Does anybody got an idea what will happen if Republicans and Democrats can't find a compromise for the national budget within the next ten days? A total collapse of business and everything else, or just holidays for the pupils? I mean the world could change in a few days, neither America nor Europe would be wealthy any more. Some of the States like Minnesota are insolvent already, many cities as well. There is no hope on economic growth any more and everybody tries to escape the depression. Similar in Europe, after Greece, Portugal, and Ireland now Italy is going to fall. Italy is much too big, to be rescued by the other europeans. So if Italy falls, Spain, Belgium and other countries will probably follow. Can someone imagine what will happen, in case of a chain reaction like this?

The big problem that nobody is talking about is derivatives which caused the financial meltdown in the first place. Then the taxpayer had to bail out Wall Street and the bankers -- and we wound up with this major recession (I know, sales on high end items have gone up, and incomes of the wealthy have gone up so Obama says the recession is over yada yada yada) and it is only going to get worse.

It's hard to say, I'd like to think that the people responsible for these negotiations and vote have the common decency not to play with the worlds finances to the point they will default for politics... I expect that any republican or democrat that thinks they will benefit politically by a US default has not considered that there probably won't be a US within 6 months of that happening, it would probably result in the breakup of the union or / and some other equally drastic fall out.

As for the system on a whole, this it would probably be the beginning of the end of our "Union Style" countries / economies. Wether it's the U.S. or the E.U. I think it is ultimately going the way of the USSR. When the system becomes to big and to corrupt to sustain it self, a breakup of the union is inevitable. You can already see the individual states fractioning and challenging the Union and Washington. In Europe there are a lot of countries toying with leaving the union or breaking it up. Calling it a "failed" experiment.

As much as we look at our way of life and see that as a total breakdown and loss, It's not something that hasn't happened before, even in recent history. You (demon17) were a lot closer to it then most I'm sure, but what was the sentiment in Germany and in Europe as the USSR broke up and reformed it's economic system? I understand the '90s were not great for the people of the fractured country, but even just a decade later many of the former Soviet States appear to get on their feet and were fully functioning countries with their own functioning economies. Were these the kind of discussions that came in the weeks or months before?

It's all scary to think about, but in the end I think that life will continue and a breath of fresh air might flow into a disenfranchised population who are looking at this whole think like a high school "Class President" debate, wondering when the real grownups will show up and send the "kids" home.

It is the same again edward777. The Hedgefonds are betting against Italy with assistance from the rating agencies. The rating agencies might be owned by the same people who are betting against Italy. But Italy is too big we hope and 55% of the public bonds are in the hand of Italians. It's a mixture of private speculation and stupidity and opportunism of the politicians, which drives the interest rates for Italy on a critical level of 5,5%. When it reaches 7% there will be no return. This Credit Default Swaps and other hidden risks of speculative transactions are just one reaseon. The other reason is the deficit spending of many countries in good times. The whole western world became a house of cards which is near to collapse.

An interesting thought sleeplessimmortal,

but don't forget the War of Secession. I can't imagine that the USA would divide itself in different States, because most the States have the same financial problem like the federal gouvernment. In a German newspaper I have read an article about the reduction of the eurozone, if more and more countries are going bankrupt. At the end there were four countries Austria, Netherland, Finland and Germany which would have been left. That can't work. America is exhausted by chronical underfunding since 10 years now and too many expensive wars. The EU is exhausted through overstretching its borders since the 80ies. First the new democracies in the south had to be supported, than the new democracies in the east, (which still have their national currencies.)

But history doesn't wait, if the democracies still want to be the leading political power of this planet, they have to stay together. Europe got dozends of different nations with different languages and lot's of close minded patriotism. The EU is a political must and single States of the USA would be a toy for China. Democracy got to prove it's efficiency. And I'm not so sure if it will.

No system is sustainable. Eventually the system fails, balance of power shifts, and the world changes. Sound like situation normal. Its just our turn to take a ride into chaos.

I don't see the American union in jeopardy. Anymore our country sees itself as one country, which is something that the USSR and EU have never really been able to accomplish. I don't even think the complete downfall of our economic system could have caused disunion in 1819 when our states still viewed themselves as individual sovereign countries. I do think it could have caused the federal government to dissolve & reform itself [much in the same way the federal republic replaced the confederation in the midst of a great depression]. But as long as there are Americans there will be an America [who knows what the system of government will be like in the future though].

This may very well be the case. Other then through media portrayals, I don't have to much personal experience with American Patriotism. Everyone I know is either from Alaska or Washington, and for the most part they seem pretty dismissive of national patriotism. Their love of their "home" is certainly expressed, but not much beyond that (the Alaskans I know, refer to themselves as such, not as Americans for example). It may well be that there is a sense of connection on a whole I'm not familiar with. I could see "Groups of States" holding their own, so to speak, rather then actually dividing into 40-50 individual countries, but I think any form of a new "federal" government would probably be severely neutered in regards to it's power over the individual states.

