If the government does not cover its debts, its rating goes down and, just like with an individual debtor, nobody will loan them money anymore. All transactions must be in cash and maybe not with US Dollars. The last creditor is the taxpayer. So payments TO taxpayers will cease and payments FROM taxpayers will increase. Raising the debt limit, the amount the government is allowed to borrow, postpones that default but doesn't solve the problem of the government spending money that is borrowed in the forst place. The reckoning will occur when our creditors request payment. Currently, we, as a government, pay out creditors interest with money we have borrowed from other creditors. It's a ponzie scheme. With luck, creditors will not make serious demands within my lifetime. But it will come. There are reports that the national debt exceeds the US total domestic product output for the first time.
Over the last 5 years, Mobil shares have gained about $25 ($82 to $107) Using sloppy math, that's about 30% or 6%/yr (ignoring compounding). That's not enough to make it into a decent growth portfolio.
The banks reported low interest loans as cash assets. When interest rates were raised by the fed, the cash value of those low interest loans declined ($100 @ 2% generates $2/yr. If current interest is at 4% that 2% loan is worth only $50 because 4% of $50 is $2). The banks did not change the reporting of the assets on their books when rates went up. They looked great on paper. So when customers who had deposits in those banks wanted their cash (to meet payroll and overhead costs) the banks had to sell the loans at a deep discount to raise cash and didn't have enough to cover their customers withdrawal orders. They were bankrupt. This is an example of the government selecting winners and losers and unilaterally abandoning rule of law.
If the government does not cover its debts, its rating goes down and, just like with an individual debtor, nobody will loan them money anymore. All transactions must be in cash and maybe not with US Dollars. The last creditor is the taxpayer. So payments TO taxpayers will cease and payments FROM taxpayers will increase. Raising the debt limit, the amount the government is allowed to borrow, postpones that default but doesn't solve the problem of the government spending money that is borrowed in the forst place. The reckoning will occur when our creditors request payment. Currently, we, as a government, pay out creditors interest with money we have borrowed from other creditors. It's a ponzie scheme. With luck, creditors will not make serious demands within my lifetime. But it will come. There are reports that the national debt exceeds the US total domestic product output for the first time.
Over the last 5 years, Mobil shares have gained about $25 ($82 to $107) Using sloppy math, that's about 30% or 6%/yr (ignoring compounding). That's not enough to make it into a decent growth portfolio.
The banks reported low interest loans as cash assets. When interest rates were raised by the fed, the cash value of those low interest loans declined ($100 @ 2% generates $2/yr. If current interest is at 4% that 2% loan is worth only $50 because 4% of $50 is $2). The banks did not change the reporting of the assets on their books when rates went up. They looked great on paper. So when customers who had deposits in those banks wanted their cash (to meet payroll and overhead costs) the banks had to sell the loans at a deep discount to raise cash and didn't have enough to cover their customers withdrawal orders. They were bankrupt. This is an example of the government selecting winners and losers and unilaterally abandoning rule of law.