Possibility of a US default

Discussion in 'Economics' started by doublet83, Jul 28, 2011.

  1. Glancing thru some of the posts here, it seems like many believe that the US can't default on its interest payments, since tax receipts greatly exceed that of interest payments. However, this line of thinking seems to ignore two factors. I am no expert on the subject so correct me if I am wrong.

    1. The US constantly has debt maturing that needs to be rolled over into new debt. I'm not sure if a default would entirely prevent the issuance of new debt or simply require the old debt to be replaced with much more expensive debt (since investors will obviously be more hesitent to lend to someone that is in this state).

    2. Tax receipts are seasonal and I imagine occur primarily from February to April.

    I think a more reaslitic reason of why the US can't technically default is that they can print as much money as they want. Although this is no more practical of an escape, as this will cause hyperinflation and other bad things that will destroy the economy just the same.

    Whatever the case may be, if the debt ceiling is not raised, I'm sure the results will be catastrophic.
  2. You can scare people once in March 2009.
    You can scare them a second time in July 2010.
    Betcha you can't scare them a 3rd in Aug 2011!?!
  3. Not raising the debt ceiling is most likely short term pain, long term gain.