Quantcast
Home / Opinion / Commentary / Here’s what will happen when the U.S. can’t pay our debts

Here’s what will happen when the U.S. can’t pay our debts

100dollar-620

Americans are a passionate breed. Get us started on something combustible like freedom of speech and we’ll burn the house down. Talk to us about deficits and surpluses and debt and you can see yourself out.

I have a modest goal of making you more “excited” about budgets by the end of this brief tirade, albeit not the happy kind.

First, I’d like to accuse the vast majority of Americans of not actually knowing what happens when a country defaults on its debt. Forgive me for shooting from the hip. No, I don’t have any polling data on it, which is surprising given polling agencies have time to ask Americans about their peculiar displeasure with the usage of “Arabic numerals.” Nevertheless, I’m quite sure of it. Americans just don’t know what would happen when the day comes that we can’t continue to pay our debtors.

But something does happen, and the most recent example of what that might look like is probably Hambantota Port on the southern tip of Sri Lanka.

Dan Jones

Dan Jones

You see, Western think tanks and media outlets like to deride China for what they call a “new colonialism” or “colonialism with Chinese characteristics,” whereby Beijing snookers unwitting foreign governments into borrowing vast sums of money they’ll never be able to pay back. The Belt and Road Initiative is rife with examples of this practice — so-called “predatory lending” in American parlance.

The Hambantota Port was initially financed to the tune of $307 million by China’s Export-Import Bank despite feasibility studies showing the port was unworkable. The cost of completing the port grew and grew until the Sri Lankan government could no longer afford the interest on the debt. Today, the port, including 15,000 acres of land around it, is “under lease” by China on a 99-year agreement. That’s right, a sovereign nation was forced to give up a strategic port to a rival because it could no longer afford the very terms it had agreed to.

We condescend when we express pity for these countries — many of which have democratically elected leaders — as if they’ve been bullied into their predicaments by methods we civilized Americans would never tolerate. Yet we are fundamentally no different, only we walk the plank willingly. Our representatives are not bribed or blackmailed into debt traps; they do it voluntarily because we’ve come to think of ourselves as special and somehow exempt. As if nothing happens after the default.

As Congress deliberates on spending another $3 trillion we don’t have and will have to borrow from unfriendly governments, Americans might do well to consider what they’ll be willing to part with when we can no longer pay our debtors. My guess is it will start with territories or intellectual property, perhaps Guam, but who knows what assets we’ll be asked to sacrifice when the time comes. And it is coming.

There was a time in America (1789-1913) when one-half of our bicameral federal legislature was directly beholden to state legislatures which probably would’ve been less forgiving of politicians who voted in favor of sinking us further and further into debt. Today, virtually all our representatives in Washington seem rather unconcerned.

“There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.” -John Adams

– Dan Jones is small business owner who lives in Phoenix.

4 comments

  1. This man has no actual understanding of sovereign finance, nor the global financial system. Does he actually think that the United States could be bullied into a permanent lease of OUR territory by China, like Sri Lanka?

    Power is a real thing. China has it; Sri Lanka does not. America is the world’s premiere military and economic power and could never be dominated or coerced in such a fashion by a mere creditor, even a near peer like China. It’s an absurd notion those puts the lie to not just to this gentleman’s thesis, but his very credibility.

    America has one thing China (or any other country) does not: the world’s premier reserve currency. The world’s creditors are effectively paying us to take their money right now. Despite the current crises we face, the United States is still the bedrock of the world financial and economic order. We don’t budget or borrow the way a family or a small business does; we borrow as an act of sovereign decision making and state craft. This gentleman doesn’t understand that distinction, and it makes all the difference in the world.

  2. Joseph Rodriguez

    Nice article. What is the background of the author?

  3. I’m assuming you’re against extending federal relief unemployment and you’re likely happy that the most Arizonans can usually get (without the federal bump) is $240/week—and you probably support that that $240 per week when you’re jobless (by no fault of your own because if you lose your job due to “cause” or a mistake on the worker’s end there is no unemployment at all to be had) that that $240/week is taxed. So, it’s really only 180/wk.
    I realize that defaulting on our debt might lead to a future crisis. It also might not—with the exorbitant amount of military spending, with for-profit war—America would likely get away with it.
    And yet, right now, today: we have a homeless crisis. Americans, Arizonans are losing their homes, they are being evicted from their apartments, women try to leave men that beat them and end up homeless or dead, parents are not able to feed their children, the majority of the working poor our single mothers.
    These are crises happening today. Happening under our watch. We need so much more social welfare. Medical
    Debt is one number one debt that bankrupts Americans. That is an American crisis. The fact that Arizona is one of the lowest in the country for education. There are a long list of things we need to change—for profit policing and for profit prisons. Be passionate. Have opinions. But let’s help Americans today.

  4. Yes, America is the world’s premier military and economic power. What danger if any, do you see in the rapidly rising national debt and unlimited Fed money printing? Are both unlimited and protected by the US$ being the world reserve currency?

Leave a Reply

Your email address will not be published. Required fields are marked *

*

 

x

Check Also

Phoenix Police officers watch protesters rally June 2, 2020, in Phoenix during demonstrations over the death of George Floyd, a black man who died after being restrained by Minneapolis police officers on May 25. Groups and politicians from both sides of the aisle are pushing to limit qualified immunity for police officers, a legal doctrine that makes it nearly impossible to prevail in lawsuits against the police. (AP Photo/Matt York)

Don’t defund police; eliminate qualified immunity

The big picture is this: the fragmented impact of piecemeal defunding may not result in conclusive reform, dampening much of the momentum of the reform movement accelerated by George Floyd’s death.