What will happen if we default on August 2nd?

With Greece defaulting – not a “technical default” or “restructuring” as it’s being branded but a real live default – the stage has been well set for August Second if the USA does in fact default on it’s own debt.

I tend to percieve the sky as falling earlier than most because I grew up in an environment of political instability. That said, I worry that we have underestimated the incompetence of our legislators. They may not realize how serious the consequences are if we don’t do something – anything – to solve the issue coming up on August second. They rarely have to solve a problem that is truly time critical because – well hell we’re the United States of America and we set the damn clocks the way we see fit.

The rare instances of time critical decisions required from our lawmakers are usually related to war. Sad and cynical as it sounds, wartime is an incredible opportunity for any government to push through ideological agendas  – like the patriot act – that are enthusiastically adopted by opposing lawmakers and the populace while emotions run high and we’re willing to trade some liberty for some safety and another excuse to wave the flag.

But this isn’t one of those times.

Ideological forces are strongly opposed in our government and any decision is going to leave a bitter taste in everyone’s mouth. So no one wants to make the decision. Which is why I’m worried there may be no decision by August 2nd and we will be well and truly fookered.

What will the consequences of a default on August 2nd be? Here are my bullets and they’re all pure speculation:

  • Interest rates in this country will start to rise and continue for some time. Remember, the Federal Funds rate was over 20% in June 1981.
  • The housing market will start a double collapse due to a rapid rise in mortgage interest rates.
  • In the uncertain environment, housing sales will stall and the terrifying housing data in September, October and November 2011 will have a knock on effect i.e. home sales will completely stall.
  • This will precipitate what should have occurred in 2008 and 2009 had the banks not been bailed out. The assets underlying many of their creative financial products will drop massively in value causing many banks to fail, this time without a bailout.
  • Because the dollar is the world’s reserve currency and many countries are holding Dollars, US debt and dollar denominated debt, a world financial crisis of epic proportions will begin to unfold.
  • If ratings agencies actually downgrade US debt, the effect will be catastrophic. Many banks, countries and other organizations are required to keep a specific mix of risk on their balance sheets. This will force world-wide balance sheet restructuring as countries and companies move away from the US dollar or dollar denominated debt – specifically US government debt.
  • The dollar will increase the rate of it’s current slide.
  • Gold prices will hit $1800 in September/October and $2200 or more by year end.
  • Credit will once again dry up wreaking havoc among businesses and banks.
  • Expect massive layoffs world wide as businesses deal with lack of access to credit and batten down the hatches preparing to weather the storm.
So what good will come of this?
  • With a declining dollar, US exports will earn more money.
  • There will be a massive power restructuring in corporate America as incumbents fail by the hundreds, opening up opportunities for young, innovative businesses.
  • Some wealth will be transferred back from the wealthy holding US dollars to the true innovators in this country as the dollar declines and the value of exports increase.
  • Manufacturing jobs will return to the USA as it becomes cost effective for other countries to use our labor force and base operations in the USA.
  • Our politicians will be exposed as incompetent and old power bases and old boy networks will crumble giving way to new blood, new ideology and possibly a new political party in the United States.
I’d love to hear your  prognostications in the comments, good and bad, of what will happen if we don’t raise the debt ceiling by August 2nd…

60 thoughts on “What will happen if we default on August 2nd?

  1. Hmm is anyone else having problems with the images on this blog
    loading? I’m trying to find out if its a problem on my
    end or if it’s the blog. Any feed-back would be greatly appreciated.

  2. I still want to know what will happen to colleges…. I am currently an independent and a junior in college what could possibily happen to me. What could possibly happen to the colleges across Texas and the nation. Also what assets should I invest in to keep and possibly increase my purchasing power. …and just to ask, to make sure my head is thinking of things straight… “I will still have the same money in my wallet and hand… but the value of it will go down???”

    • Esteban,

      I’m assuming you’re in the USA so..

      You’re asking two questions: The first is what will happen to colleges. The second is “what assets to invest in”.

