5 ms·

> This is not true. It is neither false. It's only "not true until now".

RobertoG 11y ago
Well, I suppose that if you don't have a theory to make sense of the data, you can say that about everything. A sovereign country with its own money can't default (at least it choose to do it). Inflation happens when the economy is at full capacity and demand continue growing. Not Japan not the United States are in this situation. The Euro area is a different thing, because the countries there are borrowing in what, in a practice way, is a foreign money. A congruent view, that makes sense, of how modern money works: https://en.wikipedia.org/wiki/Modern_Monetary_Theory https://en.wikipedia.org/wiki/Modern_Monetary_Theory
- dmichulke 11y ago
  > Well, I suppose that if you don't have a theory to make sense of the data, you can say that about everything. Even more general: You can't say "X is false because it didn't happen until now" because it can still happen. You're right, technically they can't default if they issue their debt in their own currency. But practically I doubt the creditor had payment in a devalued currency in mind when he bought the bond. I myself for sure wouldn't like it (which is why I don't buy bonds) but I'm aware that I generalize here. I guess it's a matter of definition, in the contract is probably written that the principal + interest must be repaid (so devaluation is ok) but the creditor probably wanted principal + interest @ comparable purchasing power. Unfortunately, today's creditors often work with other people's money (think pension funds) and just pass on the devaluations. So the pension fund itself doesn't care and the common guy should but doesn't.
  - RobertoG 11y ago
    "but the creditor probably wanted principal + interest @ comparable purchasing power." When you are buying a bond, you know exactly what you will get in return. Bonds are a govern liability expressed in a govern unit of account. In a sense they are money: https://petermartin2001.wordpress.com/2015/04/03/3320/ https://petermartin2001.wordpress.com/2015/04/03/3320/ You are not entitle to anything else that a return in the government unit of account. In fact, this is the reason that bonds are considered safe assets, because they can always be payed. If you consider money as a claim over the real economy, a bond grant you that you will have a claim in the future about a percentage of the real economy. How big is this claim depends on what the real economy did in the time to maturity. The responsibility of a government should be with the real economy (physical capital, knowledge, etc.. ) not with the return of rentiers.
  - RobertoG 11y ago
    'Even more general: You can't say "X is false because it didn't happen until now" because it can still happen. ' Well, that's true. But you realize that this is the problem of induction in epistemology. I doubt we are going to solve it here today. https://en.wikipedia.org/wiki/Problem_of_induction https://en.wikipedia.org/wiki/Problem_of_induction
  - pjc50 11y ago
    payment in a devalued currency in mind when he bought the bond This is why developing countries issue bonds priced in dollars. That therefore is why worrying about Zimbabweisation of the US is silly: you can force a printing race but not an absolute devaluation on a huge scale.
- pjc50 11y ago
  Inflation can also be the other side of a forex coin: you can't print other countries currency, and if your trade balance is bad then printing results in the cost of imports soaring. The US is the country least likely to have this problem, as the countries where it is a problem (e.g. Argentina) use the dollar as hard currency to buy imports.

Well, I suppose that if you don't have a theory to make sense of the data, you can say that about everything. A sovereign country with its own money can't default (at least it choose to do it). Inflation happens when the economy is at full capacity and demand continue growing. Not Japan not the United States are in this situation. The Euro area is a different thing, because the countries there are borrowing in what, in a practice way, is a foreign money. A congruent view, that makes sense, of how modern money works: https://en.wikipedia.org/wiki/Modern_Monetary_Theory https://en.wikipedia.org/wiki/Modern_Monetary_Theory

dmichulke 11y ago
> Well, I suppose that if you don't have a theory to make sense of the data, you can say that about everything. Even more general: You can't say "X is false because it didn't happen until now" because it can still happen. You're right, technically they can't default if they issue their debt in their own currency. But practically I doubt the creditor had payment in a devalued currency in mind when he bought the bond. I myself for sure wouldn't like it (which is why I don't buy bonds) but I'm aware that I generalize here. I guess it's a matter of definition, in the contract is probably written that the principal + interest must be repaid (so devaluation is ok) but the creditor probably wanted principal + interest @ comparable purchasing power. Unfortunately, today's creditors often work with other people's money (think pension funds) and just pass on the devaluations. So the pension fund itself doesn't care and the common guy should but doesn't.
- RobertoG 11y ago
  "but the creditor probably wanted principal + interest @ comparable purchasing power." When you are buying a bond, you know exactly what you will get in return. Bonds are a govern liability expressed in a govern unit of account. In a sense they are money: https://petermartin2001.wordpress.com/2015/04/03/3320/ https://petermartin2001.wordpress.com/2015/04/03/3320/ You are not entitle to anything else that a return in the government unit of account. In fact, this is the reason that bonds are considered safe assets, because they can always be payed. If you consider money as a claim over the real economy, a bond grant you that you will have a claim in the future about a percentage of the real economy. How big is this claim depends on what the real economy did in the time to maturity. The responsibility of a government should be with the real economy (physical capital, knowledge, etc.. ) not with the return of rentiers.
- RobertoG 11y ago
  'Even more general: You can't say "X is false because it didn't happen until now" because it can still happen. ' Well, that's true. But you realize that this is the problem of induction in epistemology. I doubt we are going to solve it here today. https://en.wikipedia.org/wiki/Problem_of_induction https://en.wikipedia.org/wiki/Problem_of_induction
- pjc50 11y ago
  payment in a devalued currency in mind when he bought the bond This is why developing countries issue bonds priced in dollars. That therefore is why worrying about Zimbabweisation of the US is silly: you can force a printing race but not an absolute devaluation on a huge scale.
pjc50 11y ago
Inflation can also be the other side of a forex coin: you can't print other countries currency, and if your trade balance is bad then printing results in the cost of imports soaring. The US is the country least likely to have this problem, as the countries where it is a problem (e.g. Argentina) use the dollar as hard currency to buy imports.