Why default when you could easily ask for the ceiling to be raised?
Yes, no one wants more spending or a greater deficit, but when you've taken out a significant loan and you have the option to extend the loan or raise the borrowing amount, you do so. No sense in defaulting because some uninformed tea baggers want to shout 'no more spending', and be as unqualified to make that decision as Joe the plumber. The bottom line is the ceiling could have been raised without any backlash or devaluation. But hey, why am I complaining, the Canadian dollar is great compared to the American $ right now.
American currency becoming worthless, while good for the loonie, is bad for Canada at the same time due to our dependency upon their dollar.
Defaulting was actually a good choice because it means the US would immediately have to spend within it's own means, like every other country not Greece, or Spain, rather than living on excessive consumption that it can't afford. It would be disastrous for the short term but it would be great for the long term.
Americans still believe they should be living in the bubble era without understanding that era comes with great consequence once the party is over and reality hits that there's a tab to pay. Americans had a chance to go into a deeper recession but come out strong but instead government bailed out companies, absorbed toxic debt, injected money throughout the world into financials and foreign banks, printed money like crazy, and tossed stimulus after stimulus (guaranteed another is coming with Obama's 2nd term), so now you have a situation where the necessary medicine to take is going to be that much more heavy, and it needs to be taken now to avoid that much worse of a situation later.
Defaulting does not mean a dime is not spent, it means spending within what you have as far as funds go. A good way of analogising that is spending within your chequeing account and not your credit account. How is this a bad thing given the importance of not endlessly accruing debt and defaulting that way? This seems just a game of perpetuated borrowing until no one gives them the credit anymore, then they'll default anyways.. by then interest payments will be so high a much larger recession than needed to be will result. This is ridiculous. While I doubt the tea party and other people protesting the ceiling had much an idea what they were protesting, it still was a better idea than this.
Edited by zaibatsu, 08 November 2012 - 08:53 AM.