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The four times the United States government defaulted on its debt (2021)

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Re: The four times the United States government defaulted on its debt (2021)

#31

Post by Jedd »

"BRETTON WOODS A system for international financial management and stability which was put in place by the Allies, minus the Soviets, in 1944 and destroyed in 1973 by President Richard Nixon without consideration being given to a replacement.

"Nixon hoped in this way to solve some short-term American economic problems by re-creating the sort of financial disorder in which the largest power would be best placed to benefit. It could be said that this was the single most evil act undertaken by an elected leader in the postwar period. Other leaders should not be discouraged, however. The opportunity to do worse is perpetual."

    --- John Ralston-Saul, The Doubter's Companion, 1994

Re: The four times the United States government defaulted on its debt (2021)

#32

Post by thomastjeffery »

rootusrootus wrote: post #16

Our politics is so dysfunctional. We waste tremendous amounts of time making the same arguments over and over and over, like somehow this time will be different. I assume both sides want it to continue, though I don't really understand the motivations from the left. The right is super easy to understand, it's a huge win for them every time.

The Republican party depends on unification while the Democratic party depends on diversity.

There is no coherent Left in the US: instead we have one tent for every person who isn't conservative.

Re: The four times the United States government defaulted on its debt (2021)

#33

Post by tastyfreeze »

ragnot wrote: post #18
roenxi wrote: post #8

The US defaulting isn't really the most interesting topic at this point - scenarios where it honours its debts became implausible a while ago. It'd be much more interesting to get an honest insight into the views of the Chinese & Japanese leadership (two countries with the largest US dollar holdings) on what they think they are getting out of this. The numbers are obvious - someone isn't going to be getting much in t…

No better alternative for the Chinese. US Treasuries are the worlds most liquid and deep markets for money at the nation-state scale. Euro's are still in America's sphere of influence. Holding Yuan just destroys their export economy. Japanese depend on America for security so they do it as a sort of quid pro quo. I do agree though: pensioners (i.e. US public) will suffer first. International treasury defaults would t…

China has been buying gold. They have been preparing for the collapse of the dollar for years. There are some claims that the collapse of the dollar is China's goal.

Re: The four times the United States government defaulted on its debt (2021)

#34

Post by adventured »

tastyfreeze wrote: post #28
Jedd wrote: post #20

Earlier quoted context omitted.

> ... when the world moved off Breton Woods ... When Nixon decided to end Bretton Woods.

When Nixon stole gold from other countries by breaking an international treaty. The US is lucky no country declared war over the thievery.

> The US is lucky no country declared war over the thievery.

There were no other countries capable of going to war with the sole global superpower. Not even remotely close. Western Europe desperately needed the US to continue standing off the Soviets. Who was going to declare war? Nobody of course.

That remains true today (China for example can't project force outside of its borders effectively and the Europeans still desperately require the US to stand off the Russians).

Re: The four times the United States government defaulted on its debt (2021)

#35

Post by tikkun »

The most likely path in 2023:

* Politicians play chicken, waiting until the last possible moment

* The markets get upset in the meantime and this impacts US Treasury bond prices

* Eventually the limit is raised, right before the deadline

The estimated deadline is approximately mid August, though could be somewhere between June and early September.

In the long term, either we need something that provides massive growth (increased tax revenues, reduced welfare spending), or we'll default.

A default in 2023 is not impossible, though is definitely unlikely.

Re: The four times the United States government defaulted on its debt (2021)

#36

Post by tastyfreeze »

rootusrootus wrote: post #16

Our politics is so dysfunctional. We waste tremendous amounts of time making the same arguments over and over and over, like somehow this time will be different. I assume both sides want it to continue, though I don't really understand the motivations from the left. The right is super easy to understand, it's a huge win for them every time.

You have to participate to fix the dysfunction you see.

Re: The four times the United States government defaulted on its debt (2021)

#37

Post by ragnot »

roenxi wrote: post #27
ragnot wrote: post #18

Earlier quoted context omitted.

