What would happen if the US decided to just default on its debts to Asian countries?

DJCR

Right ok, I asked this question and got the following answer... unfortunately we only had two mins to discuss it I'm just looking for other peoples thoughts?

Original answer given to me:

1) All hell breaks loose as the Dollar is used all over the world.
2) The Asian countries who have loaned massively to the US will be in a lot of trouble (especially China)
3) In the short term it would be disasterous for the US
4) in the long run the US would be better off than it is currently headed.

Now, don't ask me to back these up but I wouldn't know how... but still.... why doesn't the US just default on its debt?

Cookie_Monster

2.

This is why China has been trying to offload its dollar surplus for the last while. They are using it to buy anything they think will be useful, the most notable I've head is a coal mine in Australia somewhere

Denerick

Can it just choose which countries it could default its debts on? I;d imagine that the credit rating of the US Dollar would be annihilated, could be the beginning of the end for American hedgemony in the world. A very real possibility it could go bankrupt without massive spending cuts...

MysNthR0p3

At a guess, you'd see the dollar become instantly worthless as other countries drastically cut back on trading with the US for fear of the same treatment. OPEC would probably jump to the Euro in a heartbeat, strengthening the EU. It would also cease trading with the US (maybe with the exceptions of Kuwait and Saudi, who would have to deal with tension from the other members).

Drastically reduced oil supplies and cheap luxury goods would impact American quality of life meaning political suicide for the sitting congress and senate. Strained supply lines to US military worldwide would see mid-east insurgencies in Iraq and Afghanistan multiply exponentially and the US withdraw from the latter (as no oil interests there) to consolidate forces in Iraq. Tense relationships between US and other UN troops in region as political fallout from the default ensues.

The World Bank and IMF (essentially US run institutions) would collapse as foreign participants withdrew. Anti-American countries (everyone from France to Iran) would immediately petition the UN for economic sanctions against the US, which would force the US to consider its membership. The Security Council (of which China is a member) would go ballistic as tensions flared.

Any unwritten understandings between Asia and the US would be out the window, meaning Taiwan would become a flashpoint for escalating tensions. China would immediately act to take state control of American companies operating in its borders (Walmart, KFC, Ethan Allen, etc.) which would further impact the US economy.

Assuming we're talking Asia in general and not only China, closure of US bases in Korea and Japan may entice North Korea to renege on the ceasefire agreement, especially if it could gain support from China. Russia would mobilise its military south and eastwards to deal with the regional instability.

All in all, a pretty nasty situation. Just at a guess.