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Countries with debt in their own currency don't really have to pay it back. They can print the payments, at the cost of cutting the value of the currency by abo
by trashtester 3y ago
Countries with debt in their own currency don't really have to pay it back. They can print the payments, at the cost of cutting the value of the currency by about half, through a period of intense inflation.
But only once. After that, nobody will lend to them, at least not at reasonable interest rates.
But if done intentionally, with a warning to the citizens that from here on, taxes will have to pay for expenses, it is quite doable for a country like the US to get out of almost any debt trap, at the expense of bond holders.
- zeroCalories 3y agoPrinting money without a plan to repay it would be a disaster. Better to just adjust policy.
- trashtester 3y agoToday, yes. Bug if debt-to-GDP reaches 400% before the budget is balanced, it's better to just do what basically amounts to defaulting on it. Keep in mind, there are very few signs that the US is going to balance the budget anytime soon. At some point, the debt will be so high that lenders lose confidence, especially for 30-year or even 20-year maturity bonds, and at that point, there is very little time left to turn the ship.