What if foreign countries stop lending money?

[Oliver]

In light of the huge debt, the reality of a wimpy tax revenue situation, the economic turbulences that require to largely increase the national debt, the rising costs of Medicaid and Medicare and the possibility of inflation: What exactly, in a domestic sense, would happen once foreign countries stop to buy Treasury securities, so that the Government couldn't pay it's bills anymore?

And doesn't those circumstances imply that the US government will be increasingly prone to blackmailing by those foreign countries that lend the majority of the money [China/Japan] due to buying Treasury securities? :

For a very recent example: "China pushing for a international reserve currency".

 

[Josh_LA]

yes, that's the only reason we EVER attack countries, because they don't play ball.

If they did, what couldn't be solved with enough money?

 

[hugolp]

Thats why China and the rest are now unloading the 30 years treasuries on the FED but keep on buying the short term treasuries. Now the USA goverment is more dependable on foreign goverments because it needs to roll its debt more often.

 

[Oliver]

yes, that's the only reason we EVER attack countries, because they don't play ball.

If they did, what couldn't be solved with enough money?

Given historic actions, I tend to agree with you when it comes to non-democratic interventions - but since we can doubt that the US would intervene in China, it isn't that relevant concerning the Topics questions.

 

[Oliver]

Thats why China and the rest are now unloading the 30 years treasuries on the FED but keep on buying the short term treasuries. Now the USA goverment is more dependable on foreign goverments because it needs to roll its debt more often.

Well, so it does make the US bribable, does it not? - And what would happen if those foreign lenders would start to think that the T-Bills aren't worth to invest in them anymore - and consequentially stop lending money?

[ETA: I might add that this scenario isn't that crazy given the current situation]

 

[Josh_LA]

Given historic actions, I tend to agree with you when it comes to non-democratic interventions - but since we can doubt that the US would intervene in China, it isn't that relevant concerning the Topics questions.

give me a war event, and I'll ask

"Could this have been settled if we paid them off?"

 

[Oliver]

give me a war event, and I'll ask

"Could this have been settled if we paid them off?"

Well, since neither Iraq nor Afghanistan has something to do with treasury lending, do you suspect that the US would attack China to sell their treasury securities - or did I miss your point here entirely?

 

[Josh_LA]

Well, since neither Iraq nor Afghanistan has something to do with treasury lending, do you suspect that the US would attack China to sell their treasury securities - or did I miss your point here entirely?

Neither Iraq nor Afghanistan would play ball!

If they gave us their whole country's control over money, labor and resources, would we be so stupid to attack them?

If they accepted any amount of bribery we gave, what couldn't be done?

Do I suspect the US would attack China? No, we can't afford to and we won't need to, fortunately. We MIGHT however, attack countries that are trading with China to make their economy difficult. Speculating whether we'll attack China is secondary, but no doubt it'll be motivated by MONEY (or power, which can be solved with money).

 

[Oliver]

Neither Iraq nor Afghanistan would play ball!

If they gave us their whole country's control over money, labor and resources, would we be so stupid to attack them?

If they accepted any amount of bribery we gave, what couldn't be done?

Do I suspect the US would attack China? No, we can't afford to and we won't need to, fortunately. We MIGHT however, attack countries that are trading with China to make their economy difficult. Speculating whether we'll attack China is secondary, but no doubt it'll be motivated by MONEY (or power, which can be solved with money).

Yes, money and the flow of obviously did play a major role in some of the infamous historical interventions in foreign countries. But that doesn't necessarily relate to the threads questions about what will happen if the US government can't get any more money from foreign countries.

 

[Josh_LA]

Yes, money and the flow of obviously did play a major role in some of the infamous historical interventions in foreign countries. But that doesn't necessarily relate to the threads questions about what will happen if the US government can't get any more money from foreign countries.

didn't I just answer you?

they'll do whatever is necessary to get money going again!

 

[hugolp]

Well, so it does make the US bribable, does it not? - And what would happen if those foreign lenders would start to think that the T-Bills aren't worth to invest in them anymore - and consequentially stop lending money?

[ETA: I might add that this scenario isn't that crazy given the current situation]

Well, this is the first step of the crisis. The foreign nations refusing to fund the US gov anymore, and only accepting on funding it on the condition that USA monetizes (buys with new printed money) its long term debt, so they keep buying short term debt.

Whats the next step? Who knows, but the US gov certainly is not in the greatest position.

 

[Oliver]

didn't I just answer you?

they'll do whatever is necessary to get money going again!

Well, that's my point: When it comes to China and Japan, the US can't do anything about them if they decide to get rid of the T-Bills or if they stop lending money. Why? - Because the US-Market is China's and Japan's strongest ally - and the US won't attack it's own market to bring Japan and China down on their knees. It's a Non sequitur to start with.

 

[Oliver]

Well, this is the first step of the crisis. The foreign nations refusing to fund the US gov anymore, and only accepting on funding it on the condition that USA monetizes (buys with new printed money) its long term debt, so they keep buying short term debt.

Whats the next step? Who knows, but the US gov certainly is not in the greatest position.

That's pretty sad, isn't it? - Anyway: Can you imagine what will happen to the country once foreign lenders stop lending money? - I don't know how ugly it would be, but given the circumstances, it could border to a civil war once that happens.

 

[Josh_LA]

Well, that's my point: When it comes to China and Japan, the US can't do anything about them if they decide to get rid of the T-Bills or if they stop lending money. Why? - Because the US-Market is China's and Japan's strongest ally - and the US won't attack it's own market to bring Japan and China down on their knees. It's a Non sequitur to start with.

so what do you think it'll do?

print money to save itself, or go along with what their allies decide to do.

of course, increasing production is an option too.

 

[Oliver]

so what do you think it'll do?

print money to save itself, or go along with what their allies decide to do.

of course, increasing production is an option too.

Well, increasing production is what the Obama-Administration is trying to do due to getting the banks to lend money again. The FED decides if they print money or not, it's not a matter of the Government since the FED is trying to keep the deflation/inflation in balance and in my scenario, the Government would need the FED to print money. So the FED would have the final say in this issue, not the Government per se.

I suspect that the Government would have to stop and to reduce services almost instantly, but I have no idea if they would be able to do so - literally "over night". So I wonder what the domestic outcome would be once the Government wouldn't be able to pay for a big chunk of their bills...

 

[hugolp]

That's pretty sad, isn't it? - Anyway: Can you imagine what will happen to the country once foreign lenders stop lending money? - I don't know how ugly it would be, but given the circumstances, it could border to a civil war once that happens.

I see more posible the USA defaulting on its debt, and setting all the ingredients for WWIII. And that is really scary.