"Economic conditions for children today are similar to those of a year ago—and much worse than they were in 2007. Millions of families with children have not yet regained ground lost during the recession." write Julia B. Isaacs and Olivia Healy in The Recession’s Ongoing Impact on Children, 2012: Indicators of Children’s Economic Well-Being (Adapted choosen excerpts by Job Market Monitor to follow)
The US debt and how defaulting will change the world
The obvious answer is…Everything will change and the USA will never have the same image again
A default would have some “pretty serious ramifications” for the US economy and, because the US is still 20 per cent of world GDP, it would be terrible for a lot of other countries as well. With Europe in the middle of a huge crisis the knock on effect could be disastrous. The UK is struggling along with many other nations but the biggest economy in the world hitting the wall again….Disaster or just longer pain?
We will see higher interest rates and potential destabilization in financial markets, higher taxes, lower incomes, less money in the economy, market crashes, job losses, families suffering and much much more.
The question is what will happen to the relationships with the creditors that the US government owes so much to. China, Saudi Arabia and others are owed trillions of dollars by the American government.
What will happen if the debts and interest are not paid?
What happens if a country like the USA defaults on the bills and payments they owe to others?
We all know the consequences for the individual. For more information on this view the previous article I wrote.
How much is the debt?
$16,000,000,000,000 and growing!
Who does the USA owe money to?
A default will change the way the world looks at the once safe US economy. It will make Treasury bills more expensive over time and interest rates higher.
Many US businesses would face downgrades and that would lead to higher costs of capital. This would lead to less job creation and less investments in American companies and the economy as a whole.
The Federal reserve will serve notice on the government that the account they have is in overdraft and this is a violation of the Federal Reserve Act.
With Congress not allowing the government to borrow more, usual payments like social security could not be made. Social meltdown is on the way.
Even if the issue is resolved, most government services, programs and benefits will take a devastating hit.
Potentially the first assets to be affected after a default would be money-market funds that hold government securities.
Banks that buy bonds directly from the Reserve and resell them to consumers, including pension and mutual funds.
Foreign investors, which holds nearly half of all Treasury securities(China hold 50%of all US Treasury securities) could start dumping them.
The US dollar would be hit and the currency regarded by most as the reserve currency of the world, would no longer be the safe investment it once was. If other central banks start selling off the green backs , the value keeps dropping but what is the alternative some ask…The Euro? Will gold go higher?
If the dollar is worth less it will mean the cost of buying American goods becomes cheaper. The reverse side is it will cost an awful lot more for Americans to buy goods. Commodity prices are sure to take a hit.
China could become the real world leader and other currencies will become the new reserve currency of the world.
China and other countries will have an even stronger hold on the US government and even today they could cause a crash by dumping treasuries. Russia is also a player in this game and the Us government needs to be very careful as certain scenarios are too horrific to think about.
The answer to the question is difficult to know. What is known the image of America will change forever more. The greatest economy in the world is run on debt and the people will be the ones that suffer the most.
Creditors will negotiate new deals and will take haircuts in order to gain anything. If you owe a bank money and cannot pay, they will take what they can get and then kick you to the curb…will the United States of America be thrown away…No, but it will take the hit and in time ( along time) through a lot of pain rise again. The reason I believe this is simple…The citizens of the US have fought all of time and were formed through revolution. This is a new chapter, a new revolution is about to start but this we hope will end up with a positive outcome.
Apocalyptic ideas are not even worth talking about as these will affect every person on the planet. Many economists will always tell you that wars are a great diversion and a means to solve many economic problems. From war comes rebuilding and the chance to eradicate certain issues…this is a doomsday scenario but history shows huge growth after terrible events. Now I am not an expert on any of these fiscal issues and no single person can really answer what will happen if debts are not paid but we all know it will not be good for anyone. The world is global and every country is interlinked in some way. A hiccup in a small country these days can affect many other countries. Therefore the thought of this hiccup being in the USA paints a terrible picture in most people’s minds. Raising the debt ceiling does not fix the problem but it blocks that terrible outcomes that might happen worldwide.
As we near the New Year we can only hope for a positive outcome even though this affects every American. Business will continue and life will go on. We will keep building our business and hope to launch a company that can create jobs and help other businesses worldwide.
Did you know China owes America?
- Treasury Secretary Tim Geithner: US to hit debt limit Dec. 31 (scooprocket.com)
- U.S. to reach 16.4 trillion dollar debt ceiling on Dec. 31 (thesantosrepublic.com)
- Fiscal Cliff Has China Credit Agency Lowering U.S. Debt Outlook (forbes.com)
- World’s Riskiest Debt In Pictures (forbes.com)
- MERRY CHRISTMAS: Chinese Credit Ratings Agency Dagong Puts The US On Negative Watch (businessinsider.com)
- Republicans Are Making It Very Clear They’re Going To Pursue Another Debt Ceiling Fight (businessinsider.com)
- Saudi Arabia Issues Warning: US Debt Burden Has Reached Same Ratio as Italy (thegatewaypundit.com)
- U.S. Debt Ratio Is Now The Same As Italy’s (warnewsupdates.blogspot.com)
Fiscal Cliff Tax Hikes , less money in your pocket and a disaster for business and jobs
Here are some comments collected from around the web about the possibilities from a negative outcome to the fiscal situation in the USA. America is facing tough times and even if this is sorted out, it is only a short term financial solution. Most economist agree that the economical situation will not be solved just delayed until a new stop gap measure is created. The facts are the US is in debt and this needs to be paid, if not what is the solution?
30 million Americans will be damaged in some way..the reality is, all will suffer.