It might seem as a bit "over the top" but I really don't understand any way that the US could continue it's "way of life" so to speak without the ability to borrow enormous sums of money. If they default on the debt, that's what's going to happen, China and Japan and other bond holders are going to stop showing up at the sales booth.

Maybe I'm missing something major, but I just don't see it working any other way. As many sound minded politicians have already stated... A deal will be reached, because default is simply not an option...

I have read this thread with avid interest and I only wish I knew enough to feel as if I could contribute more than my own lack of understanding.

I knew that the budget problems were bad, but honestly, until today, i had not realized how terrible the crisis is. Even now, i wonder just how far the reaches of what is happening now will go, and its impact on America and our future history.

A separation of the union seems almost impossible to me and where I would stand should such an unlikelihood happen baffles me profoundly. I, in my limited understanding, find it hard to fathom such a world and my place within it. I have no political affiliations. I consider myself to be a liberal, but I hold to no party. I also don't give a damn about my state, and my loyalty to my country is certainly not on the side of patriotism. I support and love my country, but I know its faults and I hold no illusions of my country, nor do I see it as being better than others.

My state, Florida, though I have lived here my whole life is not a state I, personally, am very proud to call 'home sweet state'. Sure, Florida has great qualities with Death Taxes and endless beaches, not to mention the awesome weather during hurricane season. However, it is always hot, it never snows, the people dress as if everyday is a trip to the beach (though i have no room to talk there, given my own clothing preference!), and there are a lot of older people here who are very stuck in their ways. Florida is ran by Republicans (no judgement), and the people in power here, save for a few, are simple not very good people. rick Scott, our governor, makes me sick to my stomach just to think about him.

I know this sounds like such a childish question but could the budget really cause such problems. Surely it would not tare the country apart (I should hope) but what else is it capable of doing to America?

Also, I was reading today about Obama's, I guess...desire? to cut medicare and social security. I am fearful of such a thing. not for my sake, but for that of my grandparents. Neither one is able to work and if their Social Security is cut or reduced, there is the possibility of them losing everything they have worked their entire lives for. I know the elderly are generally overlooked, but they should not be. they have helped make the country what it is (for better or worse) and should not be put out like yesterday's garbage.

Article

Keith Olbermann Video on Obama and Medicare

Overall, I do not know what to think. I am lost, confused, and utterly despairing in my lack of understanding for topic, and even crisis, of the magnitude.

First of all I have to correct myself. The limit of 14,3 trillion dollars for national debts has been reached mid of may. Since this time the finace secretary is working with tricks to pay the bills. Begin of August the Gouvernment will be unable to pay any more. Then a third of expenditures will have to be saved somehow. It seems that Democrats and Republicans can not find a compromise. Obama offered a quote of 17% new taxes to 83% savings to close the whole in the federal houshold, which is financed to something about 33% with credits. The Republicans, especially the Tea Party is not ready for compromises, as far as I'm informed. This means there will be significant reductions of public wellfare anyway. If they find a compromise or not. If the gouvernment will have to cut down a third of all expenditures from today to tomorrow there will be costs about several billions each month, simply because parts of the State can't work any more. There are lots of public sevices which are irredeemable. Another matter is, America might loose the triple A rating from the rating agencies. The interest rates the USA will have to pay for credits would rise. How much is 1% of 14,3 trillions? All in all another economical depression becomes much more probable.

The situation in Europe is similar. If one of the big nations will fall, it will loose any possibility to get new credits for years. So parts of Europe will fall in depression whereas other parts theoretical might have steady growth, which more and more depends on China and other world markets like India or Brasil. The problem ist, that many banks won't survive this, and we all remember what happened when Lehman Brothers became insolvent ...

So might be the Eurozone becomes smaller because insolvent countries will have to leave it, but secessionism in the USA don't make sence anyway.

Well, first I would take a deep breath and try to relax a bit. I think it is extremely unlikely that this default will happen. At this stage, more then a week away (as close as that seems) this is all still political grandstanding.

*IF* a default happend, well.. it would more or less be the same as any family or business defaulting on their debt... not a lot would happen in the first minute, other then the stock markets would start to tank due to reaction. But Government spending would come to a halt and a borrowing increase of some sort would be approved (as an emergency measure or something) so that really basic operations could continue. Once the default happens though, the US on a whole would not be considered a "reliable borrower" and it's costs to borrow would go up. This means that a much larger portion of collected taxes would go to national debt, so taxes on a whole would need to rise. Services of all sorts would need to be cut, and the country would have to have a honest conversation with it'self about entitlements and who gets what. There is no doubt about it, life would get hard for a time, as the "way of life" changes.

