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What would happen if America defaulted on its debt?
Sure we know it would be bad, but what do all of these scary numbers really mean?
- At the press time, the value was $21.7 trillion dollars.
- Lots of people know that a default would be bad, but not everybody seems to get how horrible it would be.
- While the risk is low, knowing what would happen if a default did occur is important information for all voters.
The United States government has a lot of debt. I mean a ton of it. At the time of writing, the value was 21.7 trillion dollars and climbing. This comes out to roughly 66,000 dollars per citizen. While the debt to GDP ratio today is not quite so high as it was after WWII, it is still at the unsettlingly high level of 105 percent. If the debt were visualized as a stack of one-thousand-dollar bills, it would be more than 1400 miles high. In single dollar bills, it would extend past the moon.
All of these statistics are pretty dry though. The numbers are too large to have any meaning, the percentages and ratios too arcane to prompt a reaction. Catastrophic scenarios like the government defaulting on its debt are described so abstractly that the gravity of the situation is obscured.
To make up for this, we'll look at what would happen if the United States was unable or unwilling to pay its debt from five different perspectives, starting with the world of international finance and ending with the prices at the grocery store.
What would happen if the United States Government defaulted on its debt?
Before we begin, it is important to mention that while many countries have defaulted on their national debts before, no country so influential, so thoroughly integrated with the global economy has ever gone bust. This means that while we can look to the past for evidence, there are variables in this case with no analogs elsewhere.
So, while nobody knows for sure what would happen, we can make educated guesses and predictions using the data we have. Take these predictions with a little salt, but not too much.
The first blows would come to the world of global finance. Investors and governments around the globe purchase U.S. government bonds. There are lots of them available to buy, and they are currently a very safe bet. While you won't make much money on them, you are sure about getting payment at a later date.
According to former Treasury Secretary Timothy Geithner in a letter he sent Congress in 2011, a U.S. government default would cause interest rates to spike all over the world. This is because treasury bonds "represent the benchmark borrowing rate" and anything that causes them to become a less certain investment will affect the entire financial system.
The interest rates on the bonds would go up, as investors would no longer be as sure of future payment. This would send up rates on everything else and increase costs for everything from government borrowing to your car loan. The cost of doing business would go up, threatening jobs and economic growth.
If the government defaulted and either refused to pay interest or declared it would pay bonds back at a fraction of the face value, lots of bondholders would be in trouble. The sudden realization that the full repayment of these bonds was unlikely would probably lead to a stampede to unload them on anybody who would take them.
Any organization that holds lots of these securities, such as banks, pension funds, or the government of Japan, would also be in trouble; since trillions of dollars in what were previously safe assets would then be worth a fraction of their face value. Banks would suddenly become very miserly with their money and less likely to lend. Some institutions would likely find themselves suddenly in the red.
Global stocks would likely fall as well, as occurred during the 2011 debt ceiling crisis. In that case, the Dow dropped 200 points the day after the S&P changed its outlook on U.S. debt. Imagine what it would look like if something actually happened!
The U.S. Economy
It gets worse. Investors would likely pull their money out of U.S. stocks and put them into safer stocks abroad since the rising cost of business in the U.S. would make companies less profitable. This, combined with the global effects mentioned above, would likely spark a recession.
This capital flight is exactly what happened to Russia and Argentina when they defaulted, though both economies bounced back fairly quickly.
Unlike with those examples, however, the US economy is so large and connected with the rest of the world that it would probably drag everybody else down with it. A taste of this was seen in 2011 during the debt ceiling crisis when other countries' stock markets fell in response to the chance of the U.S. not paying its bills.
People holding government debt
Despite what fearmongers might tell you, less than half of the national debt is owed to foreign governments. More than half of the total amount is owed to the federal reserve, mutual funds, public and private pension plans, insurance companies, banks, and the holders of savings bonds. All of these institutions would suddenly find themselves a lot worse off than they were the day before a default.
If the government defaulted, the people hurt the most would be retired people and anybody who hopes to retire, as the value of a large number of pension funds would fall as their assets decrease in value. Also, since the U.S. government owes the social security fund 3 trillion dollars, there will be a nice crisis on where social security money is going to come from to worry about too.
The disruption to daily life
If the likely stock market crash and increased cost of doing business described above weren't enough, Timothy Geithner, former Secretary of the Treasury, also pointed out in his letter to Congress that the U.S. government would also have to stop paying salaries to soldiers and officials. Social Security, student loan, and Medicare payments would end once the money ran out. Money for keeping government offices open would dry up.
