It might be just true. Destroying value is not such a big deal since after all value can always be created.
But when bonds default people start losing trust in fiduciary instruments. And trust is much more difficult to build than pure value.
But when bonds default people start losing trust in fiduciary instruments. And trust is much more difficult to build than pure value.
Fannie/Freddie bonds before the housing crash were a perfect example of this. All the information marketing the bonds came with specific warnings that they were not backed by the US government and didn't carry any "explicit or implied" government guarantee. Of course, this turned out to be bunk, and the bond markets knew it, which is why Fannie and Freddie were able to borrow money at lower rates than everyone else. When push came to shove, everyone knew Fannie and Freddie were too big to fail and the government would have to bail them out. I wouldn't be surprised if history repeats itself.
?! I'm not sure what you mean by that, but value is rather hard to create. Certainly the value in real estate and physical goods. Stock value and services are a bit more ephemeral.
But the reason Keyensian hole-digging makes sense is that labour is a wasting good - you can't store the output of people who would otherwise be unemployed, and having people unemployed does long term damage to productivity.
We aren't talking about literal hole-digging. There are a ton of infrastructure projects in America (highways, bridges, etc.) that could use the labor in construction.
The only sense in which value is destroyed is if the money ends up in the hands of someone who less productive at invest it. But that can't really be predicted. If value is lost in a default, the value was already destroyed in the past, regardless default choice.
Bankruptcy causes real destruction of value as inventory is sold at liquidation prices and the concentration of knowledge and organisation that makes a firm valuable in the first place evaporates.