US Debt Default

[That thing you do]

https://www.theguardian.com/business/2023/jan/13/treasury-secretary-janet-yellen-debt-ceiling

 

$31tn hole in the finances in US of A. 

 

Quite incredible. Shows dollar wont last. No wonder US and UK looking at digital money.

 

Cant see how this ever sustainable

 

[henrysmithsgloves]

😲 holy smoke

[Lone Striker]

10 hours ago, That thing you do said:

https://www.theguardian.com/business/2023/jan/13/treasury-secretary-janet-yellen-debt-ceiling

 

$31tn hole in the finances in US of A. 

 

Quite incredible. Shows dollar wont last. No wonder US and UK looking at digital money.

 

Cant see how this ever sustainable

 

Eye-watering stuff.  Yet it shows one of the absurdities of how the global capital markets seem to tolerate - and even thrive on - enormous debt.       Pretty much every country in the West is addicted to this scenario -

 

USA - "We'd like to borrow 100bn dollars please - we're willing to  pay 5% interest on the new bonds"

 

Wall Street - "OK, but since you've already got a very poor credit rating,  you'll need to pay a lot more than 5% to attract buyers for the new bonds.   We can find buyers at 10%. "

 

USA - "OK. I guess we'll just have to do that, then"

 

Wall Street - " By the way, the bonds you'll need to issue in the near future just to pay the interest on the ones you're about to issue now will need a 15% yield.     Nice doing business with you. See you soon" 

 

 

 

[Cade]

The entire capitalist system is built on massive piles of debt.

Personal debt, household debt, business debt, national debt.

Borrowing to the hilt to encourage spending so you can kid on that your economy is growing.
This is why we have constant cycles of boom and bust. The debts are eventually called in.

[Diadora Van Basten]

I think the rises in interest rates in the US and the UK have been far to aggressive.

 

In the last budget the UK needed to find £30 billion in additional taxes to cover the increased cost of interest and the US will have similar problems.

[henrysmithsgloves]

Is it true china owns a fair chunk of Americas debt?

[Ministryofdad]

Another massive fire sale going to happen shortly. Be ready for a bargain 

[henrysmithsgloves]

11 minutes ago, Ministryofdad said:

Another massive fire sale going to happen shortly. Be ready for a bargain 

 

[Des Lynam]

32 minutes ago, Ministryofdad said:

Another massive fire sale going to happen shortly. Be ready for a bargain 

 

Some of those few voices that called the 2008 crash have said what's coming is going to make that look tame. 

[Watt-Zeefuik]

There’s absolutely nothing wrong with the US debt loads unless we arbitrarily decide to stop paying service on it for stupid political reasons. Which would be idiotic and truly catastrophic, and which the House GOP may very well do anyway. 
 

****ers.

[Ked]

Whose money is it we the west are borrowing from and how was this money made?

We the UK have been in debt for the past 50 years from 80% to now 100% of our gdp.

 

 

[Watt-Zeefuik]

1 hour ago, Ked said:

Whose money is it we the west are borrowing from and how was this money made?

We the UK have been in debt for the past 50 years from 80% to now 100% of our gdp.

 

 

 

I'm not sure what the formal instrument in the UK is, but in the US it's in the form of sales of US Treasury Savings Bonds, considered one of the safest investments in the world, which is why governments and investment houses all over the world buy them in order to store value. In return, the US gets to borrow money at extremely low rates.

 

If the government can't pay its debts, some section of those bonds go into default, which has about 20 different bad ways of causing trouble.

 

And to be clear, the same cynical arseholes who are currently talking about defaulting happily voted to raise the debt ceiling repeatedly when Trump was President. It's because Biden is President that they're even talking about it.

Edited January 14, 2023 by Led Tasso

[Ked]

11 minutes ago, Led Tasso said:

 

I'm not sure what the formal instrument in the UK is, but in the US it's in the form of sales of US Treasury Savings Bonds, considered one of the safest investments in the world, which is why governments and investment houses all over the world buy them in order to store value. In return, the US gets to borrow money at extremely low rates.

 

If the government can't pay its debts, some section of those bonds go into default, which has about 20 different bad ways of causing trouble.