Your Income Tax Rates Will Go Up The expiration of the Bush-era tax cuts on Dec. 31 means nearly every American taxpayer will see their rates go up to levels of almost a decade ago
Paychecks Will Be Smaller after the Social Security payroll tax holiday expires on Dec. 31, raising the rate from 4.2 to 6.2 percent.
You Cannot Collect Extended Unemployment and this will have a disastrous effect on business, incomes, support structures, charities and more…
The cost of goods will be rising, a gallon of milk could double to $6…so once again your money will buy you less.
The child tax credit will be reduced…Your children Will Cost You More Money and your income will buy you less.
How to find a job?…A New Job Will Be More Difficult to find, employment opportunities will decrease, careers will be difficult to find.Job creation and the chance to work , even finding job vacancies will be difficult.
Stock markets and your shares could crash leaving you short and a more difficult future on the horizon…this in itself will affect jobs, businesses and financial systems worldwide.
Medicare,..It Will Be Harder To Find A Doctor to help you, if it was not difficult enough already and the cost will soar for many.
Obamacare…High Earners Will Pay New Taxes to pay for this, leaving them less money and putting their finances under threat. Money will be spent on basic requirements and businesses will then suffer from the lack of cash and dollars in the market place.
US President Barack Obama has used a last-ditch White House meeting to urge Congress to back an interim plan to avoid the “fiscal cliff”, reports say.
He reportedly asked Republican and Democratic leaders to back tax cuts for those earning under $250,000.
They have only four days to reach an agreement before across-the-board tax rises and spending cuts take effect.
Analysts say sliding over the “cliff” could tip the US into recession and set back the global economic recovery.
Why does it matter?
Analysts paint a grim picture of the US economy, The situation is so bad it could make the Euro zone crisis seem insignificant.
“The US fiscal cliff represents the single biggest near-term threat to a global economic recovery,” the Fitch ratings agency said recently.
“The dramatic fiscal tightening implied by the fiscal cliff could tip the US and possibly the global economy into recession
Global growth rates will halve in 2013 is the latest prediction
The IMF warns that job creation and peoples money will be trashed.Growth rates could drop by 4% and thus effect the markets and growth of all other countries around the world
How will people in the US suffer?
Money losses… $550,000,000,000 will be sucked out of the economy. Imagine how the markets will deal with this money loss and how many jobs will be lost. Your local businesses and local areas, your community, family, children…..
The average yearly tax bill for each American would rise by $3,500 on average. Can the average American deal with losing $300 a month and the knock on consequences are huge
The super-rich face a tax rise of $121,000 approx a year.
Lowest earners will see an increase of about $420
For the middle income earners which is the largest proportion of the Us economy the average rise will be around $2,000.
If things go wrong , we are a small business that will do its part in helping reduce the costs to business…let’s all hope the short term problem is fixed as at the end of the day it is the people that will suffer
- Fiscal news,USA,market worries, jobs,tax&future..Zynkin reports (zynkinnews.com)
- How the ‘fiscal cliff’ could impact RI (wpri.com)
- Reid: ‘Fiscal cliff’ deal unlikely (familysurvivalprotocol.com)
- Fiscal cliff will affect paychecks (kshb.com)
- US ‘heading over fiscal cliff’ (bbc.co.uk)
- “Fiscal Cliff”: These is no Drop Dead Date and more thoughts (calculatedriskblog.com)
- What Happens If There’s No Fiscal Cliff Compromise (on.aol.com)
Obama heading home
Efforts to prevent the U.S. economy from going over a “fiscal cliff” stirred back to life on Wednesday with less than a week to go before potentially disastrous tax hikes and spending cuts kick in at the New Year.What will happen? Will huge job losses be the future? Market crashes?
House of Representatives John Boehner on Wednesday urged the Senate to pass its version of legislation to avert the cliff in a sign that congressional efforts to avoid a crisis are coming back to life days ahead of the year-end deadline.
Just before Christmas…With only a week left before a deadline for the United States to go over a “fiscal cliff,” lawmakers played a waiting game on Monday in the hope that someone will produce a plan to avoid harsh budget cuts and higher tax for most Americans from New Year’s Day.
The situation in the retail sector…worries about bad results leads to job worries, if taxes go up margins get squeezed and more unemployment in the future…The 2012 holiday season may have been the worst for retailers since the 2008 financial crisis, with sales growth far below expectations, forcing many to offer massive post-Christmas discounts in hopes of shedding excess inventory.
The markets… Stocks fell for a third straight day on Wednesday, dragged lower by retail stocks after a report showed consumers spent less in the holiday shopping season than last year.
Zynkin offers a solution to help business reduce costs with the weight of this cliff sliding onto local businesses.
- Years of Austerity,recession,depressing news on the UK economy (zynkinnews.com)
One of the aims of Zynkin will be to help businesses create new trade,reduce costs and get people back to work.Jobs are very important to us and we aim to connect parties and offer opportunities of work through our marketing programs.
WASHINGTON (CBS DC) -- The threat of a massive cyber-attack on 30 of the largest U.S. banks has been confirmed by a recent report issued by the McAfee network security firm.
An October report from the RSA security firm got the attention of the online banking world with its announcement that a highly sophisticated Trojan had been developed that can funnel money from bank accounts at places such as Chase, Citibank, Wells Fargo, and PayPal, …
Rep. James Lankford (R-OK) tells CNN’s Soledad O’Brien that Republicans are trying to solve the debt and deficit and “not trying to solve the fiscal cliff.”
Rep. Lankford says, “We’re not trying to solve the fiscal cliff. We’re trying to solve the debt and deficit. That’s the bigger issue. The President’s proposal was let’s raise taxes on the wealthiest Americans, which raises about $80 billion.