Sun. 12/06/17 09:39 EDT
.post #169
[url=What would happen if the US defaulted? - #4 by EmbraceLiberty]
If you define “default” as “failure to meet financial obligations”, then I think repaying loans by simply printing more money (and all the concomitant chaos this engenders) qualifies. The borrower/counterfeiter has only met his “financial obligations” nominally, but in terms of worth or purchasing power, he hasn’t. In terms of worth or purchasing power, he has repaid less than he borrowed. I suppose you could reasonably argue that, since the debasement doesn’t affect earlier recipients of new money (e.g. bondholders) as adversely as later recipients, it’s not correct to call it “default.” But, the word becomes more appropriate in direct relation to the rate at which the value or purchasing power declines. When that rate of decline reaches Zimbabwean levels, the word “default” is entirely appropriate.
If you think of “default” as “We’re out of money, we can’t raise taxes, nobody will lend us any more, we can’t pay our bills!”, then yes, possibly…but not necessarily, if the state can continue to print dollars that the people continue to accept. In that case, the state will just keep printing. The trick, the “balancing act,” is to postpone the hyperinflation for as long as possible, to keep the game going.