Sovereign nations operating within the global financial system can certainly go bankrupt. But all US debt is denominated in US dollars. It's technically impossible for us to go bankrupt. In fact, you could argue that almost every single modern debt crisis on this list was only possible because of us, and enriched us at the defaulting country's expense. They are almost entirely fueled by foreign debt held in, you guessed it, USD.
Technically, the US has defaulted in '79... but I think we can agree that was not a true default in the spirit of this conversation.
It doez though illustrate technically and reality are 2 different things.
And the reality is the US can default. While the option is there to endless print money and technically avoid default, should that situation happen, USD will become worth less the more they print. So you end up hitting a point where you essentially issue money of near no value. Once a govt sees this happening it's more realistical they bite the bullet, hit the reset button and default. Because a country needs a functioning currency that people have confidence in to run and recover. No reasonable govt is going to keep issuing money to 'avoid default' at the cost of recovering the economy.
And arguably even if they did, issuing worthless money would in the spirit of debt repayment, be considered a form of default.
What about the case of China? Their debt management demands attention even with the arguably greater monetary control that the government holds. If they didn't care for too much debt, wouldn't they have taken less conservative actions by now?
>What about the case of China? Their debt management demands attention even with the arguably greater monetary control that the government holds. If they didn't care for too much debt, wouldn't they have taken less conservative actions by now?
It's all about bonds. Nobody wants Chinese bonds yet. So no matter how big they are, they still have to play the same global financial game like everyone else and use foreign debt to raise cash. Depending on the current value of their currency against the international reserve (USD), that may or may not be financially viable. When the US needs money, we just say "Hey everyone, buy our bonds. Here's the price."
People buy US bonds because our workers are the most productive, and our political system is the most transparent and stable. A US bond is essentially just a promise from the government that an American worker will produce $X amount of value in the future, and as long as we have the most productive economy per worker hour, our bonds will always be the most valuable. The Eurozone is catching up on that front, and it's why the Euro has exploded as a reserve currency in the last 10 years. But the Yuan has a long, long way to go.
Technically, yes. But if you start print money too recklessly, you will trigger inflation and inflation expectations. Your creditors from abroad will either add heavy markup on future USD debt, or ask for debt in different currency. The only reason this doesn't seem like an immediate threat for US is decades of responsible monetary policy that built trust. US definitely can get in a position it won't be able to sell debt in its own currency.
>The only reason this doesn't seem like an immediate threat for US is decades of responsible monetary policy that built trust. US definitely can get in a position it won't be able to sell debt in its own currency.
I think this line of reasoning is absolutely valid in a purely theoretical framework, where there is an endless supply of possible creditors and perfect market competition. But we live on planet earth, and if you look at the Realpolitik of global trade, the US is uniquely situated to dominate markets no matter what. We have more fresh water than the rest of the planet combined, and more arable land than China or India. It's too productive of an economy, with too many fundamental geographical advantages that position it above any other political entity in the world, that it's impossible to imagine a scenario short of nuclear apocalypse or total political breakdown where the US cannot repay its' debts.
Reserve currency is the key word here.
Sovereign nations operating within the global financial system can certainly go bankrupt. But all US debt is denominated in US dollars. It's technically impossible for us to go bankrupt. In fact, you could argue that almost every single modern debt crisis on this list was only possible because of us, and enriched us at the defaulting country's expense. They are almost entirely fueled by foreign debt held in, you guessed it, USD.