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Argentina defaulting can hardly be compared to the US defaulting. I am no economist, but I doubt the US economy would ever be the same if it suddenly decided no
by marvin 19y ago
Argentina defaulting can hardly be compared to the US defaulting. I am no economist, but I doubt the US economy would ever be the same if it suddenly decided not to repay any of its foreign debt.
Argentina's GDP today is about 1/60 that of the US, and it is hardly a huge player internationally. When they defaulted, 93 billion 2001 US dollars were lost by its creditors. The United States foreign debt (omitting Medicare+Social Security obligations and, unfairly, the more direct debt to its public) is 4000 billion 2007 US dollars.
That's a monumental difference, and not paying it back would be a historic violation of trust bordering on an act of war. Argentina _did_ get in a lot of trouble for its decision to default, and it doesn't seem very likely that the world would forgive a similar, but 30 times larger, transgression from the US. It is not an option. If anything like that happened, it would be indirectly (such as being caused by a dollar crash)
- jorgeortiz85 19y agoExcept defaulting on the foreign debt would also mean defaulting on the entire national debt. That would pretty much screw up the entire US financial system. Of course, what's more likely is inflating away the debt (i.e., devaluing the value of the dollar, and thus all dollar-denominated assets). There may not be foreclosures, but there will be a clearance sale on US assets. 90% off! Everything must go!
- anamax 19y ago"Bordering on an act of war" in hyperbole. Yes, it would be a huge financial loss for those holding bad paper (and the US could pick and choose what paper became useless - including discriminating by ownership) but what can they do other than yell and refuse to lend again? Yes, they could impose economic sanctions and kill their export market.