What happens if the United States as a country files bankruptcy?
Tags: bankruptcy, concerned citizen, federal government, government files, government spending, national debt, united states
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April 12th, 2010 at 1:14 pm
The United States is already bankrupt. We became a debtor nation in the 1990’s. We owe more money than we can ever pay back. Much of our Treasury debt is held not by US citizens but by foreign countries who SOMEDAY will want their money back, and we can’t pay it. Clinton got us out of debt but George W. piled up a $1.7 trillion debt for the Iraq war and tax cuts, and Obama is going to add another $1.7 trillion for health care. Where is this money going to come from?
The government pays this off with inflation: by printing more and more money, making "old" dollars worth less so debts can be paid off in new lower-value dollars that don’t buy so much. That’s why some people are worried about inflation in the future.
I lived through the hyper inflation of the late 70’s and 80’s (interest rates at 16% on SAVINGS accounts), and one advisor said, Buy boxes of tuna fish cans and stack them under your bed. They will go up in value while the dollar drops. How will you be Affected? Your dollars will buy less, everything will cost more ("I remember the good old days when bread only cost a nickel"–or 25 cents, or 89 cents, or $2.89. Do you remember when gas cost 54 cents? Today it’s $2.65. THAT’s inflation. You have to earn more to keep your standard of living the same.
What can you do? Buy stocks, not bonds. But commodities like gold or oil, not consumer products that depreciate immediately like cars, TVs, computers, phones. Use mutual funds or ETFs to diversify among different asset groups in the hope that SOMETHING will go up with inflation, not down like cash, money markets and bonds will.
April 12th, 2010 at 1:14 pm
That cannot happen.
Company and people go bankrupt; countries default.
Bankruptcy is, mostly, a cut and dry set of rules that apply similarly to everyone.
Default is a case by case deal that depends on who is sitting at the table.
In the case of the United States of America, any default of a major government issue would result in total economic meltdown. It would make the crisis of 2008-9 look like a cake walk…heck, it would make the Great Depression look like a cake walk. The worlds entire financial system depends upon the financial liquidity of US Treasury Debt and the surety of the US Dollar.
Please note that the number one choice for safety and security of the entire WORLD during the 2008-9 financial crisis was US Treasury Bills. So much money flooded the US Treasury during this period that several times depositors paid the US government to take their money (rather than being paid interest).
April 12th, 2010 at 1:14 pm
Some small countries have nationalized their assets, defaulted on their debts, and then double dared their citizens or even other countries to try and get past their army. But the U S has such a HUGE amount of natural resources as well as prosperous citizens it will not go "bankrupt" unless the whole world is literally in a meltdown (like nuclear war). We survived a civil (" ") war, a depression, 2 world wars, etc and we are still here. The major problem with the U S debt is the purchasing power of our wages is slowly declining, but you can offset some of that by buying less stuff.
April 12th, 2010 at 1:14 pm
Countries can’t declare bankruptcy, worry not.