      Re what will happen to colleges: Many of them will have to cut programs and expenses and increase revenue. Many universities receive federal funding. E.g. in 2006 (the most recent data I can find) Stanford received $540 million in federal funding which is a drop from 2005. UC Berkeley received $261.7 million in 2006.

      Your second question about what assets to invest in: Invest in yourself. This does not necessarily mean spending thousands on a college education or other expensive source of education. Often spending money feels like real work but it’s not. What you need to do is to acquire knowledge. The most useful knowledge is gained through experience like work experience or starting a profitable business.

      If you do in fact have a portfolio of cash you’re trying to preserve or grow, then you’re in the same tough boat that every other investor is in globally. Even treasuries are now a little more risky. Who knew!

  3. so what happens to the public schools and local county jails, courts, and emergency response teams like the police, emt, ect… if the USA defaults?

  4. Well they passed it. so this country will go down harder that it would this time. Not that I care cause I am moving out, to a ountry that is self sufficient and independent of whatever happens here. This will be a third country I lived in my life.
    Deep inside I really wish US will suffer cause Americans need a wakeup call, they need to realize that they are not any different, not special, but just lucky to a certain point.
    I lived here for 18 years and only thing I learned is that there are really stupid, arrogant and brainless people out there, I mean here in USA. And worst thing is there are masses of them here.
    There is no freedom here, constitutional rights are being revoked more and more and more everyday.

    • Absolutely, the country needs a wake up.
      Arrogant people saying “this is America the greatest country in the world”. I had enough of that, it’s not the greatest, it’s shallow and culture-less.

    • get the f*%k out of our country! You live off our land and our money and condem us? Leave! it’s people like you that RAPE OUR COUNTRY reaping the benefits and then put us down when you are part of the problem.
      We (Americans) are not rich, we are the middle class, the working class,. The banks have control . The banks have control of the world. it is not just America. It’s global.
      Before you open your inept mouth why not pick up a book and read, learn some history.
      I bet you are a freking Brit.
      Show your real name when you posted your comments on line ! COWARD!

    • For SEBO.. oh I see your a Communist and you immigrated to our country ! no wonder you wrote such disrespet for our country.
      Why don’t you go back to where you came from!! (and i thought you were a a snobby Brit! )
      You and our non- american attitude don’t belong here.

      • Thanks Robert. I agree. It is in unity and strength that America will build itself back together. And I know that it is already started to.

        Most countries that have the illusion of stability at this point are just a few years away from the same situation. But Americans ARE the smartest people in the world and WILL chalk a new sustainable stability and economy for the world to learn from.

        Kudos Gary.

        I am also an outsider to be honest, but this country has a lot to teach me because I am confident that my own country, seemingly flourishing, will go through this crisis because of bad banking decisions and I want to witness and participate in the reconstruction of the American Foundation.

        America led the world in every aspect and it will again lead the world to a restorative effort. Fools are those who laugh at the state of this nation. The power of this nation is not its credit rating, it is the courage in the hearts of its people to be relentless.

        • Satish: America could not possibly pull out of this,

          “Thanks Robert. I agree. It is in unity and strength that America will build itself back together. And I know that it is already started to.”

          To my knowledge Robert slung accusations and called Sebo a Brit, or a Communist. American’s have for a long time associated communism with Socialism and do not actually know the differences.

          Also Communism has proven not to work but some socialist practices have been proven to have increase infrastructure compared to non-socialist ideology. Universal Health Care has nothing to do with the political Marixist movement.

          “Most countries that have the illusion of stability at this point are just a few years away from the same situation. But Americans ARE the smartest people in the world and WILL chalk a new sustainable stability and economy for the world to learn from.”

          Most countries are far more stable in some areas than others, 25% of the total prisioners/convicts worldwide are in America in Maximum or Super Max prisons. Also those said security measures are not cost effective at all.

          America being the smartest nation in the world is hardly plausible, because intellegence like what is stated is looked differently. I met some extremely smart Japanese, Chinese and Korean people. Also most Nigerians (people from Nigeria assuming you know where this is, if not it’s in western Africa.) carry more degrees and higher amount of them then majority of American natives when emmigrating from Africa.

