[incrediblylarge]

US cannot default on US debt. It is not possible. World reserve=US does not work the same way. Most politicians know that the debt does not matter, but will use it as a rhetorical device. Does the treasury yield rate matter to the US gov, like the people at the top making the decisions, in any critical sense? I kind of feel like they can control it through policy or the fed, since $USD is literally what the world runs on. So even tho treasury repayments on huge debt amounts now comprise a considerable slice of the budget, and the story is that US cannot afford to support its citizenry, cos they are in debt, I suspect that they could exert far more influence over this if they chose to.

[cosmicgadget]

Couldn't the treasury very literally decide not to pay bond coupon or not return capital? Isn't that why the US treasury has long been considered the safest of investments?

Or is this some terminology lawyering that default is a legal term that doesn't apply to a sovereign?

[jfengel]

The yield rate does mater in that it's correlated to inflation. If the yield goes up, investors sell bonds, and prices go up.

Modern Monetary Theory says that's OK. You stop the pretense of borrowing, then print as much money as you want. You then control inflation by taxation, and then simply burning the dollars you collect.

But the switch from one to the other would be unpleasant, since a lot of bond holders are depending on their bonds being worth more than the purchase price after inflation.