If the US government absorbed/forgave all private debt to China and then defaulted on its own debt to China, that might be a pretty big pile of dollars that Beijing could kiss goodbye should they attack Taiwan. And it might deter them from doing just that. As a natural consequence of this goes the presumption that we would no longer trade with China. We're their biggest customer, and losing the US market is also going to be a kick to their stomach. //

lifer1
4 hours ago
There is a flaw in your assertion that "money has no intrinsic value." While true, it is too simplistic. To be sure, that assertion is the basis for the ill-named, Modern Monetary Theory, that has caused so many Swamp creatures to spend like debt and deficit mean nothing until Election season.

Money represents goods and services. It is an intermediate currency whose soundness is key to translating one type of commodity or labor to another with relatively equal representation.

The problem with MMT and spendthrift politicians who reconcile their excess spending by printing more currency is that it doesn't so much devalue the currency as it devalues what the currency represents, which then increases the number of dollars needed to complete commercial transactions.

That is the meaning of inflation. When one defaults on a debt like ours to China, that has the identical effect of printing $1T in new currency to flood the markets as well as undermining the markets' trust and confidence in the brokers of that currency.

Do you want to see the dollar replaced as the global currency? Default on a debt.

Bad idea. Such a bad idea that its proponent likely failed Econ 101.

No, the way that's been handled, historically, is to win a war and assign a war reparations to the loser that has the effect of canceling the debt. It's not done overtly since doing so could be read as defaulting. No, the loser is assigned damages that effectively covers the debt. Then it becomes a ledger exercise, provided everyone believes it to be legitimate.