Sovereign entities like state governments have the option of simply not paying creditors. Bonds get renegotiated, pensioners get scrip instead of cash.
Ultimately, these impossible obligations that US government subdivisions have will be paid for via inflation. The US has the unique ability to tax wealth globally via the dollar.
Cities go bankrupt, states and territories do not. Pension obligations are generally state obligations.
This is a description of bankruptcy.
> Ultimately, these impossible obligations that US government subdivisions have will be paid for via inflation. The US has the unique ability to tax wealth globally via the dollar.
The states aren't subdivisions of the federal government. The federal government could bail them out, but it's going to be busy with its own debts (see also social security and medicare, to say nothing of the outstanding treasury bonds).
The feds will ultimately need to bailout the states and the markets know it at some level.
Cool thought, and sounds pretty good as someone who lives in the US. Guess there are certain perks to being the world superpower.