If the US defaults on its debts on August 2

[Tiki Tam Tam]

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

And interestingly, they are getting away with this!

This is a spectre that is haunting the world.

 

[jetti]

August 2 is the projected day the US's debt ceiling would be breached. As of now, it's hit the ceiling.

No, they have to make the payments to the tune of 300 billion very month and aug 2 is the fist working day in aug.
They have already hit debt ceiling so you are correct there.
The shortfall is 125 bil per month as the receipts are only 180 bil an their obligations are 300 bil. If they raise the debt ceiling this will allow govt to borrow more , they want limi raised by 2 trillion and they won't be bothered for about 2 years. Meanwhile Obama has promised spending cuts and raising taxes thus bringing in 40 trillion over 10 years. Bt the republicans who have house majority don't want tax increases but only spending cuts. Thus the dadlock

 

[53fd]

And interestingly, they are getting away with this!

This is a spectre that is haunting the world.

Well unfortunately, the inevitable cannot be avoided, & the future of the US unfortunately looks extremely bleak, unless it rectifies the huge structural problems in its economic system.

 

[Chinese-Dragon]

Well unfortunately, the inevitable cannot be avoided.

America could "re-industrialize". But that will be extremely difficult to implement, and will likely take more than a decade to complete.

That's the only long-term solution I think might work.

That way, the American consumer-driven economy, could live off American products, reducing the massive trade deficit. And reducing the need to borrow so much.

I.e. Be more like Germany.

 

[53fd]

America could "re-industrialize". But that will be extremely difficult to implement, and will likely take more than a decade to complete.

That's the only long-term solution I think might work.

That way, the American consumer-driven economy, could live off American products, reducing the massive trade deficit. And reducing the need to borrow so much.

I.e. Be more like Germany.

Americans for once need to learn how to live within their means, without entitlements. They might have to live in extreme austerity, & live in third-world conditions; & if corporate America is dissolved & replaced by a 'real-economy', then the US can revive itself. The structural problems in the US economic system need to be rectified, & the mentality of the people has to change. Otherwise, there is no option.

 

[53fd]

Bilal, what's the issue with August 2nd? The US can't borrow more to offset the deficit?

Basically, the US needs to borrow more loans (accumulate more debt) to pay off its previous debts to the respective creditors. As of now, the US has touched its debt ceiling, & cannot get any more loans to pay its previous debts. Failure to pay the creditors for the previous debts will be catastrophic for the US.

 

[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..

The problem is entirely a financial & economic one, because there are structural flaws in the US economic system; that has resulted in the situation the US is facing today.

 

[LeGenD]

BS. My point was about loyalty. How many times have you seen Chinese guys highlighting their country's drawbacks? how many timeS did you see same thing done by an Indian about his/her own country? How many times have you seen any Pakistani (citizen or Pakistani origin) have done disgrace to their own country? but why not a Pakistani origin of USA citizen can do the same thing? isn't their loyalties lies some where else while they WANT to live their life in USA!!!!

Dude! member bilalhaider is actually concerned about the situation in US and this is why he made this thread. He is not bashing USA but wants it to change for the better of this world. A strong and friendly USA would a blessing for many.

Yes, it is China that will suffer (along with many other Western countries tied to the US economy) initially, but in the long run, China will come out the strongest, as they have a strong base in manufacturing, infrastructure development as well as other things.

Their is a problem. China is not yet capable of developing every product of consumer use.

Specially, the computer industry is pretty much the forte of USA. Therefore, I doubt that China can (hypothetically) replace USA as the dominant industrial power.

Lots of consumers prefer made-in-USA products over made-in-China ones.

 

[53fd]

No, they have to make the payments to the tune of 300 billion very month and aug 2 is the fist working day in aug.
They have already hit debt ceiling so you are correct there.
The shortfall is 125 bil per month as the receipts are only 180 bil an their obligations are 300 bil. If they raise the debt ceiling this will allow govt to borrow more , they want limi raised by 2 trillion and they won't be bothered for about 2 years. Meanwhile Obama has promised spending cuts and raising taxes thus bringing in 40 trillion over 10 years. Bt the republicans who have house majority don't want tax increases but only spending cuts. Thus the dadlock

I think you misunderstood what I said in my first statement. What you have said here is entirely correct, & I have mentioned that the US needs further loans to pay back its previous debts to the respective creditors. Failure to make these debt payments to the creditors would be catastrophic for the US.

