Your take: Are you worried about US default?

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Have you learned to stop worrying and love default?It’s now less than a week until the federal government is projected to run out of accounting tricks and come up hard against the debt limit, the maximum amount the U.S. is allowed to borrow under existing law.

After that, what happens next is hard to predict. The government might be able to prioritize payments to Treasury investors for a while by stiffing other groups owed money, such as active military personnel and Medicare and Social Security recipients.

Even with some fancy footwork on the part of government bean counters, it’s likely that without a debt-limit raise, the government would eventually miss a scheduled payment to Treasury investors. At that point all hell would break loose, up to and including a financial panic even bigger than what we saw after Lehman Brothers collapsed. If that came to pass, that would probably mean a freeze-up in corporate and consumer credit, a massive hit to global stock prices and who knows what else.

While I still think the folks in Washington, D.C., will work something out before any of that takes place, I wrote a somewhat wonkish post about the disastrous consequences a default would have for your 401(k) and investors generally. I have to admit, I’m pretty worried about it, but how about you? Do you think they’ll work it out in time? Are you losing sleep over a government default? Or is it just more of the noise from the Capitol that we’ve all grown accustomed to tuning out?

(Photo: Fox, h/t to

{ 16 comments, please add your thoughts now! }

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16 Responses to “Your take: Are you worried about US default?”

  1. dojo says:

    I am not in the US, so it shouldn’t affect me personally, but YES I am worried. Last time the US sneezed we were all in big mess (the recession we still struggle to get out off). I also have American clients and I am afraid any issues would affect their business (and mine consequently).

    • Marc says:

      A default would definitely have impact outside the US and could cause a global recession An article from the Washington Post that describes some of the global impact we could expect if the US defaults –

  2. I am not really worried. I am not certain if they’ll work something out or not, or more importantly, if they’ll get out of the way of their own egos. We’re just focusing on what we can control and the rest will take care of itself.

  3. Claes says:

    Yeah I think you’re right that we don’t have a lot of control over it, just can’t help feeling concerned that so much responsibility is in the hands of Congress right now.

  4. I am not worried. A default wont happen and if it does there is nothing I can do to stop it. No sense in getting excited about it.

  5. Special_Ed says:

    Default now, default later. I’m not going to spend time worrying about things I have no control over. Just working and saving for retirement. Maybe I’ll get a few good years in before the politicians destroy the economy.

  6. Michael says:

    I choose to believe (perhaps mistakenly) that not even our current Congress is stupid enough to let that happen. Individual members? Yes. But not the group as a whole.

  7. Scott says:

    The time to worry came and went a long time ago. With the amount of debt the US has, along with unsustainable spending patterns, we’ve been broke for a long, long time. As we descend into QE Infinity, I see no way out currency will have any value. The time will come (as it did in Great Britain) that we won’t be able to print money anymore. It might as well be now.

    This government shutdown is the first thing the US Federal Government has gotten right in a long time. At least a few people are willing to admit… and act on the fact that we just can’t afford Obamacare.

    Alas, it’s all too late.

    • Cynthia says:

      Scott, I agree wholeheartedly with your various positions. There’s always a lag between government theft through counterfeiting our currency, with nothing backing it up, which is what the various Fed monetizing programs have been; and the inevitable onset of inflation stealing more of the miniscule savings so let’s go for it. We could make history like Germany, along with some third world economies, with hyperinflation. We always knew that Keyensian economics would lead us here but then, even the great Friedman didn’t get that value of paper should be valued on something with value. With the exception of the weaklings we have elected, it was unnecessary. How? Just live within your means. Maybe I’m wrong. I am if the avarice of man can’t be stopped. We can have a winter of discontent all our own.

  8. Huskervball says:

    I cannot believe that Congress would be so short sighted. Remember this time when it is time to vote again.

  9. fabclimber says:

    I am worried about a default. If that happens our paper money and savings accounts may be worthless! But I have a solution. All taxpayers should just sit down and write a check to the treasury for about $600,000.00 and the problem will be solved. Ooops! I forgot. I don’t have that kind of money. Maybe I can borrow it!

  10. freeby50 says:

    No. I am not worried about a default because I don’t believe it will happen. Whats happening right now is just politics and I don’t believe they have any intention of letting the government default. Just like the last time… and the time before… There have been over a dozen government shutdowns in the past and they’ve debated the debt ceiling everytime it comes up lately.

    Of course if it did happen it was be a major disaster. And thats why they won’t let it happen. Even though our politicians act like idiots we have to see through that and realize they are (almost all) very clever pepole who know what they’re doing. They’ll make a lot of noise about stuff that scares people for political reasons. That is what they’re doing right now. Fear tactics.

    Lets not fall for it.

  11. bloodbath says:

    No. The House has no choice – they MUST and WILL present a budget omitting Obamacare. The shutdown may go on for another 1-2 weeks but no more than that and workers will be paid retro-actively. I live off SS but I can use my 401k if I must and I’m sure the gov will make good on sending my check when things calm down.

  12. Tom Campbell says:

    The country is bankrupt. Default will happen as soon as enough key people realize this.

  13. TTFK says:

    Your fearmongering about the “default” only shows your ignorance of the issue at hand.

    There can only be a “default” if Obama DELIBERATELY wants one.

    A “default” can only happen if Obama deliberately fails to pay interest due on the debt. For the coming 12 months, that is approximately $287B. During that same time, the Feds will take in approximately $3.06T in taxes. This leaves more than enough to cover the $2.3T in “non-discretionary spending” built into the budget, leaving approximately $500B to cover discretionary spending.

    It’s time for people, include you, to stop dealing in fear-mongering over the “default” and start dealing with REALITY.

    To quote Moody’s:

    ” We believe the government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its creditworthiness intact,” the memo says. “The debt limit restricts government expenditures to the amount of its incoming revenues; it does not prohibit the government from servicing its debt. There is no direct connection between the debt limit (actually the exhaustion of the Treasury’s extraordinary measures to raise funds) and a default.”

    The Moody’s memo goes on to argue that the situation is actually much less serious than in 2011, when the nation last faced a pitched battle over the debt limit.

    “The budget deficit was considerably larger in 2011 than it is currently, so the magnitude of the necessary spending cuts needed after 17 October is lower now than it was then,

    In short, “default” is an artificial construct designed to do nothing more than fear-monger people into doing things they don’t want to.

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