On Wed, Jun 20, 2007 at 07:58:21PM +0200, Eugen Leitl wrote: > How can the US repay its debt? Why should it do it, it will just
as i noted, the US has a lower ratio of debt to GDP than many other rich countries. debt-to-income is the basic measure of default risk (e.g. for individuals or firms) and the US is thus much less likely to default than many other countries. germany has a public debt at nearly 70% of GDP (well above the US), and this is also the EU average; some countries like italy are much worse. note that public debt, like a credit card balance, cannot be defaulted on in one lump sum. previous bills are constantly being paid on time even as new bills are raised, which is what keeps confidence from collapsing. > default, as all states in the past with fiat currencies did. huh? most countries have fiat currencies today. some states with fiat currencies have defaulted, that hardly means that "all did" or that all will. > The state won't go broke, but you can imagine who'll be left > holding the bill. the tax payer, obviously, that's why it's called sovereign debt and reflects the lowest interest debt available to a country... > When someone starts cutting their losses, everyone else is going > to notice, which causes a stampede. Each of the top four could cause > it to happen, or lesser partier on the list, assuming they cumulate. > The stampede will be very, very rapid. Most will happen in the course > of a day, or two, a week tops. central banks aren't like ponzi scheme consumers. banks have been diversifying out of dollars for years, but they do it gradually and other banks know what's going on. the gold price didn't collapse when central banks "dumped" gold reserves over the past decade, despite widespread fears at that time, partly because the central banks made a "gold sale agreement" coordinating the divestment of their holdings. -rishab
