If the US defaults on its debts on August 2

[Chinese-Dragon]

Hmm....a US default will affect everybody.

Who do you think is the biggest foreign holder of American debt?

I think we have more reason to be worried than you do.

 

[Markus]

Who do you think is the biggest foreign holder of American debt?

China ofcourse.......

 

[karan.1970]

Its the same situation that Pakistan was in 2008 when it was about to default on loan interest payments due to lack of funds. The difference being that Pakistan was willing to take further loans but was not finding lenders and hence the IMF bailout. In the case of USA, the congress itself is not allowing the govt to take the loan since that breaches the self imposed Debt ceiling.

So in short, its more of a political crisis than a financial one since money is available to USA but is being blocked by republicans to discredit the Obama administration..

 

[Markus]

Who do you think is the biggest foreign holder of American debt?

I think we have more reason to be worried than you do.

Well, India has her own reason to be worried too especially those who are working in the services sector. A US default will DIRECTLY affect them.

 

[Markus]

Its the same situation that Pakistan was in 2008 when it was about to default on loan interest payments due to lack of funds. The difference being that Pakistan was willing to take further loans but was not finding lenders and hence the IMF bailout. In the case of USA, the congress itself is not allowing the govt to take the loan since that breaches the self imposed Debt ceiling.

So in short, its more of a political crisis than a financial one since money is available to USA but is being blocked by republicans to discredit the Obama administration..

Not that easy to compare the US with Pakistan.

The scale at which Pakistan would default is nowhere near what the US will default (if it does at all)!.

 

[53fd]

Who do you think is the biggest foreign holder of American debt?

I think we have more reason to be worried than you do.

China will initially suffer of course, but with the strong base they have in manufacturing & infrastructure development, they will rise up whatever the situation. China is not look Greece or any of the other European countries, & will recover from this situation quickly enough. When the US lead the world in manufacturing, it lead to the Industrial Revolution in this country, a time when this country was truly the greatest in the world. China is at that stage right now, & whether a default happens or not, China will eventually come out just fine. I don't know about the US though. They need perpetual warfare to survive economically, as it has became a war economy now. The defense and intelligence industries are the only things thriving in the US right now, but that is not what makes a real economy, the one China is right now. Manufacturing takes place in China now, the US has even outsourced its services to India. But manufacturing is what makes a nation truly great, which China is right now.

 

[Tiki Tam Tam]

China will initially suffer of course, but with the strong base they have in manufacturing & infrastructure development, they will rise up whatever the situation. China is not look Greece or any of the other European countries, & will recover from this situation quickly enough. When the US lead the world in manufacturing, it lead to the Industrial Revolution in this country, a time when this country was truly the greatest in the world. China is in that stage right now, & whether a default happens or not, China will come out just fine. I don't know about the US though. They need perpetual warfare to survive economically, as it has became a war economy now. The defense and intelligence industries are the only things thriving in the US right now, but that is not what makes a real economy, the one China is right now. Manufacturing takes place in China now, the US has even outsourced & shipped services to India. But manufacturing is what makes a nation truly great, which China is right now.

The base has diminished since it is getting not economical for foreign companies to do business in China. This is because, seeing the others living in relative affluence, the Chinese workers are demanding greater pay and are no longer ready to work for peanuts.

Foreign companies are moving base to Vietnam.

It also works out for US political aims where it wants to have Vietnam within its sphere of influence.

 

[53fd]

Its the same situation that Pakistan was in 2008 when it was about to default on loan interest payments due to lack of funds. The difference being that Pakistan was willing to take further loans but was not finding lenders and hence the IMF bailout. In the case of USA, the congress itself is not allowing the govt to take the loan since that breaches the self imposed Debt ceiling.

So in short, its more of a political crisis than a financial one since money is available to USA but is being blocked by republicans to discredit the Obama administration..

Pakistan was not anywhere close to hitting a debt ceiling, & it was a much simpler problem. The US dollar is the international trade currency, & it depends on the state of the US economy. The US economy right now needs more debt to function. The debt ceiling had to be imposed because of credit rating issues, & the ceiling cannot be lowered just like that, because of how it will affect the credit rating (which affects the US dollar directly, the international trade currency). Meaning the US is in deep $hit unfortunately.

 

[karan.1970]

Not that easy to compare the US with Pakistan.

The scale at which Pakistan would default is nowhere near what the US will default (if it does at all)!.

Oh! Absolutely. I was just highlighting the technical similarities in the situation since both situations were around default on payment of interest on existing loans.

 

[53fd]

Oh! Absolutely. I was just highlighting the technical similarities in the situation since both situations were around default on payment of interest on existing loans.

Even if the US doesn't default, & the debt ceiling is raised; it will affect credit rating issues in some way, which will cause huge problems as well. It will kind of like, 'prolonging the misery', if you know what I mean, instead of 'rectifying the issue right there & then' (no matter how difficult it is).

 

[karan.1970]

Pakistan was not anywhere close to hitting a debt ceiling, & it was a much simpler problem. The US dollar is the international trade currency, & it depends on the state of the US economy. The US economy right now needs more debt to function. The debt ceiling had to be imposed because of credit rating issues, & the ceiling cannot be lowered just like that, because of how it will affect the credit rating (which affects the US dollar directly, the international trade currency). Meaning the US is in deep $hit unfortunately.

Raising a 14 trillion debt ceiling by a couple of hundred billion will not do anything to the credit rating. Defaulting has much more profound implications though. So I still maintain, that the problem is more political than economic. Its the result of Congress being republican majority who is now out to get Obama..

 

[53fd]

Raising a 14 trillion debt ceiling by a couple of hundred billion will not do anything to the credit rating. Defaulting has much more profound implications though. So I still maintain, that the problem is more political than economic. Its the result of Congress being republican majority who is now out to get Obama..

The ceiling will have to be raised by a lot more than a couple of hundred billion unfortunately. It will definitely need to be raised by at least a few $ trillions. Despite the high costs from foreign expenditures, there are structural flaws in the US economic system domestically (I've mentioned the names of those programs in my previous posts), & that is one of the major causes for the high spending by the US government. As it is, the US will not be the same as it was in the past, whatever the outcome is.

 

[Markus]

The ceiling will have to be raised by a lot more than a couple of hundred billion unfortunately. It will definitely need to be raised by at least a few $ trillions. Despite the high costs from foreign expenditures, there are structural flaws in the US economic system domestically (I've mentioned the names of those programs in my previous posts), & that is one of the major causes for the high spending by the US government. As it is, the US will not be the same as it was in the past, whatever the outcome is.

AN increase of 2.4 trillion USD is doing the rounds.

 

[karan.1970]

The ceiling will have to be raised by a lot more than a couple of hundred billion unfortunately. It will definitely need to be raised by at least a few $ trillions. Despite the high costs from foreign expenditures, there are structural flaws in the US economic system domestically (I've mentioned the names of those programs in my previous posts), & that is one of the major causes for the high spending by the US government. As it is, the US will not be the same as it was in the past, whatever the outcome is.

I was referring to the immediate crisis of July-Aug time period.. but anyway, here's a good FAQ on the situation for the members here..

US debt ceiling: Why is America facing a borrowing crisis? | Business | guardian.co.uk

 

[Chinese-Dragon]

Germany is a Western nation that still maintains its powerful industrial capabilities. Instead of de-industrializing like the others.

And Germany now has the best performing economy in Europe.

America still has strong exports... but the scale is not anywhere close to being large enough to offset the imports.

As long as America has the world's largest trade deficit, they will need to borrow more debt to pay for it.