The United States has occupied parts of Europe and Japan for sixty-six years at tremendous expense. The Bush war in Iraq will cost $4 trillion, and the US is building permanent bases in Iraq and Afghanistan to hem in our former enemy, Russia. Clearly a policy as Roberts says of "bomb now, pay later". Even if a deal is worked out between the financial terrorists (the same folks who rated junk mortgage backed bonds AAA) and the President, the debt will not be absolutely reduced by $4 trillion, simply the rate of increase will be smaller. The US economy is consumer driven, but with some 20% of people out of work, the driver is crippled. What does the Obamatron, eager to appease his Wall Street contributors, offer as a remedy? Something that was tried and failed during the last Great Depression: austerity, at the expense of the middle class voters who put him in office:
*the United States has defaulted before. There were defaults associated with the War of Independence, the greenback default of 1862, the liberty bond default of 1934, and the accidental but momentary default during the debt-limit crisis of 1979. This last default is possibly most analogous to the current situation. The Treasury eventually paid face value on $120 million in due bills, but unpatriotic investors sued to obtain extra interest for the delay in payment. A later study concluded that the net result of the technical default was a tiny but permanent increase in the interest rates of T-bills. The kicker however is this: the Federal Reserve Bank purchases federal Treasury debt. Essentially this is what "quantitative easing" is. By having the Federal Reserve, an arm of the government, purchase more debt in the form of Treasury securities, the government can postpose a default against private investors theoretically until the US dollar is not worth the paper on which it is printed. The power of the printing press is an awesome thing.