Essential services, which stay open during a mere government shutdown, would likely cease.This reduction in government spending would cause many businesses not to make sales or receive payment, leading to layoffs.
The effect on consumers and the working stiff
As you might have guessed, a sudden increase in unemployment is likely to follow a default. Even if you were still getting a paycheck, don't hold bonds or owe money on loans, have a safe pension fund, and dodged the effects of a stock market crash: the inflation caused by a default would affect you.
This would mean higher prices for you at the gas station, grocery store, and at the mall; especially on imported goods. Any money you have saved away will begin to lose its value since the inflation rate will be well above the interest rate the bank is paying you. So you'll not only be paying more out of your paycheck, but your savings will be worth less and less each time you have to dig into them to pay the bills.
In Argentina, which defaulted in December 2001, inflation spiked after the government announced it couldn't pay its debt as capital fled the country and people lost faith in the currency. This caused prices to rise on all staple products; making life even more difficult for those left unemployed by the conditions leading to the default and causing the poverty rate to rise quickly.
How likely is any of this?
The risk of the United States government defaulting on its debt as a result of having too much of it is incredibly low. Alan Greenspan, the former chairman of the Federal Reserve, argued that it would never be necessary in any circumstance. In 2011 he reminded everybody that the United States borrows funds in money it controls the supply of, and therefore,
"The United States can pay any debt it has because we can always print money to do that. So, there is zero probability of default"
Of course, there is always the problem of the U.S. just deciding to not pay its bills for the sake of a political stunt.
The United States did get a credit down rating in 2011 as a result of Congress debating whether or not to pay the bills, but while the effects can be compared to a default, it wasn't one. Similarly, the government forgot to pay a $122-million-dollar bill in 1979, but that was only on a relatively small amount. Even that raised the cost of borrowing for everybody, however. The country also technically defaulted in 1790 and 1933 without an apocalypse occurring.
While the United States is unlikely to default on its debt, the possibility is always present. The effects of such an economic catastrophe can be difficult to imagine, but an understanding of what could happen if we aren't careful is vital.
 For those of you who are screaming "Hyperinflation" right now, chill out. Hyperinflation tends to happen in countries without a robust economic base, and utter buffoons were managing their economies. The U.S. is fine for the foreseeable future.
The father of all giant sea bugs was recently discovered off the coast of Java.
- A new species of isopod with a resemblance to a certain Sith lord was just discovered.
- It is the first known giant isopod from the Indian Ocean.
- The finding extends the list of giant isopods even further.
Humanity knows surprisingly little about the ocean depths. An often-repeated bit of evidence for this is the fact that humanity has done a better job mapping the surface of Mars than the bottom of the sea. The creatures we find lurking in the watery abyss often surprise even the most dedicated researchers with their unique features and bizarre behavior.
A recent expedition off the coast of Java discovered a new isopod species remarkable for its size and resemblance to Darth Vader.
The ocean depths are home to many creatures that some consider to be unnatural.
According to LiveScience, the Bathynomus genus is sometimes referred to as "Darth Vader of the Seas" because the crustaceans are shaped like the character's menacing helmet. Deemed Bathynomus raksasa ("raksasa" meaning "giant" in Indonesian), this cockroach-like creature can grow to over 30 cm (12 inches). It is one of several known species of giant ocean-going isopod. Like the other members of its order, it has compound eyes, seven body segments, two pairs of antennae, and four sets of jaws.
The incredible size of this species is likely a result of deep-sea gigantism. This is the tendency for creatures that inhabit deeper parts of the ocean to be much larger than closely related species that live in shallower waters. B. raksasa appears to make its home between 950 and 1,260 meters (3,117 and 4,134 ft) below sea level.
Perhaps fittingly for a creature so creepy looking, that is the lower sections of what is commonly called The Twilight Zone, named for the lack of light available at such depths.
It isn't the only giant isopod, far from it. Other species of ocean-going isopod can get up to 50 cm long (20 inches) and also look like they came out of a nightmare. These are the unusual ones, though. Most of the time, isopods stay at much more reasonable sizes.
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During an expedition, there are some animals which you find unexpectedly, while there are others that you hope to find. One of the animal that we hoped to find was a deep sea cockroach affectionately known as Darth Vader Isopod. The staff on our expedition team could not contain their excitement when they finally saw one, holding it triumphantly in the air! #SJADES2018
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What benefit does this find have for science? And is it as evil as it looks?
The discovery of a new species is always a cause for celebration in zoology. That this is the discovery of an animal that inhabits the deeps of the sea, one of the least explored areas humans can get to, is the icing on the cake.