          Empires do not fall over night and the Empire made up by America will make a regional power but it will no longer be the superpower it once was. Irreversable debt is a huge issue, 14trl dollars worth of debt is staggering by any account and with unemployment so high the effects are not reversable in the short term or in moderate time frame.

          As for the rest of the world learning from the US, I would say doubtful. Considering China and India are the fastest growing economies in the world and China produces more graduates of post secondary education a year then America does I would tip to a more Asian centered style of learning and know how.

          “Kudos Gary.”

          Kudos? Why for calling a person ignorant? I would like say only ignorant people call ignorant people; ignorant. I actually tend to side with Sebo but I prefer having the rest of the facts.

          “I am also an outsider to be honest, but this country has a lot to teach me because I am confident that my own country, seemingly flourishing, will go through this crisis because of bad banking decisions and I want to witness and participate in the reconstruction of the American Foundation.”

          America may be able to fair well but I doubt any non-emerging economies will really fair well at all. Debt crisis is a huge issue with the largest economy biting the dust rather quickly, this would leave a vacume for the second largest economy a.k.a. China to take over and assume the lead which is had as one of the top super powers pre-world war era.

          Reconstructing America is impossible at current though if the markets change and Americans vote in people who can actually run an enconomy that needs 3.5 trillion a year but only has in stock 2.3 trillion. Increasingly makes this an very difficult task, nor will it be any easier when your grand children have to deal with the mess from their grandparents or greatgrandparents generations.

          “America led the world in every aspect and it will again lead the world to a restorative effort. Fools are those who laugh at the state of this nation. The power of this nation is not its credit rating, it is the courage in the hearts of its people to be relentless.”

          American leads the world in Obesity rates, criminal convicts, debt, and military expenditures which resulted in one mildly successful war, and one overly unsuccessful war in the last 15 years.

          The credit rating helps and does show and overall healthy economy and allows interest rates which apply from food all the way to mortgages and then everything inbetween, makes it more difficult for university grads to find work and businesses take a higher start up cost which will ultimately lead to failure in the short term.

          Heart of its people are from my conclusion while most are general good hearted, some/many are arrogant to believe in the American superiority complex. Till more people leave their countries and go abroad and find out the answer to the universe is not Americanism, let the empire fall with thunderous appluase.

    • Sebo, you are obviously a young ignorant person.Uneducated people have a habit of criticising others because of their lack of knowledge. You are one of them.

    • Sebo, the problem are not the Americans!
      Americans are good people, always willing to help other countries, other people.
      The problem is the US government, that
      spends too much money,always meddling into other countries business, instead of taking care of it’s people, like rebuild the infrastructure, schools, etc.
      Why spend hundreds of billions in irak, afghanistan when they could use that money here!
      The US government is corrupt, it’s sad but it’s the truth!
      Eventually the dollar will collapse when foreign governments stop lending us money, then you will see a bank holiday, dollar devaluations, riots on the streets etc.
      But eventually things will get better, Americans are hard working people, innovators and they will recover.

  5. I can definitely feel a huge change coming round the bend. It is not going to be pretty, but the end result will be a much better life for anyone who can make it through all of this.

  6. I have to wonder if the real problem we’re facing lies not in the shortage of money and thereby the inability to pay off our debt, but rather an issue with overpopulation. I’m only still a teenager so this may just come off as narrow-minded drivel, but the planet can only support half of what our population is today. And with an extreme lack of resources and America’s lack of exported goods, it doesn’t surprise me that it’s come to this. The question is, will anything our government tries to do be enough?

    • This might be the issue, but this country let this happen. In my state where I still live(not for much longer thou) laws encourage lazy people to have more kids so they get more money eventually supporting whole families. And we ended up with whole neighborhoods full of lazy bastards feeding of the system.
      Should have left them in africa but no… rich wanted to get richer. Now you will pay dearly for that.

      • great point! I know people who take advantage of this country, don’t work, live on welfare, food stamps, have 10 kids they can’t support!

