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Comment by hypeatei | Hacker News Reader

It's not a lot. Multiple countries could offload hundreds of billions and the U.S. Treasury would buy them up immediately (and probably ask the Federal Reserve for some help the next day)

I can't find the program name at the moment, but the Treasury plans for situations like this regularly.

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> the Treasury plans for situations like this regularly.

For attacking allies?

I know that’s not what you meant but we must be pushing up against scenarios that haven’t been considered possible.

We've certainly planned for single allies going unhinged - but what we didn't plan for was us going unhinged and causing all our allies to take retaliatory actions. If France, Denmark, Germany, Britain - any one of them was swept up in nationalistic fervor and turned their back on our multi-lateral alliances we could easily weather that storm... when it's us though, that threatens the USD's acceptance as the defacto trading currency especially at a time when BRICS is semi-coherent and we're weathering a recent inflationary burst. This is like a perfect storm.

Definitely, I think there'd be a crisis if our biggest holders like the UK and Japan sold off their treasury securities but some "small" selloffs aren't outside the realm of possibilities. Trillions in selloffs though, that might get interesting.

The FED can print as much money as it wants. Defaulting this way on US debt won't make the US a more desirable debtor nation.

I think you are missing the point. The point is it would materialize as inflation instead of debt default. Not that there is no downside risk.

Inflation is a kind of default, I'm not missing the point.

The value of the dollar is based on the promise of 2% inflation of a basket of goods. Breaking that promise is default.

Well... no. Default is when you can't pay back what you promised. Not keeping inflation under a certain target.

Unless words just don't mean anything anymore. In which case, yes. Which could also mean no.

In case you are interested in more than definitions of words: Bond investors do not care if you default by giving them a haircut, doing things like forcefully extending the term to 100 years or lowering the currency value by printing money. In either case they will adjust their future risk premium of US govt. bonds and of course price in future inflation.

One might be able to hide the money printing for a while, though, while the haircut is explicit.

So if the Treasury is the only entity buying treasuries, what is the USD worth at your local grocery store?

how about at the companies that supply that grocery store?

and so on up the chain.

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