Just wondering what everyone's thoughts are on our economy. They give a deadline of Aug. 2 to raise our debt limit (U.S.) otherwise it might have serious consequences.
Huffingtonpost breaks it down like this:
1. Stock Markets Will Take A Dive:
U.S. starts defaulting on its debt, everyody who owns U.S. stocks and bonds will take a big hit. This will affect the big banks, corporations and even countries -- pushing some toward bankruptcy. 401 (k) and/or pension will suffer big losses. It could take a long time to rebuild those funds, delaying retirement or make it impossible.
2. You Can't Buy Stuff:
Because the global banking system has such a big stake in U.S. assets and dollars, it will essentially grind to a halt until the U.S. raises the debt limit. At that point, our usual ways of purchasing things -- including credit and loans -- will be unavailable. You can get and use cash, but it will essentially be Monopoly money for awhile, due to hyperinflation.
3. Business And Consumer Lending Stops:
With the global banking system in free-fall, nobody will be lending money for awhile. You can't make big-ticket purchases (like a car or college education). And companies that have lost all their U.S. assets won't be able to get loans to cover their day-to-day operations if the commercial paper market -- where companies lend each other money overnight -- seizes up.
4. Unemployment Goes Up:
When businesses and corporations lose their money and can't get a loan to function, they have to cut somewhere -- and that somewhere could be you. In other cases, planned expansions and new hires might be pushed back, slowing down economic progress.
5. Interest And Credit Card Rates Dramatically Increase:
When the banking system does get back on track, it will still be more expensive and difficult for business owners, the government and regular people to borrow money or buy goods on credit. That drives up the cost of our debt, both personal and the one the government owns. When interest rates go up, the value of bonds you hold in your 401(k) goes down.
6. Payments To Military Servicemembers Are Delayed Or Stopped:
Treasury Secretary Tim Geithner warned congressional leaders that failure to raise the debt limit could stop, limit or delay military payments. "This would cause severe hardship to American families," he said, "and raise questions about our ability to defend our national security interests."
7. Social Security Cash Crunch:
Those who rely on Social Security to pay their bills may well need to rely on family or government assistance (if it's still available) to get by. Social Security has a multi-trillion-dollar trust fund that ensures it will be able to pay out benefits for decades. But that trust fund is invested in special Treasury bonds, which will almost certainly plummet in value if the U.S. starts defaulting on other debts. The results could be a major crash crunch for seniors.
8. Traveling Abroad Becomes Difficult:
As the value of the dollar drops here in the U.S., it will become virtually worthless in other countries. If you're planning a vacation or business travel outside the U.S., it's going to get a lot more expensive.
9. Medicare Bills Go Unpaid:
If the federal government fails to pay the bills associated with Medicare, then hospitals, doctors and other medical service providers will not be paid. This could drive up the costs of health care -- and make it less available to those in need.
10. America Is Labeled As A Deadbeat:
If the U.S. stops paying its bills, the rest of the world will get pretty upset. Even after the debt repayment eventually restarts, China and Europe will be wary of lending more money to America -- and when they do, it will be at much higher rates.
The way i see it, "assuming" things go completely wrong i think it will lead to lots of violence. What is your take on the economy???
Admittedly I don't know much about economics beyond bulletpoints on the news. But it seems to me if we have a "debt ceiling" then it should behave like a ceiling and we should bump our noggins into it eventually. If they only ever raise it when we get close, then we should call it something else. When someone gets close to maxxing a credit card, the credit company doesn't extend more credit, and then again, and again, and scores more times indefinately. At some point they expect to be paid. So as to the current debt ceiling issue, I'm of the 'don't raise it again and let whatever consequences of hitting the ceiling happen.' Otherwise all we succeed in doing is maintaining the status quo, not paying our debts, and digging ourselves into an ever increasing hole. Whether we deal with it now, or years hence, eventually it has to be dealt with and paid. Better now at ~14 trillion then down the road at more. Will it be devastating? Probably. But it has to be done, isn't going to go away or get better if we do nothing.
