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The Debt Ceiling: What Is Happening and What Could Happen if the Ceiling Isn't Raised?

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posted on May, 2 2011 @ 11:49 AM
There is something very important going on currently and that "something" is whether or not the U.S. debt ceiling should be raised.

How is this looking right now?

NEW YORK (CNNMoney) -- When lawmakers return to Washington on Monday, the debate over raising the nation's debt ceiling will kick into hyperdrive.

That's because Congress is now staring down a series of deadlines to raise the country's legal borrowing limit. First up: May 16, Treasury's latest estimate as to when U.S. debt will hit the country's $14.294 trillion ceiling.

That's only two weeks away. If Congress doesn't act, the Treasury would employ a range of extraordinary measures to prevent the United States from defaulting on its obligations.

That reprieve will last until July 8.


There seems to be no escape but what extraordinary measures would be taken to help prevent the U.S. from defaulting?

deferring payments to Social Security beneficiaries, Medicare doctors, weapons vendors or taxpayers expecting refunds.


And what could happen if (and that's a big IF) the U.S. can no longer gain assistance from other countries and goes bankrupt?

  • The stock market will crash and credit will seize
  • All financial institutions will fail
  • All government funded programs will end (such as medicaid, defense, police, education, infrastructure support like roads, utilities etc)
  • Business will close and jobs will be lost
  • There will be mass rioting (and no police to stop the rioters or fire fighters to fight the fire)
  • Everyone will start killing each other for food
  • The rich will buy the country and turn a democracy into a dictatorship (to be fair I think that dictatorship is already here)

    But before this happens the USofA will most likely default. To know what that might look like we can look at Argentina:

    From The Sunday Times 2008:

    Sometimes it is wise for a person to declare bankruptcy but the same is almost never true for a nation. When debts are overwhelming and bills unpayable, an individual or a company can seek the mercy of the courts and obtain protection from aggressive creditors. In the case of Argentina, which declared a moratorium on its debt repayments in December 2001 and within days defaulted on $93 billion (£59.6 billion) in sovereign borrowings, it was the beginning of a nightmare.

    There is no bankruptcy court for nations. Defaulting sovereigns pay the ultimate price; they are sent to Coventry, shunned by commercial banks until, somehow, they can purge their debt. The only recourse is to the International Monetary Fund, which can provide emergency loans. Currently, the IMF has a pot of money, some $200 billion from contributing states, which is almost certainly inadequate to the scale of the potential demand that might emerge in the months to come. Iceland has already secured $2 billion, Ukraine has been promised upwards of $16 billion and Hungary is expecting double-digit billions. We have commitments for about 15 per cent of the kitty and the dominoes are tumbling.

    For Argentina, the months that followed its "bankruptcy" were horrendous. The country went into a brutal downward spiral of inflation, currency collapse and the rationing of cash by the banks. In a nation that is a big agricultural exporter, children went hungry and and the economy imploded, shrinking by 13 per cent in a year. Unable to borrow to pay its bills, the state was forced to cut public sector wages, slash the state pension and unemployment soared to 20 per cent. Unable to pay for goods with cash, many Argentinians resorted to barter.

    A sovereign default forces a nation into self-reliance mode and, if the Government lacks the will to reform its economy, it will tempted to print money to pay wages and pensions. When the choice is between paying Citigroup and paying pensioners, the political choice is obvious. However, it is no solution as the result is hyperinflation and more chaos.

    The default on Argentina's commercial loans was bad enough but what followed a year later was the default on an $800 million loan from the World Bank, which left it precluded from further help by international agencies. It became embroiled in lengthy negotations with the IMF and debtors clubs. The country had borrowed too much in foreign currencies and it made matters worse for itself by pegging the value of its currency to the dollar. Argentina became uncompetitive and slipped into recession. When the currency peg was finally severed, the peso collapsed and the country was unable to repay its debts.

    IMF loans come with tough medicine and it is this that makes the institution unpopular and its intervention greatly feared. Ukraine is now debating the passage of a law that is a precondition to the IMF bailout and, from what is reported, the country will be forced into an austere regime of budget cuts, tax increases and measures designed to get Ukraine's inflation under control. Iceland has just raised interest rates by 6 per cent — a harsh monetary tightening aimed at shoring up its currency but which will bring further misery to its people.

    The above copy and paste job from The Sunday Times is a very interesting read. A sign of things to come? In my opinion, seeing how the world is still trading in U.S. dollars, a default or the bankruptcy of the States would be a global nightmare.

    What is the possibility of this happening? Anyone care to add anything to this?


    edit on 2-5-2011 by AeonStorm because: subtracted + added

  • posted on May, 2 2011 @ 12:10 PM
    reply to post by AeonStorm

    The only thing to add would be "be very afraid." Review for complete updates.

    posted on May, 2 2011 @ 12:16 PM
    Talk about the U.S. having a riot...Just let them STOP the welfare checks......They will burn the US down to the ground.....This is one truth all can agree on....

    posted on May, 2 2011 @ 12:16 PM
    The possibility of this happening? Very high. Not a certainty but not fantasty tale either.

    They will raise the debt ceiling, even the so called conservatives acknowledge this, they are holding out for purely symbolic spending cuts so they can look tough for their sheeple.

    The spending cuts are symbolic (no matter how much they can get) because their is simply not enough cuts available in all reality to stop us from hitting the current debt ceiling.
    At the current spending scenario it is reported that for every US dollar spent by the feds, 0.40 is borrowed money. We are talking about cutting the federal budget 40% just to stop the borrowing and break even, and if that were possible without causing the scenarios your post describes (it isn't) the debt would slowly continue rising and still hit the current debt ceiling due to the huge bill caused interest.

    So they will raise the borrowing limit, no doubt, problem is there is only so much money in the world period, that is total wealth of real value in existence, and sooner or later other nations will not loan to us because they don't have it to loan, and we will hit a point in the future were we can't even afford the debt payments so other nations won't have the incentive to loan. Default. Dollar collapse. But by raising the debt ceiling they can at least kick the can down the road a bit further and hopefully get some painful but necessary cuts under way, so drastic it will probably reduce the American standard of living for at least two generations. But hey the honest ones have been warning that we are indebting our children and grandchildren for years. The bill will come due one way or the other, sooner or later.

    posted on May, 2 2011 @ 12:30 PM
    Uhm,i hate to say this...but

    US Debt Clock

    Its already too late...they are already well above the Debt Ceiling...

    Edit to add: ATS Thread here and Vitchilo said here that the "Math" will be official by tomorrow (ask Vitch in his Thread what he meant...)
    Edit 2: After thinking about it...a False Flag tomorrow wouldn´t be too hard to predict,now woulnd´t it?
    Edit 3: Damn,i like to connect Dots

    Edit 4 (the last one,honestly): And to top it off,they are gonna blow up the New Madrid Fault tomorrow(to prevent the Flooding of the Mississippi of course...) Thread here
    edit on 2-5-2011 by Shenon because: damn im gooood

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