I think they’d just print more money first wouldn’t they? That would lead to high inflation, and they’d need more money so print more, and next thing you know they’re challenging Zimbabwe for the highest denomination bill?
Ok, serious question: say that happens and we end up with $1000 for a sandwich type hyperinflation overnight shit. I’m assuming most financial institutions would be in ruins, but assuming they’re not, what happens to people with debts? Like, they can’t increase the amount you owe, so if you owed them $50k for a car loan, and suddenly $50k is the equivalent of a soda, would that make paying off pre inflation debts easier? I’m guessing there’s a big caveat that in that situation most things would not be functioning normally at all anymore.
Like, I’m not trying to be all “hurry up with the downfall of the US!” or anything like that. Just curious how this would play out for individuals. Is there possibly some silver lining for people with large medical debts, for example? Just wondering.
Just look at the historical examples of hyperinflation, e.g. Germany, Argentina, Venezuela. Your debts are technically wiped/worthless, but everything else goes to shit, and it takes at least a decade to recover.
I could see the government trying to step in though and do something about that because that would be a shit show, but you do have a contract so fuck them if they try.
It would be such a shit show though globally if the US went through hyperinflation, so ya it’s not something we want.
I imagine the hyperinflation will be accompanied by hyper interest rates, just because. That way, every debt will balloon with prices and everyone will be in utter shit, except the lenders.
Interest rates are locked in as part of the terms of the lending contract, unless you’re talking about adjustable rate mortgages, which I am not. You’re factually wrong here, sorry.
That, and the US is a fiat currency system. Treasuries are a relic of the gold standard. If no one wants to loan the US the money it itself creates out of thin air, it can simply loan itself the money. Really, just will it into existence.
Europeans can exchange their dollar holdings for other currencies or spend their dollars on US goods or dollar-denominated oil. This would weaken the dollar and make imports into the US more expensive. But it’d make US exports more competitive.
I’m always baffled how people, particularly Europeans, don’t understand fiat currency. They have ceded their sovereignty to bond market vigilantes so thoroughly they can’t even conceive of a fiat system.
This particular threat seems like a way to wishfully think their way out of a poor defensive posture. Europe, you’re being squeezed by Russia on one side, the US on the other, and China is hollowing out your manufacturing. Time to hit the gym.
This devalues the currency making it harder to import things and if no one buys your exports you’ll have a very very sad economy. Printing money is possible but has very serious repercussions if you just yolo.
it would be the bank’s problem if burgerland stopped borrowing money. Instead they keep going because they can’t fund themselves. I wonder what could happen if nobody lent them any more money.
At a certain level, economics are just about good will.
If the whole world sees that the US don’t want to pay, on mutual accord, we can decide that they don’t owe anything to anyone, effectively cancelling the debt.
After that, the US will remain out of the rest of the world without the possibility of borrowing any money at all.
Counterpoint:
– J. Paul Getty
I’m not defending the US, I’m just pointing out a teeny ten trillion dollar problem.
I think you’re missing the part where the US goes effectively bankrupt because it can’t sell debt. Everybody loses.
I think they’d just print more money first wouldn’t they? That would lead to high inflation, and they’d need more money so print more, and next thing you know they’re challenging Zimbabwe for the highest denomination bill?
Bye bye confidence in the dollar.
What do think tarrifs are for? They get people used to inflation.
Ok, serious question: say that happens and we end up with $1000 for a sandwich type hyperinflation overnight shit. I’m assuming most financial institutions would be in ruins, but assuming they’re not, what happens to people with debts? Like, they can’t increase the amount you owe, so if you owed them $50k for a car loan, and suddenly $50k is the equivalent of a soda, would that make paying off pre inflation debts easier? I’m guessing there’s a big caveat that in that situation most things would not be functioning normally at all anymore.
Like, I’m not trying to be all “hurry up with the downfall of the US!” or anything like that. Just curious how this would play out for individuals. Is there possibly some silver lining for people with large medical debts, for example? Just wondering.
Just look at the historical examples of hyperinflation, e.g. Germany, Argentina, Venezuela. Your debts are technically wiped/worthless, but everything else goes to shit, and it takes at least a decade to recover.
So you’re saying there’s hope for the US…
/s
Inflation does make your debts easier to pay yes.
I could see the government trying to step in though and do something about that because that would be a shit show, but you do have a contract so fuck them if they try.
It would be such a shit show though globally if the US went through hyperinflation, so ya it’s not something we want.
It’s one of the paths to a debt reset, the most likely one at this point. Print money and hyperinflate the debt away
I imagine the hyperinflation will be accompanied by hyper interest rates, just because. That way, every debt will balloon with prices and everyone will be in utter shit, except the lenders.
Interest rates are locked in as part of the terms of the lending contract, unless you’re talking about adjustable rate mortgages, which I am not. You’re factually wrong here, sorry.
That, and the US is a fiat currency system. Treasuries are a relic of the gold standard. If no one wants to loan the US the money it itself creates out of thin air, it can simply loan itself the money. Really, just will it into existence.
Europeans can exchange their dollar holdings for other currencies or spend their dollars on US goods or dollar-denominated oil. This would weaken the dollar and make imports into the US more expensive. But it’d make US exports more competitive.
I’m always baffled how people, particularly Europeans, don’t understand fiat currency. They have ceded their sovereignty to bond market vigilantes so thoroughly they can’t even conceive of a fiat system.
This particular threat seems like a way to wishfully think their way out of a poor defensive posture. Europe, you’re being squeezed by Russia on one side, the US on the other, and China is hollowing out your manufacturing. Time to hit the gym.
This devalues the currency making it harder to import things and if no one buys your exports you’ll have a very very sad economy. Printing money is possible but has very serious repercussions if you just yolo.
it would be the bank’s problem if burgerland stopped borrowing money. Instead they keep going because they can’t fund themselves. I wonder what could happen if nobody lent them any more money.
Then the US defaults, the dollar craters, and the trillions european countriesbhave invested are instantly worthless. Gone. Disappeared.
At a certain level, economics are just about good will.
If the whole world sees that the US don’t want to pay, on mutual accord, we can decide that they don’t owe anything to anyone, effectively cancelling the debt.
After that, the US will remain out of the rest of the world without the possibility of borrowing any money at all.
it takes two to tango, both parties willingly participated in this exchange
Yes, because until not long ago, the US were a country with shit stuff but somewhat reliable.
If you remove the reliability from the equation, one of the parties will most probably stop lending money to the other.