The Obama regime wants tax hikes (& some budget cuts), whereas the Republicans don't want tax hikes, but cuts in budget & expenditure. So you are right there. Obama's assessment of the problem is not realistic though, as tax hikes by themselves would not be able to bring down the debt, as there are structural problems with (corporate) America & its economic system. There are programs like Medicare, Medicaid, food stamps, unemployment, social security, student loans & a lot more that are also responsible for US government spending. Until these are not resolved, tax hikes by themselves will not resolve the issue. The US defaulting will bring its AAA credit rating down to maybe a D.

But even then, raising the debt ceiling is not that easy, & has several serious repercussions to it. It's not just a political problem that the Democrats & Republicans cannot come to an agreement.

 

[Awesome]

And I believe, defaulting will also affect its rating which will complicate the problem even more.

That actually remains the biggest problem I see emerging immediately out of this default. Otherwise I don't see the US defaulting - it won't just pay its Soc sec cheques and any other internal expenses that come up... until revenue is internally generated.

 

[Chinese-Dragon]

Their is a problem. China is not yet capable of developing every product of consumer use.

Specially, the computer industry is pretty much the forte of USA. Therefore, I doubt that China can (hypothetically) replace USA as the dominant industrial power.

Lots of consumers prefer made-in-USA products over made-in-China ones.

You're right, we can't replace the USA.

But the USA won't disappear. They will probably decline in "relative terms", but I doubt they would collapse completely.

So there is no need for anyone to replace them. They'll still be here.

 

[53fd]

Their is a problem. China is not yet capable of developing every product of consumer use.

Specially, the computer industry is pretty much the forte of USA. Therefore, I doubt that China can (hypothetically) replace USA as the dominant industrial power.

Lots of consumers prefer made-in-USA products over made-in-China ones.

Actually, Chinese products make it all over the world, & you will find that almost every other product in the US is a Chinese one, imported from them. It is hard to find 'made in US' products in the US these days, because practically everything is imported from China. I found this observation to be true, when I lived for 4 years in Nigeria, traveled across Africa, & whenever I go to Ghana to visit my dad these days. China will have a problem making up the losses from the US consumer market though, but I think it can recover from that in time.

 

[karan.1970]

The problem is entirely a financial & economic one, because there are structural flaws in the US economic system; that has resulted in the situation the US is facing today.

The problem may be economic one and has been for decades now, however the crisis is political in nature. Its not the 1st time American congress has had to raise the Debt ceiling. Has happened multiple times in the past.. However this time, Republicans who are in majority are streching Obama over the rack for the same..

 

[53fd]

The problem may be economic one and has been for decades now, however the crisis is political in nature. Its not the 1st time American congress has had to raise the Debt ceiling. Has happened multiple times in the past.. However this time, Republicans who are in majority are streching Obama over the rack for the same..

It is not simply a political problem, it is not that easy to raise the debt ceiling. There are serious consequences to that as well. Secondly, Obama is basically proposing tax hikes (with limited budget cuts), whereas the Republicans are asking for major budget expenditure cuts & no tax hikes. In my opinion, Obama's solution will not work, as I have mentioned many times that the state of the US economy cannot be improved by tax hikes only.

 

[LeGenD]

Actually, Chinese products make it all over the world, & you will find that almost every other product in the US is a Chinese one, imported from them. It is hard to find 'made in US' products in the US these days, because practically everything is imported from China. I found this observation to be true, when I lived for 4 years in Nigeria, traveled across Africa, & whenever I go to Ghana to visit my dad these days. China will have a problem making up the losses from the US consumer market though, but I think it can recover from that in time.

Brother, the thing is that lots of US industries have manufacturing plants in China.

The products manufactured in them are actually American but fitted with some Chinese parts (which reduce costs). Hence, you very often see the 'made in China' or 'assembled in China' tags.

China is not yet self-sufficient on Industrial basis. It still has long way to go.