Helen Wong of the National University of Singapore, who co-authored the species' description, explained the importance of the discovery:
"The identification of this new species is an indication of just how little we know about the oceans. There is certainly more for us to explore in terms of biodiversity in the deep sea of our region."
The animal's visual similarity to Darth Vader is a result of its compound eyes and the curious shape of its head. However, given the location of its discovery, the bottom of the remote seas, it may be associated with all manner of horrifically evil Elder Things and Great Old Ones.
If computers can beat us at chess, maybe they could beat us at math, too.
- Most everyone fears that they will be replaced by robots or AI someday.
- A field like mathematics, which is governed solely by rules that computers thrive on, seems to be ripe for a robot revolution.
- AI may not replace mathematicians but will instead help us ask better questions.
The following is an excerpt adapted from the book Shape. It is reprinted with permission of the author.
Will machines replace us? Since the origin of artificial intelligence (AI), people have worried that computers eventually (or even imminently!) will surpass the human cognitive capacity in every respect.
Artificial intelligence pioneer Oliver Selfridge, in a television interview from the early 1960s, said, "I am convinced that machines can and will think in our lifetime" — though with the proviso, "I don't think my daughter will ever marry a computer." (Apparently, there is no technical advance so abstract that people can't feel sexual anxiety about it.)
Let's make the relevant question more personal: will machines replace me? I'm a mathematician; my profession is often seen from the outside as a very complicated but ultimately purely mechanical game played with fixed rules, like checkers, chess, or Go. These are activities in which machines have already demonstrated superhuman ability.
Some people imagine a world where computers give us all the answers. I dream bigger. I want them to ask good questions.
But for me, math is different: it is a creative pursuit that calls on our intuition as much as our ability to compute. (To be fair, chess players probably feel the same way.) Henri Poincaré, the mathematician who re-envisioned the whole subject of geometry at the beginning of the 20th century, insisted it would be hopeless
"to attempt to replace the mathematician's free initiative by a mechanical process of any kind. In order to obtain a result having any real value, it is not enough to grind out calculations, or to have a machine for putting things in order: it is not order only, but unexpected order, that has a value. A machine can take hold of the bare fact, but the soul of the fact will always escape it."
But machines can make deep changes in mathematical practice without shouldering humans aside. Peter Scholze, winner of a 2018 Fields Medal (sometimes called the "Nobel Prize of math") is deeply involved in an ambitious program at the frontiers of algebra and geometry called "condensed mathematics" — and no, there is no chance that I'm going to try to explain what that is in this space.
Meet AI, your new research assistant
What I am going to tell you is the result of what Scholze called the "Liquid Tensor Experiment." A community called Lean, started by Leonardo de Moura of Microsoft Research and now open-source and worldwide, has the ambitious goal of developing a computer language with the expressive capacity to capture the entirety of contemporary mathematics. A proposed proof of a new theorem, formalized by translation into this language, could be checked for correctness automatically, rather than staking its reputation on fallible human referees.
Scholze asked last December whether the ideas of condensed mathematics could be formalized in this way. He also wanted to know whether it could express the ideas of a particularly knotty proof that was crucial to the project — a proof that he was pretty sure was right.
When I first heard about Lean, I thought it would probably work well for some easy problems and theorems. I underestimated it. So did Scholze. In a May 2021 blog post, he writes, "[T]he Experiment has verified the entire part of the argument that I was unsure about. I find it absolutely insane that interactive proof assistants are now at the level that within a very reasonable time span they can formally verify difficult original research."
And the contribution of the machine wasn't just to certify that Scholze was right to think his proof was sound; he reports that the work of putting the proof in a form that a machine could read improved his own human understanding of the argument!
The Liquid Tensor Experiment points to a future where machines, rather than replacing human mathematicians, become our indispensable partners. Whether or not they can take hold of the soul of the fact, they can extend our grasp as we reach for the soul.
Slicing up a knotty problem
That can take the form of "proof assistance," as it did for Scholze, or it can go deeper. In 2018, Lisa Piccirillo, then a PhD student at the University of Texas, solved a long-standing geometry problem about a shape called the Conway knot. She proved the knot was "non-slice" — this is a fact about what the knot looks like from the perspective of four-dimensional beings. (Did you get that? Probably not, but it doesn't matter.) The point is this was a famously difficult problem.
A few years before Piccirillo's breakthrough, a topologist named Mark Hughes at Brigham Young had tried to get a neural network to make good guesses about which knots were slice. He gave it a long list of knots where the answer was known, just as an image-processing neural net would be given a long list of pictures of cats and pictures of non-cats.