No better alternative for the Chinese. US Treasuries are the worlds most liquid and deep markets for money at the nation-state scale. Euro's are still in America's sphere of influence. Holding Yuan just destroys their export economy. Japanese depend on America for security so they do it as a sort of quid pro quo. I do agree though: pensioners (i.e. US public) will suffer first. International treasury defaults would t…

The Asians have potentially just given huge amounts of real stuff to the US in exchange for ... arguably the exposure? They could have just taken the day off instead and been economically in the same position. "No better alternative" is a bit of a trick in assuming that the natural order of the world is Asians slaving away making life better for someone foreign. It didn't have to be that way. I'm not saying that they…

Japan doesn't. It is essentially a US vassal state when it comes to international disputes.

For China: Where would they put that money? They can't keep it in the Yuan because it strengthens their currency which destroys their export economy. So they have to buy other currencies to reduce demand for their currency while strengthening others. Which currency can they go to? The answer: USD. It's the only one that can support their scale.

Sure can they make up another currency? I think they've been trying to do a BRICs currency for a while now. However, you can be sure if that gains traction that the US will start doing something about it, either covertly or kinetically. It is that much of an existential threat to the US.

Re: The four times the United States government defaulted on its debt (2021)

#38

Post by johnchristopher »

roenxi wrote: post #27
ragnot wrote: post #18

Earlier quoted context omitted.

No better alternative for the Chinese. US Treasuries are the worlds most liquid and deep markets for money at the nation-state scale. Euro's are still in America's sphere of influence. Holding Yuan just destroys their export economy. Japanese depend on America for security so they do it as a sort of quid pro quo. I do agree though: pensioners (i.e. US public) will suffer first. International treasury defaults would t…

The Asians have potentially just given huge amounts of real stuff to the US in exchange for ... arguably the exposure? They could have just taken the day off instead and been economically in the same position. "No better alternative" is a bit of a trick in assuming that the natural order of the world is Asians slaving away making life better for someone foreign. It didn't have to be that way. I'm not saying that they…

Hindsight is 20/20 here and the default hasn't even happened yet.

Re: The four times the United States government defaulted on its debt (2021)

#39

Post by calgarymicro »

throw0101a wrote: post #12
curiousllama wrote: post #7

The US Government has never defaulted on its debt under the current (~50 year old) global financial system. It HAS defaulted when transitioning off the gold/silver standard, when the world moved off Breton Woods, and during the Civil War. I’d note that each of those defaults were related to the total collapse of the existing rules for national/global finance. So ultimately, these defaults do bolster the case for the…

> The US Government has never defaulted on its debt under the current (~75 year old) global financial system. Except for 1979: * https://www.reuters.com/article/usa-debt-default-idUSN1E76A0... * https://www.theatlantic.com/business/archive/2013/01/heres-w... * https://archive.is/jKayD

> technical default 32 years ago was blamed on check-processing glitches and quickly corrected . . . affected only a tiny percentage of maturing securities at the time.

Not exactly the same thing.

Re: The four times the United States government defaulted on its debt (2021)

#40

Post by jjoonathan »

roenxi wrote: post #8

The US defaulting isn't really the most interesting topic at this point - scenarios where it honours its debts became implausible a while ago. It'd be much more interesting to get an honest insight into the views of the Chinese & Japanese leadership (two countries with the largest US dollar holdings) on what they think they are getting out of this. The numbers are obvious - someone isn't going to be getting much in t…

> It'd be much more interesting to get an honest insight into the views of the Chinese & Japanese leadership on what they think they are getting out of this.

Industry. They wanted it. They got it. This is how.

Remember, debt substitutes exports in the balance of trade. Issuing debt pumps assets and dumps exports. Buying debt pumps exports and dumps assets. Countries buy US debt because they want to pump exports. They want real jobs building real things with real infrastructure and real machines.

I wouldn't worry about China getting short-changed. I'd worry more about the implications of the US offshoring its industry. The implications to hard power are obvious, but the domestic implications are more consequential for most of us:

"We used to make shit in this country, build shit. Now all we do is put our hand in the next guy's pocket." - The Wire

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