4 ms·

When you have debt you have to make payments. If you don't (can't) make the payments, the people you owe money to get upset. If you didn't make the payments b

When you have debt you have to make payments. If you don't (can't) make the payments, the people you owe money to get upset. If you didn't make the payments because you were just irresponsible, people are less likely to lend you money in the future. That's a big problem if you depend on people loaning you money.

foobarian 4y ago
When you control the currency the debt is denominated in you can just devalue it until the debt is no longer a problem. Ordinary debtors don't have that option. The comparison is far from apples to apples but sadly too tempting to make due to similar words, and the opportunity to moralize.
- throwaway5959 4y ago
  And how likely do you think it is that people will continue loaning money to a country whose currency is constantly being devalued? Eventually the dumb money will run out.
  - bobkazamakis 4y ago
    >how likely do you think it is that people will continue loaning money to a country whose currency is constantly being devalued? as long as those assets continue to outgain the cost of inflation.
  - throwaway98797 4y ago
    countless countries have defaulted on their debt and still get $ see greece, latin america, russia, etc etc
    - foobarian 4y ago
      Also those countries' national currencies are not the most popular oil exchange or global reserve currency. Apples to oranges (or maybe pears?).
    - neilknowsbest 4y ago
      > $ It is observed that sovereign borrowers that inflate their way out of debt find their ability to borrow in the local currency reduced. They may still be able to borrow USD, though. Argentina in particular comes to mind, with something around 50% of total government debt denominated in USD [0]. Even Russia appears to have $40B in USD or EUR debt (private borrowers in Russia have another $100B or so) [1]. Of course, they can still outright renege on this USD denominated debt but it removes the option of inflating it away. [0] - https://www.stlouisfed.org/on-the-economy/2021/august/dollar-exposure-public-debt-asia-latin-america https://www.stlouisfed.org/on-the-economy/2021/august/dollar... [1] - https://www.nytimes.com/2022/03/15/business/russia-debt-bonds-default.html https://www.nytimes.com/2022/03/15/business/russia-debt-bond...
  - throwaway6734 4y ago
    The dollar is incredibly strong right now and will most likely be going forward. The US is a military, technological, energy & food producing powerhouse. The alternatives are either getting their asses handed to them in a war against their much smaller neighbor or facing a massive demographics crisis
  - matai_kolila 4y ago
- phkahler 4y ago
  >> When you control the currency the debt is denominated in you can just devalue it until the debt is no longer a problem. That's called inflation, and the public really doesn't like it. Economists don't actually like it either, nor do governments like it to be too high as that can lead to lots of big problems.
Goronmon 4y ago
When you have debt you have to make payments. If you don't (can't) make the payments, the people you owe money to get upset. So, if the payments are easily made, then this isn't a problem?
ljosifov 4y ago
Afaik US can always pay its debt. It is counterintuitive but: USG (or its agents) are the sole creators of USD. Fed can always create usd to exchange for bonds as they mature. Other bad things may happen - but not exchanging a bond due for usd in reserve account is not one of them. Unless USG decides willfully to default on a particular bond.
baron816 4y ago
I am not a government that prints its own money.

foobarian 4y ago

When you control the currency the debt is denominated in you can just devalue it until the debt is no longer a problem. Ordinary debtors don't have that option. The comparison is far from apples to apples but sadly too tempting to make due to similar words, and the opportunity to moralize.

throwaway5959 4y ago
And how likely do you think it is that people will continue loaning money to a country whose currency is constantly being devalued? Eventually the dumb money will run out.
- bobkazamakis 4y ago
  >how likely do you think it is that people will continue loaning money to a country whose currency is constantly being devalued? as long as those assets continue to outgain the cost of inflation.
- throwaway98797 4y ago
  countless countries have defaulted on their debt and still get $ see greece, latin america, russia, etc etc
  - foobarian 4y ago
    Also those countries' national currencies are not the most popular oil exchange or global reserve currency. Apples to oranges (or maybe pears?).
  - neilknowsbest 4y ago
    > $ It is observed that sovereign borrowers that inflate their way out of debt find their ability to borrow in the local currency reduced. They may still be able to borrow USD, though. Argentina in particular comes to mind, with something around 50% of total government debt denominated in USD [0]. Even Russia appears to have $40B in USD or EUR debt (private borrowers in Russia have another $100B or so) [1]. Of course, they can still outright renege on this USD denominated debt but it removes the option of inflating it away. [0] - https://www.stlouisfed.org/on-the-economy/2021/august/dollar-exposure-public-debt-asia-latin-america https://www.stlouisfed.org/on-the-economy/2021/august/dollar... [1] - https://www.nytimes.com/2022/03/15/business/russia-debt-bonds-default.html https://www.nytimes.com/2022/03/15/business/russia-debt-bond...
- throwaway6734 4y ago
  The dollar is incredibly strong right now and will most likely be going forward. The US is a military, technological, energy & food producing powerhouse. The alternatives are either getting their asses handed to them in a war against their much smaller neighbor or facing a massive demographics crisis
- matai_kolila 4y ago
phkahler 4y ago
>> When you control the currency the debt is denominated in you can just devalue it until the debt is no longer a problem. That's called inflation, and the public really doesn't like it. Economists don't actually like it either, nor do governments like it to be too high as that can lead to lots of big problems.

Goronmon 4y ago

When you have debt you have to make payments. If you don't (can't) make the payments, the people you owe money to get upset. So, if the payments are easily made, then this isn't a problem?

ljosifov 4y ago

Afaik US can always pay its debt. It is counterintuitive but: USG (or its agents) are the sole creators of USD. Fed can always create usd to exchange for bonds as they mature. Other bad things may happen - but not exchanging a bond due for usd in reserve account is not one of them. Unless USG decides willfully to default on a particular bond.

baron816 4y ago

I am not a government that prints its own money.