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Yes, the US government could simply print all the money it needs then pay off all it's creditors. But how would those creditors respond? They would refuse to l

by MarkMc 8y ago

Yes, the US government could simply print all the money it needs then pay off all it's creditors. But how would those creditors respond? They would refuse to lend in US dollars in future, and the US government and private companies would be forced to borrow in a foreign currency. Net result is that the US loses a valuable asset - the ability to borrow in its own currency - and becomes more like Turkey or Argentina.

spiralx 8y ago
If creditors are paid off, why would that discourage them from making future loans? Creditors surely want to get their money back, and countries that have trouble borrowing money are those that don't make debt repayments, not those that do.
- diggernet 8y ago
  Because printing more dollars reduces the value of each one, so they've been paid back with dollars worth less than the ones they loaned out.
  - spiralx 8y ago
    But even if that's true - does printing more dollars affect the price of crude oil on the international markets for instance - if the interest accrued on those loans exceeds the loss of value due to inflation, then they're still ahead overall. And that's the sort of thing that people take into account already when making investments. And that's not considering that the same would happen with any alternative investments, nor the fact that risk is an important part of an investment calculation, and US debt is considered "risk-free".
    - diggernet 8y ago
      This is all true, but look at the context of discussion... Why would someone be discouraged from making future loans if the government printed money for the purpose of paying them off? Because the government took action which directly and intentionally reduced the return on their investment beyond what they anticipated in their original analysis. That will effect their analysis for future loans, reducing the appeal of those loans. Thus discouraging them.

by MarkMc 8y ago

spiralx 8y ago

If creditors are paid off, why would that discourage them from making future loans? Creditors surely want to get their money back, and countries that have trouble borrowing money are those that don't make debt repayments, not those that do.

diggernet 8y ago
Because printing more dollars reduces the value of each one, so they've been paid back with dollars worth less than the ones they loaned out.
- spiralx 8y ago
  But even if that's true - does printing more dollars affect the price of crude oil on the international markets for instance - if the interest accrued on those loans exceeds the loss of value due to inflation, then they're still ahead overall. And that's the sort of thing that people take into account already when making investments. And that's not considering that the same would happen with any alternative investments, nor the fact that risk is an important part of an investment calculation, and US debt is considered "risk-free".
  - diggernet 8y ago
    This is all true, but look at the context of discussion... Why would someone be discouraged from making future loans if the government printed money for the purpose of paying them off? Because the government took action which directly and intentionally reduced the return on their investment beyond what they anticipated in their original analysis. That will effect their analysis for future loans, reducing the appeal of those loans. Thus discouraging them.