Quote from prc117f:
Joe Six pack probably has no real idea whats going on, this is why you do not see people calling up people in congress and telling them to cut this out, or massive protests.
So lets say on the 17th debt celling is not raised what happens?
interest payments get missed? do all federal employees/contractors get sent home (ie FAA shuts down no more flights etc..)
or is it business as usual?
So what will happen and how will this impact Joe Six pack? and lets say the debt ceiling is not raised for days or months.
how does this cause issues as time passes?
Somehow the only way things get fixed is if it actually impacts the regular working stiff.
The 1%ers are probably safe, via hedging etc.. or are they?
I have a strange and indirect answer. It's psychological so therefore a little abstract and may sound like BS, but I think there's an element or a lot of truth in it.
I think Joe six pack (which made me lol very hard btw) WANTS the default to happen. In a recent poll over 50% of Americans said they were behind not raising the ceiling and allowing default. Why?
Well, for starters most Americans don't really understand the ramifications of a default as you pointed out - and actually, I don't either, and probably no one does regardless of what they might say.
Middle class American tea-party types and fiscal conservatives may say they don't want to raise the ceiling because Gov't is spending and wasting too much money. Then you have middle class liberals who will also say that our spending is really out of control due to conservative backed wars and too much spending on military. These are the reasons they give.
I actually think though there's really a bigger idea and a different motive going on that the majority of people in both parties share (and not necessarily their representatives in any branches of Government). They also may not be saying it directly to their representatives but it's an underlying phenomenon going on that only a few dare say out loud.
Basically, I think a default is kind of in a way a revolution against our now crony-capitalist system which most Americans believe is totally corrupt and rigged against them now more than ever.
So, their logic is something along the lines of, well a HUGE or a small or any change from the way things are in this Country can't be much worse than how things are now: the average American has no assets, is working minimum wage, and has overly burdensome debt and they see no way out even with hard work. The "conspiracy theory" that a few rich and powerful people are ruling the Country has now become the mainstream view. So to them, the American dream is almost impossible if you're not in the "1%" or have an uncle who is. So, default is kind of a way for them to give the middle finger to all the powers that be, and also, possibly gives them a chance to reset and level the playing field.
Another thing is they feel that the last time in 2008 when we did all the bailouts and everything, the American people were told these things were done because if they weren't there would be total collapse. Well, 5 years later all they see is that the 1% grabbed everything and things probably weren't anywhere near as bad as pundits and bankers and economists in the 1% made it out to be. So now, they're totally skeptical when they're told that a default would be the apocalypse.
I think that's the psyche of "Joe six Pack".
How would a default actually impact him? Who knows? But, can it get much worse for them economically than it is now? Do you really think things will totally crumble because we miss a payment to China? I don't. Maybe a default would be a great thing.
Russia defaulted in 1998 wasn't long before their economy resurged. I mean, defaults have happened a million times before and countries bounce back. Yes, America is the only superpower in the world and we have the reserve currency so this complicates things a lot. But, "Joe six pack" will bounce back regardless IMO. Maybe it'll be a boon for him.
Also, I'm long volatility and short the mkt so I may be talking my book a bit. But actually, I put my shorts on b/c this logic started to occur to me. Could be totally wrong. Anyway, default will come down to Boehner and Obama and other 1%'ers. They're pulling the strings. But I think what gives each of them their audaciousness to act the way they have is they know the average American doesn't really give a sh*t if we tell China to piss off.
(And just as I'm writing this I see that Yellen is now officially nominated for next Fed chair - which is just another symbolic handoff of a continuation of the current system and administration that we've had for the last five years. Perfect timing too, volatility just went above 20 today for the first time in forever - "strange" timing.)
