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Consequences of a U.S. Debt Default

Sandy Smith by Sandy Smith
August 24, 2019
in Learn Something, Rants
8
Consequences of a U.S. Debt Default
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Welcome back! Have you checked out the free webinar on how to establish credit for your small business?


The debt default debate continues to rage in Congress as we barrel towards defaulting on our debt obligations.  At this point I’m ready to call a repeal on every single member of Congress – no matter what party they are in.  I think that it’s absolutely disgusting that the people we elected to be in office to represent us are not doing their jobs.  We should never reach a point when we are only days away from a default.  We are already putting the world on edge and having a negative impact on our economy – the very thing that these morons say that they are trying to prevent.

Now, I realize that many of us don’t know what the big deal is.  So you pay your bills late, so what?  Well, it’s not like paying the cable company when you default on your debts as one of the world’s superpowers.  I feel a need to bring it down to Joe Taxpayer level so that we all understand what’s at stake for all of us if the U.S. throws a crap shoot.  It’s quick and dirty, and you might not like it.

  1. Social Security Checks Won’t Go Out
    Does grandma get either Social Security retirement or disability?  Well tell grandma to start couch fishing, cashing in the coke cans and picking up pennies because her check won’t be in the mail.  But wait, isn’t Social Security different from the other stuff in the whole debt thing? I mean, isn’t there a tax specifically to put money into Social Security?  Yes, there is…but guess what? The government borrowed from Social Security and if it isn’t paying any debts, that includes grandma’s “guaranteed” money.  Sorry granny, better luck next time.
  2. Value of U.S. Dollar Drops Like Lead
    Remember when the U.S. dollar would get like $1.50 in Canadian dollars?  Now if you go to Canada your $1 is only worth $0.95 in Canada.  You’ll long for those days because the value of the dollar will continue to fall and fall fast.  Everything that you buy that comes from overseas will cost you more.  I’m not talking about just the BMW that you’ve been drooling on.  I’m talking about all the other stuff that’s doesn’t carry a Made in the U.S.A. tag.  You know, things like just about everything in Walmart.  Kiss those low, low prices goodbye.  Oh and if you think that gas is expensive now, get out a mortgage!
  3. U.S. Downgraded by Rating Agencies
    There are a couple of agencies that rate what the likelihood is of an entity defaulting.  Right now, the U.S. is rated really, really highly saying that there’s never a chance in hell that the U.S. would default on its debts.  Why would it be rated any differently?  We never have before.  Well, if we do default expect that all to change.  How does that affect you?  Here’s the juicy part.  The U.S. will have to pay a higher interest rate to borrow money.  It’s kind of like if you don’t pay your credit card the credit card company jacks up the rate to like 29.99%.  If the U.S. has to pay more then guess what, so do you!  Have a student loan? Interest rate goes higher.  Getting a mortgage?  Expect to pay a higher rate.  Adjustable rate mortgage or credit card? Kiss your current rate goodbye.  Have a savings account?  Expect to get an even LOWER return.  Well even if the U.S. doesn’t default this could still happen.  Agencies are threatening to downgrade the U.S. debt rating even if we don’t default…all based on the amount of debt that, our spending habits, and the idiots that we have in office.
  4. People Lose Paychecks
    Work for the government?  You might get furloughed since the government won’t be able to issue you a paycheck.  That will affect federal employees as well as the military.  That’s a substantial amount of people and families that won’t be able to pay their bills because a check will not be in the mail.
  5. Investment Account Balances Drop
    The stock market could dramatically fall taking the value of your 401(k), IRA or whatever you have investment in the market with it.

Now, I’m just listing the few that would affect most of us.  As you can guess, I’m more than a little pissed off about this whole thing and if you are too then you should pick up the phone and call the schmuck that you elected to be in office. It doesn’t matter what party they’re in.  Let them know that you’re tired of this political posturing and you want action now.

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Can You Live on $1 Per Meal?

Sandy Smith

Sandy Smith

I started this blog years ago as a way of keeping myself accountable to my own debt reduction plans. Now I'm using this site to help others get out of debt, and learn about personal finance so that they can live their best lives.

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Can You Live on $1 Per Meal?

Comments 8

  1. Peter says:
    10 years ago

    I think a lot of the supposed side effects are being overblown. Social Security checks will only not go out if that’s what Obama (who made the threat) wants to happen. Otherwise they can shift priorities and make sure SS checks still go out.

    The stock market may show some temporary drops, but it isn’t likely to be a permanent drop by any means. Interest rates may go up as well, but again, probably mostly temporary.

    Other side effects are mostly going to be temporary, the one most worrying for many government employees is the furloughs understandably..

    To be quite honest I’m one of the ones that thinks that the bigger issue is our out of control spending, and finding a way to make sure our spending is a bit more in line with actual revenues, and not spending on huge deficits like we are currently.

    Reply
    • Sandy says:
      10 years ago

      Our spending is absolutely ridiculous. What are we borrowing 40 cents on every $1 that we spend? We spend way too much on the military, pork and entitlement programs, but the threats going back and forth will accomplish nothing. Political posturing isn’t getting things done when these sides don’t want to sit down at the table and find a middle ground.

      Reply
  2. retirebyforty says:
    10 years ago

    I remember those days when we get $1.35 Canadian for a US buck. It was great to go shopping across the border. Now we stick close to home…
    Those idiots needs to sit down and work out a compromise. Cut spending and get rid of the Bush tax cut.

    Reply
    • Sandy says:
      10 years ago

      Seniors near the border would get their medications from Canada because with the exchange rate it was cheaper. That and the fact that the drug companies charged Canadians less.

      I wish these people would grow up instead of going the “take my toys and go home” route.

      Reply
  3. icebergking says:
    9 years ago

    Its funny that the politicians voting are pretty much all millionaires. The working man just has to keep working!

    Reply
  4. Lorriane Christoph says:
    9 years ago

    Hey may I use some of the insight from this site if I reference you with a link back to your site?

    Reply
    • Sandy says:
      9 years ago

      Use away and credit.

      Reply
  5. explained here says:
    9 years ago

    Given the massive size of the national debt (over $13 trillion,) what would be the consequences of defaulting on it, and would it be worth a try? Just erase everything to $0.00 and pretend like it never existed – refusing to honor any debt.

    Reply

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