        • hopefully when everything goes down most people will be able to make it through without the government and free handouts. But there are alot of lazy people out there and most of them won’t make it. When the shit does hit the fan I’m taking my kids, my husband the bible and our necessities and heading in the mountains. Haha then we might ba able to live the way we were ment to live. God bless everyone.

    • I lived in comunism, and really It would be hard to choose between here and then. Both system are pretty messed up, but it seems like at least during commie time we people knew where we were, and for the most part, there was less laws and more freedom. The scale of delusion in USA is at such a big scale, that is unbelivable. All those idiots with bumper stickers saying “FREEDOM” make me laugh, it is sad.

  7. I think we Definitly got to look at the people running this country into the ground and wander why we are electing them. USA does have a very impressive GDP per capita but take a closer look and see what it is made up of. 1% agriculture 20% industry 80% services. Now when your spending your money on food to survive. Who is going to be paying for services.
    Things need to change and maybe the government already know this…..AUGUST 2nd

  8. you forgot to mention that part of the reason jobs will be coming to the US is will be close to a 3rd world country.. people will riot in the streets because of unemployment, food shortages, people homeless because social security checks vanished,

    • great point! That;s why they recently passed the national defense authorization act to round up people when the dollar collapse, riots start, the ss check will not come!

  9. One thing that will happen if we default is that businesses owned by members of Congress will be boycotted & picketed,just like abortion clinics. I just did all the work to set that up here. Sheriff protection will be in place. The signs will say:

    The man who owns this store bankrupted America

    Unless he backs off and votes with the President, we’ll see how long it takes to bankrupt Republican Congressman Scott Tipton. We’ll be out there next to his driveways every day, informing the public.

  10. essay: China has been keeping their currency artificially weak by buying US dollars or dollar denominated debt. If the US does default on it’s obligations, China will be forced to diversify. That, combined with a weaker dollar relative to other currencies will make it very hard for them to maintain a strong Yuan.

  11. So China has our high rise buildings our national parks and numerous railroads as colatiral for the money the us owes them so who’s to say the Chinese won’t get a bug up there ass and invade the country not only that if we defult the intrest rates on what we owe them will then rise how will we pay that if we can’t pay them now. When Argentina defulted there paso was worth next to nothing and had to start using the barting system. And then no other major banks would loan them money for a decade. With todays society if this were to happen civil uprising is bond to happen do u think inner city thugs will just sit back and wait for the gov to work things out they will take advantage of the situation and will try to over rule the local police and yes we will be practically a 3rd world country with no banks with money and the IMF dosent have enough to bail us out which last I checked they have only 200 billion for bailout I think this situation could possibly worse then what CNN and fox news let’s on I hope not but its possible.

  12. “well hell we’re the United States of America and we set the damn clocks the way we see fit.”

    Exact mindset which keeps getting you guys in trouble and not doing anything time critical, Frankly.

  13. One correction, the “Unemployment in the USA is just under 10%” number is a falsehood. After a relatively short period out of work you no longer fit the technical definition. The real US number is between 17% and 22%. Here’s the reason why, from


    Worse, the aforementioned unemployment rate of 9.4% is just a fraction–perhaps half–of the overall jobless rate. That is because this so-called official rate includes only those considered to be technically unemployed. That is, those individuals, who are without a job, but who are actively looking for full-time work. This official unemployment rate does not include several other nagging jobless or underemployed categories that also are weighing on the economic upturn now under way.


    These people are in much worse shape than anyone in Washington is willing to admit. I suggest that you reconsider whether homelessness & starvation are enough to rip the fabric apart.

    Then again, just in case you’re correct about your software business, where’s the open jobs listing? What languages / disciplines do you need?


  14. Keith:

    I’m familiar with the fragility of the social fabric. I grew up in South Africa during apartheid. When my kid brother was born the doctor had a gun on his hip in the O.R. I’ve been teargassed more times than I care to count. I was a block from the Admiral Duncan in London when it was pipe bombed.

    My point is that I know what it takes to rip the fabric of a society in two. And I know the difference between that and the random crazies out there.

