Monetary Policies for Crypto Tokens

No.

Intuitively, it seems like piling up mountains of debt would lead to a default (or default equivalent) some day in the future. But if you're a government and your debt is denominated in a currency that you control, you'll always be able to meet your debt obligations by creating new currency.

Now you might think that this kind of "money printing" action would lead to inflation, which is the equivalent of a default that's distributed across the entire economy. This isn't true either.

This is where monetary policy comes into play. Any inflationary pressure caused by fiscal policy has to be compensated for through monetary tightening. Poof goes the distributed default.

The deficit can be way higher than it is now. And it can be permanent. We can cut taxes AND increase spending no problem.

There is, in fact, a limit to how much of this we can do. That is to say, there's no limit to how big the debt can grow, but there is an optimal size of the deficit, above which (and below which) we start to see some problems. But that optimal size has nothing to do with balancing the budget in the traditional sense.

If we don't kick the can down the road sufficiently, we're dropping the ball.

What's wrong with central bankers tightening in response to fiscal expansion? From where I'm sitting, central bank tightening seems like exactly what we need. And we can't have it without the fiscal expansion coming first. What do you mean when you say that monetary tightening will "counter and undo" the benefits of fiscal expansion?

The problem with monetary policy that's too expansionary is that it leads to the creation of lots and lots of debt in the private financial sector. And the thing about private debt is that it's WAY less stable than public government debt. As private debt builds up in the economy, the web of interconnected private debt obligations becomes ever-more brittle and susceptible to a chain reaction of defaults bringing down the whole system. See 1929 and 2008.

Fiscal expansion, on the other hand, increases the amount of public debt. This expansion induces a monetary policy tightening response that raises interest rates and reduces the amount of lending in the private economy. You're basically swapping in a more stable form of debt for a less stable form of debt. I'd rather have the stable form of debt.

To put it succinctly, fiscal expansion coupled with monetary tightening helps crowd out what Austrian economists call malinvestment in the private economy.

The "collapse of Rome" outcome is what we get when the federal deficit is too small for too long. It's not the other way around.