Comment by bhouston
7 days ago
Trump is a wildcard, but I could see the US defaulting on its debt, probably in some way that focuses the default burden on foreign countries holding US debt with some relief for domestic holders. I would definitely not be holding it over the coming few years.
Defaulting on the US debt would send the US into hyperinflation and likely the end of the US.
The US sells debt to US and world investors, at good rates (a few percent), and continually rolls over past debt with new issues. The US spends around 11% of budget on interest on this debt.
A default means the world stops lending at low rates. Triple rates triples the interest payments to 33% of the budget. There’s no possible way the govt will collect that much more, especially as the economy craters, and no group would likely cut all the benefits, since they’d simply get in-elected. So we’d do what countless other countries did throughout history: we’d print money to pay the bills.
Of course this devalues each dollar, so this accelerates, and there would be a massive implosion as the US gets cannibalized by whomever can extract value the quickest.
Default would be incredibly bad.