Many point out that, even if the government "shuts down", we have enough to pay the interest on all our debt, so we don't have to worry about default. But that completely ignores maturing treasury bills. In order for us not to be up shit creek, we need China, Japan, Wall Street, HK to rollover these bonds (i.e use the money we owe on them to buy more).
Most of this debt is short term (less than two years). What happens to our economy if China decides not to rollover $1T over that time? Or starts selling it? If it doesn't end with everyone else throwing in the towel, it will at least end with huge interest rates. The only thing stopping the US becoming 1930's Germany is the Chinese. It's nice that we have all the other requirements in place: Father^H^H^H^Hhomeland Security, Christian Fundamentalists, huge military, secret police, massive jails.
Here's some nice commentary about the reality of the debt limit: http://ftalphaville.ft.com/blog/2011/06/22/602761/the-imposs...
Many point out that, even if the government "shuts down", we have enough to pay the interest on all our debt, so we don't have to worry about default. But that completely ignores maturing treasury bills. In order for us not to be up shit creek, we need China, Japan, Wall Street, HK to rollover these bonds (i.e use the money we owe on them to buy more).
Most of this debt is short term (less than two years). What happens to our economy if China decides not to rollover $1T over that time? Or starts selling it? If it doesn't end with everyone else throwing in the towel, it will at least end with huge interest rates. The only thing stopping the US becoming 1930's Germany is the Chinese. It's nice that we have all the other requirements in place: Father^H^H^H^Hhomeland Security, Christian Fundamentalists, huge military, secret police, massive jails.