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Monetarily sovereign nation. The US Federal Government has a central bank that is the sole issuer of US dollars. They cannot run out of US dollars, ever. They a

Monetarily sovereign nation. The US Federal Government has a central bank that is the sole issuer of US dollars. They cannot run out of US dollars, ever. They also have a federal fiscal capability, which redistributes money around to lessen imbalances between states with stronger economies and states with weaker ones. The Federal Government can and should stop them from defaulting! To not do so is voluntary. The US became monetarily sovereign when they removed the unnecessary artificial constraint of the gold standard after Bretton Woods fell apart (as all gold standards do eventually) and floated their exchange rate. In comparison, Greece, Italy, Portugal, Spain, France, etc. do not have central bank that can issue Euros. So they cannot issue risk-free debt, like the US, UK, Australia, NZ, Japan, etc. can. The EU does have a central bank, but doesn't have any federal fiscal function to reduce imbalances between the member states (self-imposed, because politics), and the central bank is not allowed to buy bonds directly from member states (because politics) although did eventually have to start buying it up on the secondary market. But mostly the only options of the weaker member states in a crisis are austerity, which leads to unemployment, and eventually contraction and default.

grey-area 8y ago
They cannot run out of US dollars, ever. I hoped point 2 would make it clear I think this a specious argument. A soft default (what you espouse when you say they can’t run out of dollars) is just a default by another name. If they truly can’t run out of dollars, why bother with taxes at all - just keep printing dollars? A soft default is arguably more pernicious than simply defaulting - it hurts future generations as well as the present. The EU has a central bank, engages in QE, sets interest rates etc, and has the same problems with inequality as any other large super-state like the US has. It also redistributes funds to poorer regions. There are clear differences, but also striking parallels with the early US. The states within it have chosen to subsume their economic identity within a larger bloc, they have the same ability to print Euros as a group as the united states (and have done so). Austerity was a political choice, imposed by the troika, it is not the only possible solution. Just to take one example, the EU could have engaged in more QE (or another variant of money printing), in order to fund Greece debt, but it was not judged politically expedient in Germany to do so.
- User23 8y ago
  "Soft default" is a completely meaningless term used only by "hard" money enthusiasts–which apparently means gold and now distributed computer games ledgers. The reality is there is no such thing as a "soft default," there is just an elastic money supply. At what level of elasticity does it stop being normal balance sheet expansion and start being "soft default?" I find it helpful when discussing literally quantifiable subjects like sovereign accounting, to stick to terms that can be meaningfully defined. Those who do not are being ignorant or dishonest.
  - grey-area 8y ago
    At what level of elasticity does it stop being normal balance sheet expansion and start being "soft default?" A flexible money supply and low, controlled inflation are good. Using inflation as a way of avoiding debts and obligations is not good (and yet so tempting that rulers have attempted to do so throughout history, with disastrous results). Doesn’t really matter what you choose to call it, but money is not infinitely elastic, and high inflation has nasty consequences.
    - User23 8y ago
      Nobody said money is infinitely elastic, it observably isn't. It's arbitrarily elastic. Default "hard," "soft," or "gooey" implies reneging on an agreement. The Federal Reserve's agreement with its primary currency user requires maximum employment, stable prices, and moderate long-term interest rates. It also promises to pay you dollars for your dollars. More importantly, the vast majority of money used by citizens and thus that can have an effect on inflation (which is caused by too much money chasing too few goods and services) isn't controlled by the Federal Government or the Federal Reserve. It's created ex nihilo as deposits in privately owned licensed banks. Is a bank "soft" defaulting on its depositors every time it creates a mortgage which results in the creation of new deposits, often in the amounts thousands of times larger than the typical depositor's entire account?
      - grey-area 8y ago

grey-area 8y ago

They cannot run out of US dollars, ever. I hoped point 2 would make it clear I think this a specious argument. A soft default (what you espouse when you say they can’t run out of dollars) is just a default by another name. If they truly can’t run out of dollars, why bother with taxes at all - just keep printing dollars? A soft default is arguably more pernicious than simply defaulting - it hurts future generations as well as the present. The EU has a central bank, engages in QE, sets interest rates etc, and has the same problems with inequality as any other large super-state like the US has. It also redistributes funds to poorer regions. There are clear differences, but also striking parallels with the early US. The states within it have chosen to subsume their economic identity within a larger bloc, they have the same ability to print Euros as a group as the united states (and have done so). Austerity was a political choice, imposed by the troika, it is not the only possible solution. Just to take one example, the EU could have engaged in more QE (or another variant of money printing), in order to fund Greece debt, but it was not judged politically expedient in Germany to do so.

User23 8y ago
"Soft default" is a completely meaningless term used only by "hard" money enthusiasts–which apparently means gold and now distributed computer games ledgers. The reality is there is no such thing as a "soft default," there is just an elastic money supply. At what level of elasticity does it stop being normal balance sheet expansion and start being "soft default?" I find it helpful when discussing literally quantifiable subjects like sovereign accounting, to stick to terms that can be meaningfully defined. Those who do not are being ignorant or dishonest.
- grey-area 8y ago
  At what level of elasticity does it stop being normal balance sheet expansion and start being "soft default?" A flexible money supply and low, controlled inflation are good. Using inflation as a way of avoiding debts and obligations is not good (and yet so tempting that rulers have attempted to do so throughout history, with disastrous results). Doesn’t really matter what you choose to call it, but money is not infinitely elastic, and high inflation has nasty consequences.
  - User23 8y ago
    Nobody said money is infinitely elastic, it observably isn't. It's arbitrarily elastic. Default "hard," "soft," or "gooey" implies reneging on an agreement. The Federal Reserve's agreement with its primary currency user requires maximum employment, stable prices, and moderate long-term interest rates. It also promises to pay you dollars for your dollars. More importantly, the vast majority of money used by citizens and thus that can have an effect on inflation (which is caused by too much money chasing too few goods and services) isn't controlled by the Federal Government or the Federal Reserve. It's created ex nihilo as deposits in privately owned licensed banks. Is a bank "soft" defaulting on its depositors every time it creates a mortgage which results in the creation of new deposits, often in the amounts thousands of times larger than the typical depositor's entire account?
    - grey-area 8y ago