Chances of the government of America declaring bankruptcy is often speculated every time there is a change in the Republican Party.
It is well known that the national debt of America is sky high and a majority of the people feel that another depression is just around the corner. Alarmists are perhaps waiting for an opportunity to scare everyone by mentioning “we had told us so” and therefore an American bankruptcy should not catch anyone by surprise.
We are looking at the events that can be expected if America declared bankruptcy for any reason for the only time after 1933 and the prospects are certainly not looking bright. Despite the chances of the bankruptcy being declared being unlikely it must be understood that stranger things have happened and many nations have experienced financial problems numerous times in modern history. We are using their experiences to understand how America would be affected if it declared bankruptcy.
A RUN ON BANKS IS IMMINENT
During the Great Depression in 1933 banks were being reviewed for solvency and therefore had to close down. Thousands of banks shut shop and their customers rushed to withdraw their finances. It must be mentioned that in those times there was a bank for every thousand people of the population. Things are not similar at the present moment as banks have only grown larger after they were bailed out in 2008 when a similar run on banks was noticed. Presently in the event of the government declaring bankruptcy, there would be no option for banks but to shut down because they wouldn’t have anyone to bail them out. It would be embarrassing but the reality would be out in the open.
IMMENSE SHORTAGES WOULD BE SEEN ACROSS THE BOARD
The government of Argentina declared bankruptcy in 2001 after it made an attempt to match the value of its currency with the US dollar. The impact was disastrous on their currency along with their accounts because gas stations had no fuel to sell and groceries ran out of food. Companies were reluctant to ship goods to countries which had no money and were desperate.
One may be inclined to believe that America is rich in resources and can sustain itself by locally produced goods. However, it is also a fact that America imports more than it actually exports. A bankruptcy will also bring along massive inflation and leave behind many people with money which is worth nothing. The worthless money will make it difficult for Americans to lay their hands on the goods they need and create immense shortages.
THE COLLAPSE OF THE CHINESE CURRENCY IS ALSO A REALITY
As of August 2017, America owed China $1.2 trillion. The figure was quoted by the presidential nominees during the election campaign in the presidential race. With the collapse of the US dollar, the Chinese Yuan will also plummet. The Chinese will not be able to use the debt leverage to heap more trouble on the US economy. It would be suicidal for them and similar to the use of nuclear weapons on America by North Korea.
HOMELESSNESS WILL INCREASE
During the economic crisis in Greece, the rate of homeless rose by approximately 40% despite being offered billions in bailouts. Improvements to the economy were not seen even after several years. The mortgage bankers Association of America had reported that during the recession in 2007 about 1.2 million households were lost. Therefore it would be amazing if entire cities of homeless people weren’t seen for at least a few years after the American government declared bankruptcy.
AN INCREASE IN VIOLENT CRIME WILL BE NOTICED
A bankrupt government cannot support appropriate security measures in the country and neither can it spend money on law enforcement. Without proper law enforcement agencies such as airport security, Secret Service and investigating crime scenes a massive increase will be witnessed in violent crime. It could give supporters of the Second Amendment a boost in their arm because they would be able to retain their guns and even keep them loaded simply to safeguard themselves. People are aware that the city of San Bernardino, California witnessed a 50% increase in the homicide rate a year after it declared bankruptcy in 2013. It is likely that a similar scenario will be witnessed as people will continue to try and purchase arms with the worthless money in their possession.
The national debt figures of America are certainly concerning and can scare even the best optimists. However, there is no reason why people cannot consider what has been mentioned in this article and be prepared for the worst if required.