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Sunday, July 24, 2011

Consequences of a US Default on Debt Payments

United States Mint PoliceImage by cliff1066™ via FlickrWhat will be the Consequences of a US Default on Debt Payments?

The failure of Democrats and Republicans to resolve the US cash flow problem could result in serious consequences to all American’s and negatively effect world wide economics.

The US government will be unable to fulfill its financial obligations. Creditors (ie bond holders) would not receive payment resulting in a down grading of the US credit rating. Therefore, mortgage rates would rise, and home owners would see an increase in their monthly payments. People with car loans or any loan will have to find more funds to meet their commitments.

This may be difficult for those on military salaries, social security or unemployment as these payments from the government will, in all likelihood, be delayed.

In addition, money for infrastructure repairs and improvements and education may be reduced resulting in construction and educational job losses.

What about those on Medicare, will they be left to fend for themselves?

Stock markets will, in all probability, suffer serious declines. Those fortunate enough to have 401ks will see those decline in value, disrupting their future retirement plans.

No doubt the US dollar will decline in value. This would have a positive effect for export business but an increase in the cost of borrowing would offset any such benefit.

In short it is time for the politicians to stop playing at politics and start working together towards finding a solution to this very serious economic crisis.

Stay on Track,Money Magazine Hoss

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