[petcat]

I've always heard people say that the US debt doesn't matter when the debt itself is denominated in USD.

It's the old saying, if you owe the bank $1,000 then you have a problem. But if you owe the bank a trillion dollars then the bank has a problem.

Especially when that trillion dollars was spent on an insane fleet of aircraft carriers.

[eigenspace]

This idea is based on the fantasy idea of "it's fine because the US can just inflate away its currency to reduce its debts". This is also often used as an argument for why countries shouldn't join the Euro because they'd be giving up an important tool.

The reality is that purposefully inflating your currency to reduce your debt burden is going to upset your creditors just as much as if you just defaulted on your debts, but will have the added affect of crippling your economy with inflation. Look at how much Americans freaked out over a year or two of 6% yearly inflation. How do you think Americans would respond to 30% *monthly* inflation like in Argentina or Turkey?

It's not like lenders won't notice if the USA tried to print its way out of debt.

[ghastmaster]

> It's not like lenders won't notice if the USA tried to print its way out of debt.

For historical context, this is exactly what happened when the US was on the brink of leaving the gold standard.

> From 1963 to 1966, France secretly implemented Operation Vide-Gousset to repatriate 3,313 tons of gold reserves from the Bank of England and the New York Federal Reserve. It took over 44 boat trips and 129 flights to export the gold back to the Banque de France. Since France converted its dollar holdings into gold, the French made out well when the dollar fell during the Bretton Woods period and lost 96% of its value against gold. France then withdrew from the London Gold Pool in 1966 after recovering its gold holdings to force the US to endure heavier losses.

https://www.armstrongeconomics.com/markets-by-sector/preciou...

[theappsecguy]

To be fair, it wasn't 6%. The consumer basket gets manipulated in all sorts of ways, but in general it's just not an accurate representation of day to day impact. Food and housing went up much much higher than 6%.

[eigenspace]

Whatever the number is, we know for a fact that it was

1. Extremely painful to Americans, and became one of the main pillars of their election.

2. Nowhere near high enough to cause any reduction in the USA's debt burden.

I think modern Americans are way too soft to even imagine the sort of inflation that'd be required to erase their debts. Things have been too good and too stable for too long to understand what country-wide economic hardship would be like, and even if they somehow decided to choose that path, they'd panic quit it long before it was done long enough to have any effect.

[chasd00]

currency manipulation seems to be working for China though.

https://home.treasury.gov/news/press-releases/sm751

[eigenspace]

1. Markets are aware of that and lend to China accordingly (the ones who are free to choose who to lend to).

2. Do you think Americans would tolerate having a government that purposefully suppresses their purchasing power through structurally low wages, and buying up foreign assets to supress the value of their own currency?

3. The part where China spends all their cash to buy US Treasuries to supress the value of their currency wouldn't really work as well for the USA when international trade is dollar denominated anyways, and the bulk of their GDP comes from domestic consumption.

4. The USA has a deficit. It'd need to borrow even more in order to finance the suppression of their currency, whereas China just redirects the money they earn from export surpluses.

[8note]

they might be pissed off, but would lack standing to take land or something else instead. Ultimately you are fine, just without the ability to take on more debt. you get to keep your assets.

the scale of problem is much worse when Haiti was forced to pay France a debt for freeing itself of slavery. Having to produce physical goods and sell them is much harder than giving out paper or adjusting numbers

[eigenspace]

What you're describing is identical with simply defaulting on loans and say "we're not going to pay you back".

Inflating away your currency has the same effect with the added downside of destroying your economy simultaneously.

________

In fact, the only time I can really see the argument for wanting the ability to inflate away currency to escape debt is if the country is weak and in a precarious enough position that they are legitimately worried that actually formally defaulting would lead to an invasion.

[xnx]

This used to be true, but less so after the US started alienating the rest of the world with tariffs and other erratic behavior. The US military has also been revealed to be incapable of controlling the strait of Hormuz.

[cucumber3732842]

The quiet part you're not supposed to say out loud is the "if you don't use our currency to transact for energy and thereby let us tax it via inflation we'll regime change you" implication it comes with.

[bcjdjsndon]

Except it's not a bank, it's a country with a few hundred million people that need to work and eat. Once the lenders have a problem, it would already be the end for Americans.