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"I doubt the USG will let itself go bankrupt." The federal government cannot go bankrupt. In theory the government can default on debts, but in reality there
by betterunix2 6y ago
"I doubt the USG will let itself go bankrupt."
The federal government cannot go bankrupt. In theory the government can default on debts, but in reality there is never a situation where the government would be forced to do so (it is always due to political dysfunction) -- as others have stated the US government is able to issue more money whenever it needs to do so, and thus can always satisfy any monetary obligations (though there may be negative consequences to doing so). Even if the government does default on its debts, it would not truly be bankrupt, because bankruptcy means that some higher authority has stepped in to decide what will be repaid and how, but the federal government is the highest authority. Likewise for the states, which cannot issue money but which cannot actually go bankrupt (as they have the authority to decide what obligations to meet or to fail to meet), something which has become relevant due to the enormous cost of dealing with COVID.
- nostrademons 6y agoI think that was the grandparent's point. The USG can always issue more currency and inflate away the value of its debt. Doing so is preferable to default (and the fiscal & political crisis that would bring), and so they will. Thus, we're going to get more inflation.
- parasubvert 6y agoWe watched one of the US political parties threaten default at least three times in the past 12 years. I think creating political/fiscal crises is part of the point.
- frank2 6y agoI had no idea. Where can I learn more about this? Are you sure they threatened to default of _Treasury_ instruments?
- betterunix2 6y agoBasically it came down to a refusal to raise the debt ceiling, which forces the Treasury to take "extraordinary" measures to meet debt obligations. In several cases the Treasury was warning that they were running out of such measures and that if the debt ceiling was not raised there would be a default.
- parasubvert 6y agoYes. And while the mainstream view is that Ryan/Boehner never really intended to go through with it because they knew the consequences, a sizable contingent of congresspeople & conservative pundits wanted to go through with it just to show that "they meant business". https://en.wikipedia.org/wiki/United_States_debt-ceiling_crisis https://en.wikipedia.org/wiki/United_States_debt-ceiling_cri... My perspective, when people tell you what they'll do, believe them. It would be economic equivalent to setting off a nuclear bomb in the middle of the country, but :shrug:, it would own the libs.
- betterunix2 6y agoThere was nearly a technical default just last year, and the US has actually defaulted on its debt in the past. Politicians do not always behave rationally.
- lifty 6y agoDefaulting is a much better word, I shouldn't have used 'bankrupt'. And I agree with you, I think it's a nearly impossible for the USG to default on its debt, even temporarily. The only situation in which that can happen is through insane administrative fuckup, but that's not likely.