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The US can literally choose to never default on its debt, regardless of how much money it actually has.
by scottiebarnes 5y ago
The US can literally choose to never default on its debt, regardless of how much money it actually has.
- arcticbull 5y agoYeah, and? That comes with consequences. If the creditworthiness of the US is not maintained internationally (i.e. by inflating the currency to evade insolvency) then it will lose its reserve status as significant global clout and domestic welfare. The risk of the US doing that is reflected in its credit rating which is reflected in the interest rate the US has to pay on its bonds. The interest rate is the compensation to bondholders for the risk of default. Ditto the core team raising the supply cap. Ditto the US initiating a nuclear missile strike on Iowa. They could, but there's many reasons not to.
- scottiebarnes 5y agoThat was my rebuttal to the response that central banks can't create infinite money. You agree they can service an unlimited amount of debt (with consequences), but you refuted that they can create unlimited money. But they're the same operation.
- arcticbull 5y agoI do not. Under the current model, it can't really happen. However Congress could change the model to make it happen. I was just entertaining your hypothetical.