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Actually the federal gov't would not have to default on the debt. There is revenue coming in. It would be simple (not pleasant) to pay the debt obligations priority number one and simply stop spending anymore money.
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If we defaulted and had a plan that was believeable to out creditors, we would escape any sort of inflation and faith would return to the value of the dollar.
Just look at how stupid our current policy is. Here is an example; China buys our debt so we can afford to defend Taiwan against the Chinese. Tell me where that makes any sense? Our politicians will not get serious about the debt until the American people call them on the carpet. Where is the call for an Amendment for a balanced budget? Until we have one, politicians will continue to use tax dollars to buy votes!
By defaulting, all their pet projects/earmarks/pork will go bye-bye! Out of control entitlements and other government waste will be curtailed. If they get away with raising the debt ceiling, like they did two years ago, they will look at raising it again in another two years. It just won't stop!
I just read where the Greek 2-year note is priced to yield 22% That's so cool! Of course it will never happen here. Right, Ben? Right, Timmy? Right, Barack?
We live in Cuba now.
It occurs to me ...
We have these ostensibly really smart people running this whole show, right?
Well, for a while now they've been watching unemployment (& underemployment) get worse, which means that they should anticipate lower income tax revenues, right?
So, on top of that they give out a bunch of tax credits to buy new homes to people who are working & many of whom were going to buy those homes anyhow.
So ... they spend a bunch of billions to bail out the mortgage mess because it would cause financial collapse. Then more billions to "stimulate" the economy, many of which billions only allow state & local govts to simply bridge their budget gaps & not look forward to what they will do the following year.
Now, OMG! our debt ceiling is being reached! OMG! OMG! We just forgot to count up all those billions we were borrowing/spending. The sky will fall unless you let us borrow more!
These economic geniuses, can they not do basic arithmetic? Our successful educational system at work?
So, if we let them borrow more, what are they going to do about next year? Will their arithmetic skills fail again?
Seems like they're going to argue about picking pepper out of flysheet ... massive debate over $38 billion that works out to far less. Meanwhile telling us to get used to paying $4/gallon for gasoline.
And we think these fellas are so bright we should let them run our govt and economy?
"Know in your heart that all things are possible. We couldn't conceive of a miracle if none ever happened." -Libby Fudim
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