US Treasury predicts what would happen in event of default.

As the government shutdown theater continues, the US Treasury has gone on public record about what would happen if a default were to occur.  In short, the results could be "catastrophic" according to them, with the consequences potentially being that "global economy could lead to frozen credit markets, a plunge in the value of the dollar, skyrocketing interest rates, all of which could instigate a financial crisis mirroring that of 2008 “or worse.”"

The article goes on to say, "Treasury Secretary Jack Lew said in a statement released with the report. “Postponing a debt ceiling increase to the very last minute is exactly what our economy does not need – a self-inflicted wound harming families and businesses. Our nation has worked hard to recover from the 2008 financial crisis, and Congress must act now to lift the debt ceiling before that recovery is put in jeopardy."

This whole thing is ridiculous.  This is like saying that if a person who has charged up more debt on his credit cards than he can ever hope to pay needs  to pay for something, be it an interest payment on the existing debt or other expenses such as the pool guy, the plumber, the food bill or the electric company, that all you have to do is take on more debt and all will be OK.  In fact, if said person fails to take on more debt in order to keep the Ponzi spinning then it would be categorized as a self inflicted wound.

I hope it makes sense to thinking Americans that nobody can take on debt forever just to live on.  It might seem like an endless cash stream but history and logic and math and economics show that it's only a matter of time before something happens to stop it. Either the people get fed up and have  "self afflicted" wound (which I prefer to call "return to sanity/reality) or they just let the problem grow until interest rates begin to rise rapidly at which time they cannot afford to pay the interest on the debt.

Just taxing the people more and more (like Obamacare tries to do) is very wasteful and people will resist it.  Obama hopes that by tipping the scale toward poorer folks that they will support his actions to fleece the middle and upper middle classes.  Of course that will seem to work for awhile until the armed revolution begins.

All I can say is that everyone (and I mean everyone) is predicting no default.  So there likely will be no default at this time.  But I also know that these are the types of situations where some unexpected catalyst seems to pop up and take everyone by surprise.  Everyone is in the camp of "no possibility of default right now" and so that means there is great complacency about guarding against default.  Pride goeth before a fall and all that.

Whether or not we see a default now or later there can be no doubt that we will eventually see a default.  The more debt that government is allowed to rack up, the less able the country is able to pay it even by draining the 401ks and bank accounts of every working man and woman in the joint.  So I think it is important to review what the US Treasury thinks will happen (as mentioned at the start of this post) when we do finally default.  Default is an eventual certainty.  Be ready.