What Did the U.S. Default Mean to You?
|November 13, 2013||Posted by Staff under Politics|
This 2013 excerpt of the San Jose Mercury News, Oct 15, is by Dan Nakaso.
Q What happens if the debt limit is not extended?
A Without the ability to borrow more money and add to the nation’s $16.7 trillion debt, the Treasury will be left with about $30 billion to cover government spending that’s estimated at $60 billion per day.
Q What can I do to protect my finances?
A “There’s really not too much an individual can do in the short run,” said Fred Foldvary, a retired economics professor from Santa Clara University who now lectures in public finance and law and economics at San Jose State [and blogs at this site].
But there are a couple of tricks, including parking any cash in a savings account to avoid the possibility of stock market chaos. Those worried about a drop in the market can turn to bear market funds tied to the S&P 500 that rise in value when the stock market falls, he said. Of course, “there is always risk,” Foldvary added. “You would lose money if the stock market shot up.”
Otherwise, Foldvary recommends that people keep their money in their retirement accounts, which are designed to grow over the long haul.
“Don’t panic,” he said.
Q How will the federal government function if it defaults on its financial obligations?
A The U.S. already owes $1.3 trillion to China and $1.1 trillion to Japan. Without the ability to borrow even more, the Treasury will have to rely on taxes and fees to keep the lights on and continue to pay an estimated 68 percent of its bills. Goldman Sachs estimates that government spending almost immediately will drop by $175 billion — or about 1 percent of the overall U.S. economy.