10/08/2013 08:58 am ET Updated Dec 08, 2013

Not Much at Stake

So what's really at stake if the Republicans fail to raise the debt limit?

They claim you have a choice: either "not much" or "only good things." Both are based on the concept that if you hold this line the government won't have any more money to spend, ergo, will spend less, hence we'll all be better off.

Before we get going, this is not accurate. We need to raise the limit to pay off interest on debt already on the books, because of spending bills Congress has legally passed. This is about being responsible for what you did in the past, not about enabling the future.

But back to our first question, what is at stake? Big things? Little things? Republican things? Democratic things?

Answer: it's as easy as a piece of paper.

Help me out here. Go to your wallet. Take out a dollar bill. If you're one of Mike Bloomberg's billionaires, pick the smallest denomination you've got.

Now, go to your kid's school notebook. Tear out a sheet of paper. Hold them next to each other.

Note the difference in size. Which one is bigger? A lot bigger? And the bigger one, while it doesn't have a pretty portrait like the bill, does at least offer multiple colors. Enjoy, in particular that pretty red line along the side.

But when it comes to value, the gap is greater than that between a Carnival cruise ship and safety. The itsy bitsy one buys a dollar of goods and services, the note paper is worthless.

That little segment of reality stems from a great idea human beings created quite a while ago. Instead of barter, we would have a universally accepted medium of exchange that everyone could carry, and everyone accepted. It was a lot easier than paying a bill with chickens.

But how could you trust this new system to be honest? What guaranteed that this "money" (as those new "economists" called it) would maintain its value over time? Maybe in a year those pieces of paper might just be... pieces of paper. Maybe chickens are still a safer bet. Who knows?

Some folks did know. They argued that the currency was backed by the government. As long as the nation held up their part of the bargain, currency was stable. That idea held.

Flash forward, just like Bill and Ted, to 1945. For decades the strongest currency was the British pound, backed by the wealth of that country's still insanely grand empire. Not the most valuable, not the smartest investment for speculators, but the bedrock of world finance.

But by the end of the Second World War, world leaders and international economists knew that that era was at an end. Great Britain was no longer... great. She was broke. And the colonies were striding towards the door.

So who was the big dog on the block now? Of course, it was the one nation barely bombed, with the world's largest economy untouched. By universal agreement, the world's default currency became the American dollar.

So it still is to this day. All across the world, debts can be paid, purchases can be made with dollars. Sometimes the buck is worth more, sometimes less. Other currencies may be on the rise or the fall (see: Euro, Renminbi). But push comes to shove, all over the world, they'll accept the dollar.

Right now. But what if the U.S. doesn't pay interest on its bills. What if our "full faith and credit" can't be trusted? What if there's no universal currency anymore?

The answer, for a while, is probably chaos. How will international business proceed? Without a default dollar backing every transaction you can't have middle eastern nations buying our airliners or a US consumer paying for scotch whisky. World wide business stops.

Ugly times. Very ugly. In some places quite bloody. And as always some mega winners and some losers. The biggest loser will be the United States of America.

The international business community will respond as quickly as it can, and find a new basis for stability. I have no idea of what that will be, but it's a sucker bet that it won't be the dollar, and it won't be America. We'll see the end of the post-WWII era of American leadership in the world.

What's really at stake?

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