This kind of default or bankruptcy is not something that has never happened before. Many others in the last 100 years have gone bankrupt and bounced back fine (or... were doing fine until 2009). The problem is that this time around, the US is already not on stable ground in its economy. On top of that the US $ is currently being used as a "World Reserve" meaning that it's used internationally to do business. If the US looses it's financial credibility, that will stop happening. Everything that the US enjoys because of that will no longer be available to it's people, mostly cheap products from Asia and cheap oil. The "extras" in life would become a lot more unaffordable for most people for a time and most of your income would go to food and housing (which would rise due to fuel prices). The "shockwaves" felt around the world would be based on trade with the US and it's "Reserve Status". Here in Canada for example... when the US stops buying, we feel it quickly... If the US $ is no longer used for oil, something else will have to come in. Without the US $ to peg it's currency to, China's $ will rise rapidly, making exports much more expensive for the whole world, China too would feel the pinch... etc. etc. etc... all around the world till everything stabilizes with a "New Reserve". Probably a "Basket" of currencies that can handle one or two of them loosing value without collapsing.

The good news, is that most "restructuring" phases don't take much more then 5-10 years, the better news... is that I really don't think it's going to happen... because you're right... default is pretty much "unthinkable" and is a pretty dark place to go... I expect the politicians are not "really" that stupid for "show"...

This article seems like a bit of pre-emptive spin to me. A well known fact of the situation here is that the reason the EU is so hard on us specifically is that the majority of our banks are owned by French and German banks, so if we go down they go down.

That's how the old saying goes 'eh?

Owe the bank 10 grand you're in trouble... Owe the bank 10 million, the banks in trouble...

Now we know what will happen begin of august. Obama said the state won't be able to pay out the checks of 70 million pensions, retired persons, disabled persons, veterans and other poor people. Probably meicicare and medicaid wouldn't exist any more if there is no compromise with the republicans. But soon that would not be enough. The soldiers would not get their wages any more and the flight control system might collapse. But that would not even be the worst. The finance crisis of 2008 would be a piece of cake compared to this. Standard & Poors threatens to put the rating of the USA from triple a to "worthless". Dozends of banks would probably collapse ... Now I understand why the european politicians wait with the construction of another credit for greece about 120 billions in septembre. They are waiting for the big crash.

@arquinsiel,

I don't know who owes the banks of Ireland, but there is no problem let greece going bancrupt. 10-15 billions for german banks and insurances but a bigger problem with Italy. 135 billion for them. All in all Germany would be glad if there would be just a risk about 200-300 billions for it's household in sane, but the crash of the global finance system is surely much more expensive. And we are facing that risk right soon.

I think the role of the dollar as a Reserve Currency could be used by the US Gouvernment for another desperate solution. They just could print money and cause a very high inflation with. That would reduce the worth of their debts and foreign countries would have to carry half of the costs. That might be better than a total financial crash.

I would think it would have a lot more to do with cultural and societal consistencies rather than patriotism. If you look at the EU for example; their member states are all very distinct individual countries. It wasn't even like that here in colonial times.

The far bigger concern would be; what would the American people want to replace the federal government if it were to collapse? When I think of when the masses had the most support for communism, and the most support of fascism I readily think of the great depression [when the nazis were having rallies of tens of thousands of people in Chicago city parks]. If the latinos are escapeghoated as "freeloaders that brought the system down through sneaking in to use up our entitlements" for example, would we see people gunning them down in the streets? There have already been murders similar to that. One guy an hour's drive away from here was beaten to death in the streets by a group of high school kids because they "thought" he was an illegal. The town's cops then tried to cover it up so the kids would get away with it. These things already happen. They're just not common.

The far right is more posed to take control than the far left because the masses already blame liberal policy for bankrupting the country. Those stereotypical white middle aged gun nuts that the left likes so much to make fun of? They're competent shooters, they've already lost so much, and they're angry. In a worst case scenario I could see all of central America laid ruin with nothing on its landscapes but charred buildings, overturned cars, empty bear cans, shell casings, and corpses.

Never, I think the breweries will be the last factories that will be closed.

America got two problems, it does'nt produce enough and buys to much from foreign countries. Too many countries have tied their currencies at the dollar. China and dozends of other countries. Normally the currencies of countries with trade deficits becoime cheaper, the imports become more expensive and the local producers gain additional market shares. This mechanism doesn't work any more for America. The second problem is, the upper class enriches itself on cost of the midclass. As long as these structural problems will not be solved there probably will be no significant economical growth in the USA, although this country always got a high viability in the past. I mean one third of the hausehold is financed with credits. That can not work for long. So customs duties for countries which don't let float their currencies on the financial markets would help another solution would be higher taxes for the rich, which often percentually pay less taxes than their employees. But that needs a strong gouvernment with excellent contacts to the western world. I wonder if the people of America will realize that one day.