Human history becomes more and more a race between education and catastrophe.

Image

Shutdownghazi Day 15

Shutdownghazi Day 15

If the US government does not extend the continuing resolution to pay things. (By next month):

1) We default. By defaulting all investments in government bonds set to come due from this point forward would not be paid. This would cost billions of dollars in investment money immediately as people are not being paid. Additionally it means that few would invest in them in the short term future which would cost billions more. Additionally any federal bonds taken to say build new schools, build a government building, establish a park, or the like would also likely not be paid possibly putting thousands out of work who would otherwise be employed by those projects.

2) Federal Employees would continue to be in shut down. Those on furlough would have to do without being paid knowing that they will get back pay, but those who are simply getting the equivalent of unpaid vacation would likely have to start getting other jobs after being unpaid for a full month.

3) Without the extension of the budget all the “emergency” funds will be use up in the Federal pension plans, Veterans retirement and disability pay, Social Security, and Disability pay will not be given next month. This means there will be Hundreds of thousands unable to pay bills since most of these type of people live pay-check to pay-check.

So while the default by itself will mostly only effect the rich and upper middle class who invest, all the things that are connected with it will put hundreds of thousands without pay, hundreds of thousand more without jobs, and the economy in a massive death spiral.

…Also in some shape or form we should see inflation of our money system. This means you should immediately pay off any variable rate loans you have outstanding and don’t really bother trying to save cash such as a savings account, any inflation would potentially null your savings quickly.

(The worry isn’t that the banks will collapse, it is that the dollar will collapse. Money — especially fiat money like the modern dollar — is based on a confidence game. It is valuable because people think it will be valuable to others, in the future. Gold and other physical standards for money retain value because they’re useful and rare. Fiat currencies retain value because people have faith in the organization that defines the currency.

The U.S. was such a major economic powerhouse coming out of World War 2 that the whole world basically adopted the dollar as a “reserve currency” – a way to store and manage wealth, rather than merely to deploy wealth. If confidence in the U.S. government’s ability to manage the dollar is shaken badly enough, then many countries will migrate from the dollar to other forms of wealth storage. That will greatly increase the number of dollars in the “open market” of the world, and the dollar itself could rapidly lose value.

So your money is just as safe in the bank as in bills — but that’s because the Republican threat isn’t to the bank, it’s to the dollar itself.)

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s