Raise The Roof or We'll Suffer A Concussion!

It's official, the United States has reached it's debt ceiling. So, then why hasn't the economy started spiraling out of control, unemployment run rampant, or people start looting in the streets? Well, that is easily answered by the fact that the U.S. Secretary of Treasury decided to move some money around so that we could cover our bills for a little while, buying us some time to legally raise the debt ceiling. However, time is once again running out and since June has started, that leaves a little over two months for the US to reach the August 2nd deadline.

Now, as a caveat, I want to assure everyone that a US default on our loans would cause seriously devastating damage to our economy. This issue seems to evade the comprehensive abilities of some people and I find that it is much easier explained with a simple, micro-example. Take into consideration a regular person with credit cards all at the given credit limits, but all their money is tied up and they can't bring themselves to borrow money from a friend or family member because they are either too prideful or think they owe too much already. So, that person decides to just default on their debt obligations. Now what happens?

1. They break their credit limits causing an over limit charge to be assessed by the creditor.
2. They fail to pay on the agreed upon date causing a late charge to be assessed by the creditor.
3. The creditor can renegotiate their repayment terms if default persists.
4. The creditor can require full payment if default persists.

Of course there are many more scenarios that can play out in the case of a default, but generally the outcome would cause negative effects on the defaulting individual. While this is a fairly simple example, the general ideas remain the same in the case of the United States' debt obligations, if the credit limit isn't increased and we cease to service our obligations then it isn't good for anyone.