Thursday, October 05, 2006

A Fair Point to Make

Some commenters (okay, one commenter, but one of my favs) have suggested that I've gotten a bit unhinged, which is, like, totally true, but such is the current state of America. Still, I feel I should mollify everyone by reeling back on the doomsaying ever-so-slightly, with the observation that although the United States is a vast continental power bent on world conquest of one sort or other, we are also, perhaps fortunately, totally fucking broke. Not broke in the post-Versailles super-inflation sense, but broke in the other-people-holding-our-banknotes-sense. And I think it is fair to say that the Mandarins, the real Mandarins in this case, are chuckling to themselves as we take their credit and screw ourselves out of a reputation and a position of global dominance. I don't for a moment think that our bankrollers will allow us to launch a nuclear war, though.

That may not be sunshine, giggles, and a basket of kittens, but hey, you asked. I answered.

7 comments:

Anonymous said...

So i should preface this question by saying that I know absolutely nothing about global finance, but I was wondering: What would the actual consequences be if the U.S. just defaulted on our foreign debt and gave our creditors the finger.

Is our bond debt secured debt or unsecured? If it's secured, what court is gonna enforce the security interests?

Yates

IOZ said...

Yates-That is the 64-Gazillion-Dollar question, isn't it. I honestly don't know what would/will happen, and no one, least of all the folks with the wars to run, wants to find out.

Anonymous said...

It's not an entirely unprecedented situation. After the Revolutionary and the Civil Wars, lots of states had tons of foreign held debt. The American version of sovereign immunity was in part adhered to (or made up, take your pick) specifically so that states could ignore their creditors. If I remember correctly, the states suffered the same consequences that all defaulting debtors experience, no one wanted to lend them more money for quite awhile; but it's not like repo men were showing up at the capitols.

So if I'm correct in reading your original post to mean that we won't engage in military operations (or other fiscally irresponsible practices, like funding social security) that really piss off our creditors, I think I'd have to respectfully disagree. The results of defaulting just don't seem that severe.

Yates

The System said...

Yates-

Exactly the point, methinks. If a country has to borrow money to finance its military ambitions and nobody will lend it any, then, well, ambition != capability.

In other words, it'll be a cold day in hell before anyone in Washington jeopardizes our entire messianic enterprise by pissing off those who just happen to be bankrolling it.

It's one thing to default when you don't expect to be borrowing afterwards for quite some time (see your aforementioned wars). Quite another when you expect to be borrowing heavily, well, forever by the look of things.

Anonymous said...

I think your query was addressed at least in part in:

"Bart to the Future"
1117 BABF13
Original Airdate: 3/13/00

http://www.thesimpsons.com/episode_guide/index.htm

Moloch-Agonistes said...

Duly mollified! For the record: I don't mind a bit of spittle -- in a good cause after all -- its the pat historiography. It would be so refreshing to hear someone say, "George Bush is just like Caliph al-Musta'sim."

roxtar said...

I love pointing out to Republicans that in 25 years, their daughter is ging to be changing my shitty diaper in some nursing home. When she gets her feeble paycheck, there will be a large portion deducted. This portion will make the difference between living comfortably and barely getting by. She will receive no services for the money taken from her. That money will go straight to China for debt service.

I tell them, "Your boy George borrowed this money to prop up his phoney-baloney "robust" economy, and your kids are going to get the bill, with interest.

And I'll be giggling through my dementia, demanding more pudding and fresh diapers every hour."