    That said, let me offer you some perspective:

    Unemployment in the USA is just under 10% right now and you’re talking about the streets erupting. In the USA during the great depression it peaked at 25%. RIght now in Spain, unemployment is over 20% and rapidly rising. In South Africa the “official” unemployment rate is 25% and the streets are not erupting. The unofficial rate is 45%.

    It takes more than dissatisfaction for the streets to erupt. What it needs is an ideological disagreement of epic proportions. Like apartheid, the civil rights riots, the brixton riots, the Rodney King riots you mentioned, the 2007 riots in Nairobi over the rigged election, and so on.

    Also, don’t get me wrong. I’m not rooting for any of this. Change always hurts everyone in the short term, but it does often clear out incumbents holding on to old power bases and make way for new innovators.

    Finally, to answer your question: “Who will buy your software without any available credit & their bank account wiped out?”. In an environment like that I would suggest that software that helps people replenish their bank accounts could be quite popular.

  15. well the terroristic millionaires im refering to is the anders behring breivic. he recently stated he wasnt alone on his opperations which i suspect is the truth he had a plan and knew exactly what he was doing. he wanted to be caught for some reason idk why he did but he is alot smarter than the press is leading on. i beleive more acts of mass murder could come soon. but thats besides the point at least its good to hear that its easier to be employed when i graduate and that it will be cheaper for me to be employed than a chinese graduate or somthing.

  16. @mark Who will buy your software without any available credit & their bank account wiped out? The domino effect will “trickle up” on you much faster than you might think. Especially since so many businesses are already teetering on the edge of bankruptcy. A friend shut down last month, after barely hanging on the past few years.

    I was in LA for the 1965 & 1992 riots. The social fabric is a lot thinner than most people believe. It won’t take much before the streets erupt, too many are already in dire straits.

  17. Well as someone who runs a software company, if the dollar devalues it’s going to be cheaper for me to employ you when you graduate from college than some guy in India or China. So the dollar getting weaker is actually good for you and bad for the “terrorist millionaires” as you call them.

  18. well its good tp hear that the world isnt going to come to an end i didnt fogure it would but its still scary to hear about how our dollar will probably be devalued to 20cents. i just moved out etc just got started and then this economic deppression is about to take hold idk gow college woll be paid or anything anymore. it is almost demoralizing to watch all the news about this cuse i have no idea what’s gona happen

  19. Caleb,

    The US isn’t going anywhere. It’s the most powerful country in the world, has one of the most productive populations (Google GDP per capita), has excellent universities that foreign students still flock to, it’s still the most business friendly country in the world, raising investment to start a new business here is the easiest in the world, innovation is respected, failure is not frowned upon like it is on other western cultures like England.

    I could go on for pages.

    The down-side of the US defaulting on it’s debt is a lot of short term pain, but it may have a net long term positive effect on the country because it will force us to deal with issues we’ve been postponing.

    Another thing I should make clear is that many countries in the world are dealing with similar issues that we are. There is, for example, talk that if the US defaults, demand for treasury bonds will paradoxically increase because we’re still considered a safe haven relative to other countries. In other words, the US defaulting may have a worse impact on other countries.

    On last thing: As someone who is 18 and about to enter the work force, don’t get demotivated by, or spend too much time thinking about economic crisis and geopolitical issues. I spend way too much time doing it myself and much of that time could be better spent on improving my own micro-economic situation.

    Best of luck!!

    • I take your comment, Mark:
      “Another thing I should make clear is that many countries in the world are dealing with similar issues that we are. There is, for example, talk that if the US defaults, demand for treasury bonds will paradoxically increase because we’re still considered a safe haven relative to other countries. In other words, the US defaulting may have a worse impact on other countries. ”

      And maybe franks to:
      “However, I have a growing suspicion that on the Republican side there are too many strong agendas that would favour a default. For example, some way wish to undermine China’s position,”

      What properly gets on my wick ,as I am from Australia, the U.S Greek and further more the European troubles , well to say the least I am not impressed by this so called Free Trade.

