Quote:
Originally Posted by Tinordi
Many governments have and will continue to do that. It's actually a part of the risk of investing in sovereign debt.
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This is actually I think the only way out of this with less public backlash.
Basically two options
1) Raise taxes and cut spending by a lot for a long time until debt is paid down to more reasonable levels all the while hurting if not haulting economic growth completely
2) Run the printing presses and devalue your currency so that you have less nominal debt to nominal GDP until you reach levels that are more manageable, all the while maintiaining spending increases at nominally the same clip but less in real terms.
People seem to think they're better off when there's more zeros at the end of their bank accounts regardless of what it means in real terms so I imagine that if the Fed and the Treasury ever get together this is what will happen. This is why China's having a cow because they fear getting stiffed on their treasury holdings and the fear being able to maintain their low yuan currency values against the US dollar so that they can continue to have cheaper ways of producing stuff to sell to Americans.