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From my limited understanding of how nationap debt works, it also matters a lot whom the money is owned to. If it is mainly citizens of said country, the situat

by hef19898 3y ago

From my limited understanding of how nationap debt works, it also matters a lot whom the money is owned to. If it is mainly citizens of said country, the situation is very different from foreign investors holding the bonds. Just ask Greece (which, surprisingly, wasn't mentioned in the summary, and I assume the book, as a poster child of austerity going wrong).

mjburgess 3y ago
greece defaulted on some of its debts -- it's more about whether that's happened. To my knowledge the UK has never in its history defaulted on its debts, and I'd imagine neither has the US since at least the civil war (but i assume never). The debts of governments of this type is about the lowest risk investments its possible to make, and they're treated that way. But that also means severe economic crises in those countries has an outsized impact. If the US debt were to increase 12.5% of GDP YoY for years, the entire global financial system would melt down -- as US debt is basically the baseline of the entire system
- lotsofpulp 3y ago
  A country that issues its own currency never has to default. The only question is does the country produce enough goods/services that the rest of the world wants such that the currency (or its debt) stays in sufficient demand. The above goods and services can simply be “stability” relative to the rest of the world, such that wealth seeking a safe haven continues to choose assets denominated in they nation’s currency.
  - evancox100 3y ago
    And yet they often do default. Look up sovereign defaults. Possible reasons why include things like “inflation is out of control because we’re printing money to cover the debt, and we’ll get voted out if we don’t do something”.
    - ProjectArcturis 3y ago
      >often Can you name an instance in which a developed country, borrowing in its own currency, has defaulted? I can't, at least not since the end of the gold standard.
  - nradov 3y ago
    A country that issues its own currency never has to default. But Russia chose to default on ruble denominated bonds in 1998. Sometimes default is preferable to high inflation.
  - munksbeer 3y ago
    > A country that issues its own currency never has to default That is really a statement without a real point. Countries can of course print currency to keep covering their debt obligations but that just impoverishes their citizens and means they lose access to debt markets (effectively). I know people make this statement a lot, but I never really understand what point they're trying to make. It sounds like they're trying to claim "free lunch" but I don't really know.
    - lotsofpulp 3y ago
      I was alluding to Greece’s default being inevitable due to it not controlling its currency, a situation different from US/UK/etc.
303uru 3y ago
Mostly true which is why worrying about US debt figures is hilariously stupid. It's like worrying about China holding an unloaded water gun to your head.
bryanlarsen 3y ago
Over 40% of government debt is held by other branches of government. If your right hand owes your left hand money, your net debt is $0. That 40% should not be counted.

mjburgess 3y ago

greece defaulted on some of its debts -- it's more about whether that's happened. To my knowledge the UK has never in its history defaulted on its debts, and I'd imagine neither has the US since at least the civil war (but i assume never). The debts of governments of this type is about the lowest risk investments its possible to make, and they're treated that way. But that also means severe economic crises in those countries has an outsized impact. If the US debt were to increase 12.5% of GDP YoY for years, the entire global financial system would melt down -- as US debt is basically the baseline of the entire system

lotsofpulp 3y ago
A country that issues its own currency never has to default. The only question is does the country produce enough goods/services that the rest of the world wants such that the currency (or its debt) stays in sufficient demand. The above goods and services can simply be “stability” relative to the rest of the world, such that wealth seeking a safe haven continues to choose assets denominated in they nation’s currency.
- evancox100 3y ago
  And yet they often do default. Look up sovereign defaults. Possible reasons why include things like “inflation is out of control because we’re printing money to cover the debt, and we’ll get voted out if we don’t do something”.
  - ProjectArcturis 3y ago
    >often Can you name an instance in which a developed country, borrowing in its own currency, has defaulted? I can't, at least not since the end of the gold standard.
- nradov 3y ago
  A country that issues its own currency never has to default. But Russia chose to default on ruble denominated bonds in 1998. Sometimes default is preferable to high inflation.
- munksbeer 3y ago
  > A country that issues its own currency never has to default That is really a statement without a real point. Countries can of course print currency to keep covering their debt obligations but that just impoverishes their citizens and means they lose access to debt markets (effectively). I know people make this statement a lot, but I never really understand what point they're trying to make. It sounds like they're trying to claim "free lunch" but I don't really know.
  - lotsofpulp 3y ago
    I was alluding to Greece’s default being inevitable due to it not controlling its currency, a situation different from US/UK/etc.

303uru 3y ago

Mostly true which is why worrying about US debt figures is hilariously stupid. It's like worrying about China holding an unloaded water gun to your head.

bryanlarsen 3y ago

Over 40% of government debt is held by other branches of government. If your right hand owes your left hand money, your net debt is $0. That 40% should not be counted.