Fiscal Cliff

[IpMan]

CJW is right, countless commissions have been appointed and all they say the same thing: "huge cuts to defense, huge cuts to social spending, and big tax hikes". Name a politician that wants to sell that, lol!

Oddly, look at Russia in both 98 and (lesser) 2008. Defaulted on its debt, and now is fine, and countries line up to loan them money. (Russia's situation is hugely compex, as it assumed most of the USSR debt when then USSR dissolved). So there is a precedence for defaulting, though far more likely would be some sort of debt swap (we wipe out Country X's debt that they owe us, if they wipe out the debt we owe them). Then some sort of leveraged buyout, say 60 cents on the dollar.

Most likely of all is continued burying of the head in the sand.

That right there is the whole problem in a nutshell. Most so called "debt" we have is actually countered by debt other countries owe us. In the end if we were to subtract that which is owed us from our debt we would actually be close to, if not have a surplus. Things really are not bad, it's the media and politicians blowing it up to keep the population scared and in check.

[in_the_evening]

That right there is the whole problem in a nutshell. Most so called "debt" we have is actually countered by debt other countries owe us. In the end if we were to subtract that which is owed us from our debt we would actually be close to, if not have a surplus. Things really are not bad, it's the media and politicians blowing it up to keep the population scared and in check.

I am no expert here, but I am not sure of your math (although some recent checking seems to indicate it would indeed be pretty close to zero). I remember in 1985, the US became a "net debtor nation" meaning we now owed more than we were owed. Everyone at the time thought this was madness, but they thought that in 1971 when Nixon abandoned the gold standard (albeit it was really left behind in the Great Depression). Then when we went to 1T debt, everyone couldn't believe it! Then 5T, 10T on our way to 20T. And yet, still, countries BEG to buy our debt, even with woefully horrible rates of return (less than 1%).

Even more bizarre, and I barely understand this, is something called Dollar Hegemony, which says (paraphrasing) all US Debt that is held by foreign countries is in US Dollars and is repayed in US Dollars. All debt the US holds in in US dollars as well. So force us to pay off the debt quick, we just have the Fed Res crank up the printing press as the dollar is a fiat currency with no real value. Crank it up too high, and the dollar falls on the global market, making the debt you (China, Japan, etc) are forcing us to repay, worth less to you.

And of course, don't forget, of that 18T, the US Govt owes ITSELF almost 6T of that.

Honestly, the more books I read on US Finance, the more alien it seems....