3 ms·

>It's not really all that different from borrowing to improve your personal money flow. Borrow for a house to decrease the amount you spend on rent, borrow for

>It's not really all that different from borrowing to improve your personal money flow. Borrow for a house to decrease the amount you spend on rent, borrow for a car to commute to your job and earn more money, take a student loan to get a higher paying job in the future. Of course, both governments and individuals can make bad decisions or get unlucky, and the government has more negotiating power if it has trouble repaying the loan. How exactly would a government that prints USD have trouble repaying a loan denominated in USD? It's not only impossible for a government to not be able to pay back a loan in its currency - it has pretty much full control over the interest rate (it can be pushed down with QE at will). If the government wants to borrow at 0.1% it can - and the US government apparently does. The only countries that have defaulted or come close to defaulting on their loans are countries that borrowed in a currency they didn't print (Zimbabwe->USD, Greece->Euro) or countries that unilaterally decided "fuck it, most of our debt is owned by foreigners, let's just not pay them" (Russia).

dmurray 8y ago
> How exactly would a government that prints USD have trouble repaying a loan denominated in USD? If you print too much money you might end up with hyperinflation and bad effects for your citizens. That's just as big "trouble" as a personal bankruptcy. That's not a real risk for the US at the moment, but it's a backstop that answers the question of "why can't we solve all our economic problems by borrowing or printing more money?"
- crdoconnor 8y ago
  >If you print too much money you might end up with hyperinflation That's about the rate of spending exceeding the economy's ability to produce, not the overall level of debt. It can even happen in surplus. Every country that has suffered hyperinflation had it come about because of a critical reliance upon imports and/or a debt denominated in a foreign currency. Zimbabwe didn't face hyperinflation because the deficit was a bit too high. It faced hyperinflation because they took on foreign debts which they tried to pay back and destroyed their farms. >That's just as big "trouble" as a personal bankruptcy. And a totally different economic problem. >That's not a real risk for the US at the moment And it likely never will be and still has nothing to do with aggregate debt to GDP.

dmurray 8y ago

> How exactly would a government that prints USD have trouble repaying a loan denominated in USD? If you print too much money you might end up with hyperinflation and bad effects for your citizens. That's just as big "trouble" as a personal bankruptcy. That's not a real risk for the US at the moment, but it's a backstop that answers the question of "why can't we solve all our economic problems by borrowing or printing more money?"

crdoconnor 8y ago
>If you print too much money you might end up with hyperinflation That's about the rate of spending exceeding the economy's ability to produce, not the overall level of debt. It can even happen in surplus. Every country that has suffered hyperinflation had it come about because of a critical reliance upon imports and/or a debt denominated in a foreign currency. Zimbabwe didn't face hyperinflation because the deficit was a bit too high. It faced hyperinflation because they took on foreign debts which they tried to pay back and destroyed their farms. >That's just as big "trouble" as a personal bankruptcy. And a totally different economic problem. >That's not a real risk for the US at the moment And it likely never will be and still has nothing to do with aggregate debt to GDP.