US on track for June 1 default without debt ceiling hike, Treasury says | Hacker News Reader

US on track for June 1 default without debt ceiling hike, Treasury says

reuters.com

14 pointspaulpauper26 comments

Might as well remove the ceiling on the debt because I don't think it will ever be paid down. Inflate away and enjoy it while it lasts because when the bubble pops it will be worse than any other deflationary event in history because never has the largest GDP nation defaulted and crashed before... and the US will take everyone down with them when they crash.

> I don't think it will ever be paid down.

Governments worldwide have debt payment problems. EU countries are starting to raise retirement age because they can't pay the promised pensions. They need a great reset and war will be an excuse.

At least USA controls it's currency and can simply coin money.

> can simply coin money

for some meaning of "can". Just like Zimbabwe or Venezuela "can" print themselves out of a problem.

It's funny the US paid it debt to GDP down from WWII until the 80s then it started going up again. I wonder what happened in the 80s to make it change?

I remember something I read that linked it to the Gold Standard and the US deciding to stop using it, making all other currencies free floating. I'm not sure if it's the only reason but definitely an interesting topic: https://en.wikipedia.org/wiki/Nixon_shock

It is impossible to exercise modern monetary policy while still beholden to fiat metals. The last major economy to leave the gold standard was Switzerland in 1999, and at any rate, most of the countries only started using the gold standard in the 19th century, so it wasn’t around for that long.

Hmm. That sure seems to line up with Reaganism. I'm sure they've got nothing to do with each other.

I keep seeing articles and blurbs about this but I have not see the actual possible repercussions clearly articulated. Debt is a societal creation and debt at this scale is barely comprehensible so my question is what actually happens if we default? Do we have actual assets tied to the debt? Do we have debtors that will actually try to create consequences?

Extreme weakening of the dollar.

Possibly accelerated loss of the petro dollar.

Since we left the gold, then silver standard, no the US dollar does not represent actual assets.

Social Security, Medicare to no longer be trusted by the citizenry

I already don't trust Social Security. Without continuous injections of tax dollars it will become insolvent. The whole scheme was built on the assumption that more people would pay into the system than cash out of it at any given time, but due to declining birth rates and increasing life expectancy it can't sustain itself.

This is true - even if we remove the cap on what people pay into it, it won’t resolve the fundamental issue. It’ll just keep the door open for the last of the currently retiring generation to enjoy it.

I have no expectation of receiving anything worth counting when I’m retired - I don’t think it’s ridiculous for the French to be rioting over the change in retirement age because they likely see that they’re paying into a system they will not enjoy.

US on track for default without debt ceiling hike, or a lowering of spending. For some reason "they" always forget to mention the other option.

The time for that passed. This is about agreeing to pay for spending that happened.

Spending that’s already planned. There’s plenty of income to pay our debt obligations. Just not enough to pay all the other planned spending as well.

The US should rollback spending to prepandemic levels. There’s no reason why extraordinary events should be a one way ratchet.

first opportunity I've had to pull out the 'nothing is so permanent as a temporary government program' Friedman quote from the 80's.

Too many people stand to benefit from those spending plans for their rollback to be politically viable.

This is what the republicans want to count on - to force some kind of political concessions from the democrats one way or another. It's a form of playing chicken at the highest level.

Happened, not planned.

On June first, the US is predicted to not be able to pay interest on debt it already owes.

Planned. The US debt is currently $31 trillion. The monthly servicing costs for this debt (as of 2022) is approximately $35 billion dollars. The US has roughly $270 billion dollars per month in income tax receipts. When the US hits the debt ceiling the Treasury will no longer be able to get new loans, but as far as servicing the existing debt, no problem. The US has no need to default on the debt if there is no deal on the debt ceiling, it will just have to cut future spending.

the world holds its breath. what will the US do? let USD crash and take global economy down? or siphon a bit of wealth from everyone and keep things running for a little longer. obviously they'll chose option 2, as always, but it needs to appear as if this was done only as last resort, after careful consideration.

The issue is, sometimes the hostage taker accidentally shoots the hostage.

I’m so bored with this headline. The debt ceiling, again. Oh boy I wonder what’ll happen this time.

Again? The last time the US was close to default with extraordinary measures expiring was 2011 and 2013 and it led to the first downgrade in rating to the currency.

This is not the annual budgeting process.

the fake contrived panic over the debt ceiling will be followed by the predictable fake rally that follows any kind of deal

this has happened how many times now?

retail traders sell on the worry, buy on the deal agreement

large institutions buy on the worry, sell on the deal agreement

for most people reading this comment, you may actually be better off with a collapse! you either get crazy inflation that burns away your debts, or you get crazy deflation that puts everything on sale

> you either get crazy inflation that burns away your debts, or you get crazy deflation that puts everything on sale

there's no way both scenarios could be beneficial for the same person.

Deflation isn’t happening (realistically). It’s too easy (politically and process wise) to print money.

> This has happened how many times now?

Twice. 2011 and 2013

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