I have a question
🤔💭 Theory 😲💡
I am a brain dead, so I have a question for you smart people.
Let's assume that the debt ceiling talk cannot be resolved and we as a country default on our debt.
What happened then? Who are these debtors? What will they repo?
The US Government spends more than its income. So it has to constantly borrow money. They constantly are holding meetings with investors where they sell US Government bonds. To institutions and foreign governments etc.
If the government is not allowed to borrow more, then they must live within their normal income from taxes etc. However, $640 billion of the budget is for interest payments on the US Debt.
If the US Government decides to stop making those payments, then nobody will ever buy any US Government bonds again, making running a budget deficit impossible.
If the US government just prints up the money to pay off the creditors, it leads to the same result - nobody wants US dollars any more. We are no longer the world's prime reserve currency.
This bunch of politicians will never cut spending - so we are headed for rough times IMHO. All intentional - not because of incompetence. They are doing it on purpose.
I understand all that about the default. We are only making payments on interest, and not even principal. Ridiculous. I would like to go for a default where these demons lose their credit cards so they can no longer just borrow and spend. As a citizen, I just want to know what will be repo because of the principal.
When you buy a US government bond, there is no collateral. You trust the US Government to repay you when the bond comes due. If they don't, you are just shit out of luck, end of story. Bad on you for trusting them.
It is fundamentally different than a car loan or a home mortgage where you sign papers that if you default they can take your car or home from you.
So no repo at all. But there would be extreme repercussions for US residents if they actually stop paying interest, or devaluate the currency so the interest is worth nothing.
Oh so the bonds are worthless. I understand. I don't have bonds any way. Those holding cd would probably sol also.