4 ms·

Largely agree on your post, but one nit: > If the US couldn't find buyers to finance its spending, it would default on its debt. Why would the US have to defa

Largely agree on your post, but one nit: > If the US couldn't find buyers to finance its spending, it would default on its debt. Why would the US have to default on its debt, when the debt is denominated in a currency that the US can freely print?

danuker 4y ago
Printing (currency debasement) could be thought of as a form of soft default.
- spywaregorilla 4y ago
  Extremely misleading to imply those two outcomes are similar.
  - danuker 4y ago
    There are two ways government influences the economy: monetary inflation and taxation. Whether prices get higher (government bidding up prices following monetary inflation) or taxes increase, the effect is the same: the good/service production in question will get modified relative to other parts of the economy. Inflation is just a tax increase on "everything but" what the government is buying.
    - spywaregorilla 4y ago
      > There are two ways government influences the economy: monetary inflation and taxation. Is this some sort of hot take where you try to classify government spending as monetary inflation? I don't know what the point of this reply was otherwise. It's still very misleading to imply some money printing has the same scale of ramifications as a default.
angrycontrarian 4y ago
Primarily because that scenario ignores the realities of hyperinflation. Default is bad, but hyperinflation destroys nations.
- youainti 4y ago
  More specifically, I don't know of an exception to the rule that sustained hyperinflation and economic decay go together.
  - jfengel 4y ago
    Hyperinflation happens only when you've already got economic decay -- in fact, economic collapse. Hyperinflation is the symptom, not the cause. Hyperinflation isn't numbers like 10% annual inflation, which are extreme events in functioning economies. Some definitions put it at more like 10,000%. That's not caused by central bank manipulation. That's caused by a complete collapse of the economy. The central bank can try to deal with that by printing almost-valueless currency as an IOU, but that's the result, not the cause. That's often caused by war, though it's sometimes caused by massive mismanagement of resources. It's not really relevant to the kinds of situations being discussed in the article, which are functioning economies (as long as they can keep from going to war on each other).
- spywaregorilla 4y ago
  Hyperinflation is not on the table for the scale of money printing required to continue paying foreign owned debts.
  - angrycontrarian 4y ago
    Do you have a source to back up that claim?
    - spywaregorilla 4y ago
      China has a bit less than a trillion dollars in US debt, down about $100B over the past year and expected to shrink. If the US can't source a trillion dollars something has gone very wrong.
      - angrycontrarian 4y ago
3pt14159 4y ago
They could also just default on just the portion of the debt that China holds. I never really understood this fear. If you go to war with a country and burn it's debt holdings sure you get a knock on your trustworthiness a touch, but it is literally war. Bond holders in, I don't know, Brazil aren't going to bat an eye.

danuker 4y ago

Printing (currency debasement) could be thought of as a form of soft default.

spywaregorilla 4y ago
Extremely misleading to imply those two outcomes are similar.
- danuker 4y ago
  There are two ways government influences the economy: monetary inflation and taxation. Whether prices get higher (government bidding up prices following monetary inflation) or taxes increase, the effect is the same: the good/service production in question will get modified relative to other parts of the economy. Inflation is just a tax increase on "everything but" what the government is buying.
  - spywaregorilla 4y ago
    > There are two ways government influences the economy: monetary inflation and taxation. Is this some sort of hot take where you try to classify government spending as monetary inflation? I don't know what the point of this reply was otherwise. It's still very misleading to imply some money printing has the same scale of ramifications as a default.

angrycontrarian 4y ago

Primarily because that scenario ignores the realities of hyperinflation. Default is bad, but hyperinflation destroys nations.

youainti 4y ago
More specifically, I don't know of an exception to the rule that sustained hyperinflation and economic decay go together.
- jfengel 4y ago
  Hyperinflation happens only when you've already got economic decay -- in fact, economic collapse. Hyperinflation is the symptom, not the cause. Hyperinflation isn't numbers like 10% annual inflation, which are extreme events in functioning economies. Some definitions put it at more like 10,000%. That's not caused by central bank manipulation. That's caused by a complete collapse of the economy. The central bank can try to deal with that by printing almost-valueless currency as an IOU, but that's the result, not the cause. That's often caused by war, though it's sometimes caused by massive mismanagement of resources. It's not really relevant to the kinds of situations being discussed in the article, which are functioning economies (as long as they can keep from going to war on each other).
spywaregorilla 4y ago
Hyperinflation is not on the table for the scale of money printing required to continue paying foreign owned debts.
- angrycontrarian 4y ago
  Do you have a source to back up that claim?
  - spywaregorilla 4y ago
    China has a bit less than a trillion dollars in US debt, down about $100B over the past year and expected to shrink. If the US can't source a trillion dollars something has gone very wrong.
    - angrycontrarian 4y ago

3pt14159 4y ago

They could also just default on just the portion of the debt that China holds. I never really understood this fear. If you go to war with a country and burn it's debt holdings sure you get a knock on your trustworthiness a touch, but it is literally war. Bond holders in, I don't know, Brazil aren't going to bat an eye.