 

And to be clear, the same cynical arseholes who are currently talking about defaulting happily voted to raise the debt ceiling repeatedly when Trump was President. It's because Biden is President that they're even talking about it.

I was trying to be more deep about it.

In the sense that its not real and merely the promise to pay.

But in reality it never is paid.

I'm staying out the US politics thing as I always get a doing over it and find myself taking sides that I don't want to take .Trying to make points about the whole thing .

Sorry to digress but this is what makes me laugh when I hear that Scotland can't afford itself.Given the debt ratio of nearly every country in the "west"

 

 

[Der Kaiser]

I'm sure their Saudi friends will help them out again.

[Des Lynam]

49 minutes ago, Led Tasso said:

 

I'm not sure what the formal instrument in the UK is, but in the US it's in the form of sales of US Treasury Savings Bonds, considered one of the safest investments in the world, which is why governments and investment houses all over the world buy them in order to store value. In return, the US gets to borrow money at extremely low rates.

 

If the government can't pay its debts, some section of those bonds go into default, which has about 20 different bad ways of causing trouble.

 

And to be clear, the same cynical arseholes who are currently talking about defaulting happily voted to raise the debt ceiling repeatedly when Trump was President. It's because Biden is President that they're even talking about it.

It’s completely political and has the potential as seen in 2011 to hit ordinary Americans hard. They need to abolish the statutory debt limit but the Republicans would spin this as some form of Communism. 

[Jeff]

Who do they owe it too?

 

Surely can't just be the Swiss?

 

I know little of economics 

[Ked]

15 minutes ago, Jeff said:

Who do they owe it too?

 

Surely can't just be the Swiss?

 

I know little of economics 

Themselves

[Watt-Zeefuik]

3 hours ago, Des Lynam said:

It’s completely political and has the potential as seen in 2011 to hit ordinary Americans hard. They need to abolish the statutory debt limit but the Republicans would spin this as some form of Communism. 

yup

[Ked]

2 hours ago, Lord BJ said:

Im not sure I’m understanding your question correctly but I’ll try and answer. 
 

In the UK we primary issue bonds to fund our borrowing. So these bonds can be purchased by anyone in reality but primarily via financial institutions who are looking to blend portfolios. (Bonds are way more stable than stocks) 
 

The UK borrows, at it simplistic, the same way anyone does against some form of assets. (Your credit rating kind of represents your ability to pay back)  The UK essentially has assets which are primarily us paying tax tbh, though there are some others. 
 

Most countries are in simple terms living on the never never. Though l, I accept its kind of cash flow in many ways. 
 

It is real money, despite what people thin, money is paid out by government on maturity etc. It might not be Hunt with a bag of cash but it is a ledger system and generally funded by issue more bonds to pay for the other maturing tbh. 

 

If you’re thinking that money is just a promise to pay value, and essentially it holds no real value. Well it kind of is but that’s how the monetary system works and one of the reasons it works so well is the value is fixed not subjective. It’s merely a promise system. 
 

If you’re talking about the secondary bond market, the values change as bonds worth change due to many external factors. Though I accept that stuff is a bit black magic. 
 

On the original point it’s just politicians being politicians. In reality it’s very easily sorted and will be when push comes to shove. 

 

 

Sound mate.

I went onto Google it.

All started in the Napoleon's time apparently.The workings of it are as you explained.

 

What I was getting at is that the line of credit is worth almost 9 times the value of the bonds.That means to me that it is making money out of nothing.

So since Napoleon' times we have (the west in general )steadily increased our debt and only ever pay interest.

So in the 70s we were roughly 80% of gdp now we are over 100%.

So far it seems that most of that debt is owed to private banking which as you say is c9vered by bonds.

But the bonds don't cover that nowhere near it.

So the private banks give a line of credit which they don't actually posses.

But then I remember we bailed them out.

We did this by borrowing .

From them.

 

So to go back to @Led Tasso the republicans you speak of have no chance .

But there is something very wrong about world debt and there's no chance to remedy it .

Unless the people who control the debt which comes from nothing let you.

 

So I'm sorry I know its a US debt thread but if an independent Scotland wants to go it alone "whose baws do we need to rub"?