      Here in Australia has been a decline of local manufactures hence local employment and a decline in local economy.

      O.K every country has its problems but its like having a next door neighbour having a domestic and who really wants to get involved?

      In that light it does get a little weary listening /watching someone else’s problems when we (Australia ) have our own to solve without restraint.

  20. so im curious to ask. with all this devestation and depression thats about tto hit the economy. do u think a mass migration of people panicking an fleeing the country wil happen? i mean in only 18 years old but i can already see this country could be close to the end. how will canada an other countries stop and take control of the situation

  21. I have tended to side with Mr. Soros’s opinion on economic and political matters, and his view is that this is a theater. He thinks the debt problems will be resolved in a timely way.

    However, I have a growing suspicion that on the Republican side there are too many strong agendas that would favour a default. For example, some way wish to undermine China’s position, or some may wish to undermine ‘socialist’ big government, or some may wish European banks to fold while they are still weak, and so on.

    As demonstrated horrifically in Oslo recently, it is easy to underestimate domestic nationalist extremism. Let us take the prospect of a US default with some seriousness, as there are certainly those that would take down the whole house of cards…

    • Please people stop associating anything about this government with socialism, trust me I have been a socialist for years, and we want nothing to do with this mess. Obama is nothing but a capitalist, and big government doesn’t imply socialism. Besides if we removed all socialist based policies from this government it would have fallen years ago. Socialism has nothing to do with capitalism, the reason why big government is such a problem for this nation is because that government is capitalist controlled it acts in the interest of the few, the social policies are only to maintain order, without them the working class would have risen up a long time ago. By the way Mr Soros is a major supporter financially of Socialist Party USA, and blames much of the worlds problems on capitalism.

  22. This crisis started with a housing crisis back in 2008 and is all about debt. How can the US (and other countries) get out of debt?

    The best way is too devalue the currency. That way the real value of your debt shrinks. Inflation rises and asset values (like stocks and shares) start moving up. The Federal Reserve won’t dare say it directly, but all their actions over the last few years (like “quantitative easing”) have been to gradually devalue the dollar.

    If the USA defaults, then in the long run this will probably devalue the currency. I say probably because if there is a default there’ll be a flight to safety, which normally means a strong dollar, as the US is seen as a safe haven with its AAA rating.

    But if the rating goes down, who knows? I think the dollar will plunge – so this will play into the fed’s unspoken agenda. Mortgages and debt will shrink, inflation will go up. Hopefully, and this is the danger, there will also be a wage spiral. If there isn’t then maybe USA will become like a 3rd world country. I doubt it though – this is just the beginning of another move up in the price of everything.

    My dad bought his first house in the UK for £3000. 30 years later that house is worth £300,000. Who knows what house prices will be when this inflationary / debt cycle tops out!? I’ve a hunch that after a default and another dip down, house prices will rocket far higher then they have ever been.

    • I disagree with you about the house price sky rocketing….if anything it will drop to meet the supply and demand. In this case the demand will be low because no one can afford the high interest rate and not to mention loans will be harder to obtain.

  23. Lucien the problem is not our ability to service the interest on our current debt which right now at 90% of GDP is still lower than post WWII. The problem is our broken political pipeline that may simply not get the legislation passed that it needs to in time for August 2nd.

    We’ve recovered from debt as high as 108% GDP before. But there is simply no political will right now for increasing government spending at all considering what was done with our tax dollars in the last 4 years.

    • Same sad song, and dance. How shameful the fat pigs are in this country, their sense of entitlement, feel they have the right to just shape the world anyway they see fit. Thing is all that wealth wont mean a thing once the working class finally wakes up, are the third world gets sick of the exploitation , and unites which ever happens first. This day is coming, I can only pray we wake up, and change our greedy evil ways before its to late. Thing is with this system your probably right about the taxes, it makes no sense attempting to reform a system thats destine to fail. Until we grow up, and realize that Socialism is the only way we will continue to be plagued by the threat of total collapse. When I say Socialism I mean real socialism not those false totalitarian examples (like Stalin/ North Korea) that the tools in the media sell the nebulous unfortunates that maunder on. No I mean a need based system, a system that still has wealthy peoples, a system to were we all have a truly equal chance, a strong foundation, a system were money cannot buy title, more rights, political favor, a system that doesn’t put profit first, a system of the collective, true community, backed by real Democracy. (A Socialist Democracy)

      • Socialism too has it’s problems. Human population expands until resources are scarce. Where there is scarce resource, there is always power difference. Capatalism simply formalizes this power – the power to use violence, to dominate resources, to dictate laws, demand tribute etc.

