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Why would it default? It has USD (fiat it controls) denominated debt, it can literally pay any debt through monitory expansion.
by ivalm 5y ago
Why would it default? It has USD (fiat it controls) denominated debt, it can literally pay any debt through monitory expansion.
- literallyaduck 5y agoNot that it would, it just a thought experiment. Hyperinflation and passing the tax via watering down the money supply to the foreign investors is essential the same as default right?
- Ekaros 5y agoNot exactly, but end result is very much the same. Raise of rates you have to pay for new loans to above your inflation rate. Probably overall you have slightly less to pay as risks are lower, but it won't be pretty.
- medvezhenok 5y ago> Why would it default? It has USD (fiat it controls) denominated debt, it can literally pay any debt through monitory expansion. Not if it wants to be able to borrow in the future... Look at what happened in 1978 - they had to issue non-USD bonds since foreign banks weren't willing to purchase USD bonds: https://en.wikipedia.org/wiki/Carter_bonds https://en.wikipedia.org/wiki/Carter_bonds