Debt default is nothing new for anybody who has stayed in a hostel. If your friends could get a credit rating lower than ZZZ-, they would certainly try. America, on the other hand, has the whole world in its debt trap. It is ironic that the country that has taken the loan is the one calling the shots on its creditors. That’s because the world knows that America is like the Lannisters, and the Lannisters always repay their debt. Even if the repayment is in blood.
So, it can be a little disconcerting to hear that America may run out of money to fund the military, Medicare and social services unless it raises the debt ceiling. But rest assured, we are told, there will no cutbacks for the funding on diversity inclusion and delusion for Gen Z.
America defaulting on debt is like your dadaji asking you for tobacco money at the expense of your school fees. A lot of scary scenarios are being painted about what will happen if the US defaults on its debt. Like the collapse of world markets, more heightened inflation, and a breakdown of the social order. So, basically, every second Tuesday since the pandemic began.
But then, America is not an ordinary debtor. If you take a loan from the bank for your car and don’t repay it, the bank takes away your car from you right on the street. But in the case of America, if the bank tries to take away its car, they send a drone to blow up the bank. And then they impose sanctions on the street in the name of “democracy, freedom and Vanguard/BlackRock fund managers”.
Everyone has assumed that a deal will be reached at the last minute and the unthinkable will never happen. Like Tom Cruise not making another Mission Impossible movie. But what if the US does default? How will they get the funds to repay the loans? Will they put the White House on AirBnb? Will the Statue of Liberty be mortgaged to Lodha Developers in Mumbai? Perhaps Donald Trump and Joe Biden could be asked to go at it gladiator style in the Capitol Dome and the tickets could be sold to raise funds for the Secret Service. Basically, the one who wins gets a Secret Service cover. The one who loses, has to double up as Secret Service agent for the winner to save on federal funds.
But if America does default, then who will replace the American dollar as the world’s reserve currency? And US Treasury securities as a safe haven? Can North Korean nuclear bonds be looked at? Or perhaps some emerging market explosive debt in Afghanistan? Can the Pakistani currency sinking faster than interest in test cricket be a safe haven if it is printed in China? Is Imran Khan also a Chinese print-out? These are the questions that are boggling financially savvy minds the world over along with equity analysts and investment bankers.
As for me, I’m holding on to the few dollars I have. Because I have faith in America. Because the one thing that Hollywood taught me is that America is always the hero that wins in the end. Because only America can get away with dropping a nuclear bomb on Hiroshima and attending a G7 summit there 78 years later for disarmament and peace.
The author, Vikram Poddar, is a Marwari investment banker turned corporate comedian. The views expressed in this article are his own and do not necessarily reflect the views of the website.