        Successful implementations of socialism (or other alternative systems) have always come from violent revolution. Once established, these systems are vaunerable to devolve into totalitarian states as power consolodates again. A notable modern exception is Evo Morales’ state of Bolivia, but for how long?

        I’m afraid that these problems can’t be avoided when you have scarce resources and large populations.

        I’d be first to join a socialist democractic party, but I don’t think it would be the panacea to power difference you suggest.

  24. Don’t be silly–the US Government is no absolutely no danger of default.

    Paying the interest on the debt takes 10% of income. No problem.

    The rest will have to be divvied up among the other piglets on the big teat. Some will get less than before.

    Problem solved. And about time.

    • Lucien, you do not seem to have thought this through?

      Most voices are agreed that the US will try to honor its interest payments, due on 15th August. However just servicing the debt alone does not add up to no default.

      Should the US fail to make, or defer, a single payment with the eyes of the entire globe firmly fixed on it’s minutest inflection, it will amount to a default on the part of the US government. The triple A credit rating will be removed, the glow of the “safe haven dollar” will evaporate. As Mark pointed out the vast majority of US dollars are owned by non US citizens. These dollars are held by foreign banks, global pension funds, foreign governments. Possibly the only country NOT holding vast sums of dollars is Iran alone, and I would hazard a guess that Iran most likely does have US dollar reserves.

      So what will happen if the US government skips a minor payment, or even pays its non-interest debt a day late?

      Simple, the AAA rating will be downgraded, and dollars will be sold. Gold, Yen and Swiss Franks will be the new safe haven, among other currencies that have sounder fiscal policies. Not just a few dollars, but 7 out of every 10 dollars ever printed could be sold, as this is the number of bills that is owned by non US citizens. I even have some myself, and I am a regular citizen way over in Africa. Please dear God they don’t all decide to sell on the same day….

  25. I believe this will make way to a new system. A resource based economy I believe will be the most promising and most logical solution to our problems. If we do not default and government does not go under we will be in the same fucking boat we are in now 10 years down the road if even that. I doubt people will riot or get violent the only violence will be what the government because they will not be able to control over the people. People I do not care what you think for I have studied human behaviors and understand why people become the way they are. For example if child was raised to be a good Jewish child he will grow up to be a good Jewish child. If a man was raised in a unsettling environment of violence such as abuse until you take that out of the equation you will have a violent aggressive person. Bigotry is learned at a young age and makes it hard to understand from right and wrong. We are all puppets we are all god damn slaves. Repetitious work needs to be phased out and rely on modern day technology. We have an ABUNDANCE of resources that we can develop alternative sources of energy. We peaked oil in the early 1980’s. This is not logical if we do not change as people we will die.

  26. Ironically, I think you are an optimist if you believe anything will happen other than crime, violence, and our descent into the status of a third world country. That’s what you view as the GOOD outcome.

    This is very scary. Who are those people we elected?

    • It doesn’t matter who we elect, capitalism runs our government. The white house along with everything else political in this country is bought and paid for by the corporations. Oh I know many so called intellectuals , and non intellectuals will ramble on about how everything is so great, this system works so well, or oh the liberals did it, or the republicans did it, truth is their both the same, democrats might be a little more intelligent, however they lack the backbone to support it. Which is exactly why this will continue, until the workers cant take it from behind any longer , and actually start to use their brains, instead of buying everything the capitalist backed media feeds to them. We either live as a collective are we all go down as individuals, (thinking we were right).


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