[grey-area]

That would neither be necessary nor particularly helpful.

I think you're really talking about a soft default here with 'default on the currency' (normally you default on debts, not currency), which is in fact the current policy of risking inflation to get rid of debts, but then you're following that up by suggesting austerity, which was also tried as a response to 2008 (the UK is a prominent example), and failed miserably as well.

There's nothing wrong with borrowing for counter-cyclical spending, or with borrowing in general IMO. There are other answers than borrowing to pay for everything or never borrowing and during a recession a little government support (monetary and fiscal stimulus) can go a long way.

What is wrong and dangerous IMO is to pretend that we don't need taxes any more and that countries can simply print their way out of any problem (as has become orthodoxy with MMT). This used to be called debt monetisation, and was frown upon as debasing the currency in this way usually eventually ends in financial crisis and/or hyperinflation. We'll see where it leads as this is the policy we've been pursuing since 2008 and supercharged in 2020 as you can see in the graph above.

https://en.wikipedia.org/wiki/Debt_monetization

[dnautics]

> There's nothing wrong with borrowing for counter-cyclical spending, or with borrowing in general IMO

1. You're stealing from the poor (via currency devaluation) to give to the rich (via government grants, if you are struggling in the tenderloin you are not getting a SBA)

2. Contemporary ethical government is predicated on the principle that the actions of the government have the consent of the governed. Sure, you can't always have that, but you want to try not minimize not getting the consent of the governed. If government borrows money, then people who could not have voted against the borrowing of that money are enjoined to pay it back (for example, people who became of the voting age after the act of borrowing). If you go to a pay-go system, the voters have approved of the taxation and the voters have approved of the use, and the chain of consent is not broken.