Hughes's neural net learned to assign a number to every knot; if the knot were slice, the number was supposed to be 0, while if the knot were non-slice, the net was supposed to return a whole number bigger than 0. In fact, the neural net predicted a value very close to 1 — that is, it predicted the knot was non-slice — for every one of the knots Hughes tested, except for one. That was the Conway knot.
For the Conway knot, Hughes's neural net returned a number very close to 1/2, its way of saying that it was deeply unsure whether to answer 0 or 1. This is fascinating! The neural net correctly identified the knot that posed a really hard and mathematically rich problem (in this case, reproducing an intuition that topologists already had).
Some people imagine a world where computers give us all the answers. I dream bigger. I want them to ask good questions.
Dr. Jordan Ellenberg is a professor of mathematics at the University of Wisconsin and a number theorist whose popular articles about mathematics have appeared in the New York Times, the Wall Street Journal, Wired, and Slate. His most recent book is Shape: The Hidden Geometry of Information, Biology, Strategy, Democracy, and Everything Else.
Laughing gas may be far more effective for some than antidepressants.
- Standard antidepressant medications don't work for many people who need them.
- With ketamine showing potential as an antidepressant, researchers investigate another anesthetic: nitrous oxide, commonly called "laughing gas."
- Researchers observe that just a light mixture of nitrous oxide for an hour alleviates depression symptoms for two weeks.
The usual antidepressants don't work for everyone. That's what makes a new study of the antidepressant properties of nitrous oxide so intriguing. It looks like just a single low dose of what your dentist may call "laughing gas" can help alleviate symptoms of depression for weeks afterward.
The study, from researchers at University of Chicago and Washington University-St. Louis, is published in the journal Science Translational Medicine.
Resistance to anti-depression medications
Nitrous oxide: two atoms of nitrogen, one of oxygenCredit: Big Think
According to the senior author of the study, Charles Conway, "A significant percentage — we think around 15 percent — of people who suffer from depression don't respond to standard antidepressant treatment."
"These 'treatment-resistant depression' patients," Conway says, "often suffer for years, even decades, with life-debilitating depression. We don't really know why standard treatments don't work for them, though we suspect that they may have different brain network disruptions than non-resistant depressed patients. Identifying novel treatments, such as nitrous oxide, that target alternative pathways is critical to treating these individuals."
"There is a huge unmet need," says lead author Peter Nagele. "There are millions of depressed patients who don't have good treatment options, especially those who are dealing with suicidality."
If ketamine can help, can nitrous oxide?
Credit: sudok1 / Adobe Stock
The researchers wondered if some of the anti-depression properties seen in ketamine might also apply to nitrous oxide. Nagele explains, "Like nitrous oxide, ketamine is an anesthetic, and there has been promising work using ketamine at a sub-anesthetic dose for treating depression."
The researchers conducted a one-hour session — they describe it as a "proof-of-principle" trial — in which 20 individuals with depression were administered an air mixture with 50 percent nitrous oxide. Twenty-four hours later, the researchers found a significant reduction in the participants' symptoms of depression versus a control group.
However, the individuals also suffered the unpleasant side effects that laughing gas often causes in dental patients: headache, nausea, and vomiting.
Smaller dose, longer effect
Credit: sudok1 / Adobe Stock
"We wondered if our past concentration of 50 percent had been too high," recalls Nagele. "Maybe by lowering the dose, we could find the 'Goldilocks spot' that would maximize clinical benefit and minimize negative side effects."
In a new trial, 20 people with depression were given a lighter nitrous oxide mix, just 25 percent, and the individuals tested reported a 75 percent reduction in side effects compared to the a control group given an air/oxygen placebo. This time, the researchers also tracked the effect of nitrous oxide on symptoms of depression for a far longer period, two weeks instead of just 24 hours.
"The reduction in side effects was unexpected and quite drastic," reports Nagele, "but even more excitingly, the effects after a single administration lasted for a whole two weeks. This has never been shown before. It's a very cool finding."
Nagele also notes that, despite its popular renown as laughing gas, even a light 25 percent mix of nitrous actually causes people to nod off. "They're not getting high or euphoric; they get sedated."
Delivering help to people with depression
Nagele cautions, "These have just been pilot studies. But we need acceptance by the larger medical community for this to become a treatment that's actually available to patients in the real world. Most psychiatrists are not familiar with nitrous oxide or how to administer it, so we'll have to show the community how to deliver this treatment safely and effectively. I think there will be a lot of interest in getting this into clinical practice."
After all, Nagele adds, "If we develop effective, rapid treatments that can really help someone navigate their suicidal thinking and come out on the other side — that's a very gratifying line of research."