is the difference. Obama is Bush II on steroids.

Casull · « **Reply #11 on:** May 13, 2011, 09:38:55 AM »

Quote

GWB lowering taxes for the super rich increased government revenue to the poverty level.

Junior, you don't really think you can post a lie and not get called on it, do you?

no guns here · « **Reply #12 on:** May 13, 2011, 10:22:19 AM »

I say we start a war... take everyone's mind off of the problem. Isn't that the historical precedent? Actually, we should invade the middle east and then take their oil and sell it to pay off our debts. Wow, seems like all my ideas have already been tried.

NGH

jimster · « **Reply #13 on:** May 13, 2011, 05:51:36 PM »

Quote

GWB lowering taxes for the super rich increased government revenue to the poverty level. Another year of it and we'd all be on the barter system.

GWB out spent himself by signing what Congress laid on his desk.
Obama out spent himself by signing what Congress laid on his desk....only a little faster and a little more. What's the diff???
The wealthy must be paying most the taxes, since almost half the people pay nothing and even get checks/free money back.
Where do you think the money comes from? My employer pays more taxes/regulations than you'll ever see...and they are small time.
According to the IRS, they took in much more money when taxes are down, they reported this several times..nobody wanted to hear it I guess. Look it up. They get much less when taxes are high, that's a fact.

The super rich does not have enough money to bail us out, we would spend it all in a year, and have nothing to confiscate the follwing year.
You have to actually have a budget. Without that the people who pay nothing will always be trying to drag down the wealthy, it's class warfare based on ignorance and greed, mixed with severe spending problems. Look at what you have right now under Obama...their so called budget spends 3.6/3.7 trillion next year, they can only take in 2.1 trillion, they are out spending themselves by 1.6 trillion, with 14 trillion in debt already. Same thing as someone making 55 grand a year, spending 95 grand, and having $350,000 in credit card debt already......does that help you put things in perspective? Forget the politics and the Bush rhetoric...just run the numbers.

bulletstuffer · « **Reply #14 on:** May 13, 2011, 06:41:39 PM »

I saw this a couple of years ago and people do not have any idea of the trouble this country is in. This is what china is thinking of the USA printing all this money. He did not mince words!!! He also stated it twice.

February 12, 2009
China to U.S.: "We Hate You Guys"
And you thought Treasury Secretary Tim Geithner was being unsubtle in accusing China of currency manipulation:
We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] …we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.
-- Lueo Ping, China Regulatory Commission (02/11/09)

Pat/Rick · « **Reply #15 on:** May 13, 2011, 06:59:17 PM »

Gary and jimster, Thanks, I learned alot from your posts. I wonder if totally debasing our currency so we can pay off the debts, will coincide with some life changing "Holy Cow!!!" moment?? Like a declaration of Holy War with the world of islamic nations, or the creation of a North American Union, or some other "never thought they'd do that" scenario? Either way, the only certainty we can count on, is that the banks and fed government will not be on the loosing side. I wonder if cases of arson would increase if people started being foreclosed on willy-nilly? Or if the currency was revalued and the bank demanded that you came in to sign a new contract based on the new financial system?

Gary G · « **Reply #16 on:** May 14, 2011, 06:33:43 AM »

Quote from: Pat/Rick on May 13, 2011, 06:59:17 PM

Gary and jimster, Thanks, I learned alot from your posts. I wonder if totally debasing our currency so we can pay off the debts, will coincide with some life changing "Holy Cow!!!" moment?? Like a declaration of Holy War with the world of islamic nations, or the creation of a North American Union, or some other "never thought they'd do that" scenario? Either way, the only certainty we can count on, is that the banks and fed government will not be on the loosing side. I wonder if cases of arson would increase if people started being foreclosed on willy-nilly? Or if the currency was revalued and the bank demanded that you came in to sign a new contract based on the new financial system?

It could be a "Holy Cow" moment.
What they appear to want is a gradual devaluation of the dollar. But, they could very well get something else. In most cases of historical currency total destruction, something has happened to change peoples outlook toward the currency in question. It could be something like if the government extends the debt ceiling. If people, including foreign holders of dollars see that as being no resolve in Congress to curb the debt problem, then they may decide to get rid of the dollars they hold, forcing interest rates up, causing the Federal Reserve to monetize more of the debt. You can see how this could accelerate exponentially like a crash in stocks, however this would be a crash in the dollar.

Keep in mind that the people in charge are the same people that did not see this coming and do not know what caused it. It is a shame that only a few people control our destiny. This is not a freemarket where interest rates are set by savers and private banks. It is a centrally planned economy. History has shown 100% failure with central planning.

Gradual devaluation of the currency is a way of taxing the people without their knowledge. A gradual devaluation lowers the value of your money, but they get to spend that newly printed money before it devalues and you don't. Thus, you have lost wealth in that you can't buy as many goods and they now have that wealth. Prices of goods get higher and they lay the blame on big oil or speculators and call them before congress. It is but a spectacle to keep the people dummified.

The current monitization (to the tune of about 100B per month) is due to end June 30. I think the market is anticipating that now and that is why we are seeing a commodity selloff. I am watching to see if the treasury can sell that much debt (bonds) to foreigners after that without interest rates going up. Rising interest rates will kill the mortgage market, which is already comatose and put pressure on the banks once again. I suspect we will see QEIII in the fall under some other name. QEI and QEII have not worked so they will be hesitant to make QEIII public.

Anyone who wants to know more should go to mises.org and read what you can on "austrian business cycle". Rothbard's "What has government done to our money" is a great little book to learn about money and banking.
http://www.amazon.com/s/ref=nb_sb_ss_i_5_46?url=search-alias%3Dstripbooks&field-keywords=rothbard+what+has+government+done+to+our+money&sprefix=rothbard+what+has+government+done+to+our+money

BBF · « **Reply #17 on:** May 14, 2011, 09:10:12 AM »

[quote

............ The old people in Weimar bartered their furniture for bread. ..................

Well yes they did and then they were very happy when the next guy stepped up to the plate which turned out to be even more of a disaster.

BBF · « **Reply #18 on:** May 14, 2011, 09:19:21 AM »

Quote from: jimster on May 12, 2011, 03:43:19 PM

The banking and currency reform plan....................

The Primary Owners of the Federal Reserve Bank Are....................

Foreigners, almost entirely Jewish, control the United States Money supply. They literally own exclusive rights to the dollar and simply enter dollars into their banks books to make money which they then lend back to us at a profit................. Clearly the private ownership of the U.S. Dollar is by far The Greatest Crime of the Century.

The owners of this bank have been responsible for instigating all the major wars and depressions in the last 100 years. They own the bank, they own the dollar and they own all the major media channels, the military industrial complex and most politicians, judges and cops.

Henry Ford once said "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning".

There is a lot of info on the fed reserve...mostly bad....

So very very true!!

Posting this will entitle you for some harsh punishment out of certain quarters here!!

BBF · « **Reply #19 on:** May 14, 2011, 09:31:10 AM »

Quote from: Pat/Rick on May 13, 2011, 06:59:17 PM

I wonder if cases of arson would increase if people started being foreclosed on willy-nilly?

That sounds like a plan to me. Should it ever happen here I would torch the house, have the wife torch the truck Plead guilty to arson and get jail time. There the accommodations wouldn't be great but I do have a roof over my/our head(s), get some clothing, free medical/dental and they have to feed you.

Beats living under a bridge and eating dog food and that stuff is getting expensive.