What do countries use as collateral when borrowing money?

Our credit rating and our reputation is really the collateral. The US “borrows” money by issuing debt. This means the Government sells Treasury securites like T-bills, notes, bonds et al to other agencies within the federal government, individuals, businesses and other governements. The government pays interest on these debts and must pay the value when the security is cashed in by the buyer.

The breaking bleeding backbones of their ignorant and unwittingly enslaved citizens.

There is nothing backing our loans except our word that we will repay.

@marinelife And what happens if we break our word?

@talljasperman Default and all of the bad things that go along with it.

If a country defaults @talljasperman, most of the time the debt or loans are restructured and the loan “pay back” time is extended, and some debts are forgiven. It usually means faith in that country’s financial stability is reduced.

Well let’s put this in perspective. The financial market does not operate on the premise of what actually exists in reality. It operates upon the premise of confidence or lack of. It’s a mind game.

US lost our AAA because of all the debates centering around raising the debt ceiling or defaulting. Just the discussion of default lowered the confidence of our lenders. They don’t want to lend to anyone who even entertains that notion. We’re no poorer today than we were a week ago. The AA rating was awarded because our public debate eroded confidence, not in our ability to pay, but in our willingness to pay.

That’s why everyone knows that when a person finally decides to declare bankruptcy, that swift action with no warning to lenders actually cleans the slate with no debate. Lenders are caught off guard and prepared to offer new loans to make up the lost potential. Anyone who’s declared bankruptcy will confirm that upon completion, new credit offers come in from everywhere. Yet those struggling to make good on payments are denied it at every turn. It’s all a mind game of confidence.

Darn it. I was hoping there would be some physical collateral.
China: Alright, you can have another 700 mill, but if you default we get Kansas, one Hawaiian island and a bitchin’ Corvette.