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I mostly agree with your general point, but the US wouldn't default if China stopped buying US debt. The numbers are a little out of date, but in December 2021, China held $1.1 trillion out of $23.1 trillion in US debt, or just under 5%. [0]

There's extremely high demand for US debt as it's considered the safest bond in the world. All that would happen is interest rates might go up a bit, Congress raising taxes to make up a shortfall, or perhaps some kind of Fed intervention. Default is out of the question.

[0] https://sgp.fas.org/crs/misc/RS22331.pdf

The US wouldn't default in any case because it has fiat currency and printing lots of money would be less bad than defaulting, though still awful.

On top of that, only 1/3 of the US debt is held by foreigners. Not a huge deal in any case.

Defaulting on a currency you print is always a choice.

Russia did it in 1998. Its not impossible, but it's never necessary.

It's not only about having domestic pain, it's also about willingness to withstand that pain.

Accepting possible economy collapse is taboo for USA, but autocratic or totalitarian countries are able to gamble on that.

Largely agree on your post, but one nit:

> If the US couldn't find buyers to finance its spending, it would default on its debt.

Why would the US have to default on its debt, when the debt is denominated in a currency that the US can freely print?

Printing (currency debasement) could be thought of as a form of soft default.

Extremely misleading to imply those two outcomes are similar.

There are two ways government influences the economy: monetary inflation and taxation.

Whether prices get higher (government bidding up prices following monetary inflation) or taxes increase, the effect is the same: the good/service production in question will get modified relative to other parts of the economy.

Inflation is just a tax increase on "everything but" what the government is buying.

> There are two ways government influences the economy: monetary inflation and taxation.

Is this some sort of hot take where you try to classify government spending as monetary inflation?

I don't know what the point of this reply was otherwise. It's still very misleading to imply some money printing has the same scale of ramifications as a default.

Primarily because that scenario ignores the realities of hyperinflation. Default is bad, but hyperinflation destroys nations.

More specifically, I don't know of an exception to the rule that sustained hyperinflation and economic decay go together.

Hyperinflation happens only when you've already got economic decay -- in fact, economic collapse. Hyperinflation is the symptom, not the cause.

Hyperinflation isn't numbers like 10% annual inflation, which are extreme events in functioning economies. Some definitions put it at more like 10,000%. That's not caused by central bank manipulation. That's caused by a complete collapse of the economy. The central bank can try to deal with that by printing almost-valueless currency as an IOU, but that's the result, not the cause.

That's often caused by war, though it's sometimes caused by massive mismanagement of resources. It's not really relevant to the kinds of situations being discussed in the article, which are functioning economies (as long as they can keep from going to war on each other).

Hyperinflation is not on the table for the scale of money printing required to continue paying foreign owned debts.

Do you have a source to back up that claim?

China has a bit less than a trillion dollars in US debt, down about $100B over the past year and expected to shrink. If the US can't source a trillion dollars something has gone very wrong.

Where's the citation that printing away the debt won't cause inflation? I can't find it in your post.

I'm asking you to use your brain and critical reasoning skills buddy.

Also

> won't cause inflation

won't cause HYPERinflation

Extraordinary claims require extraordinary evidence. The claim that printing away 127% debt-to-GDP won't lead to hyperinflation is very extraordinary, and yet you still haven't posted evidence from an authoritative source.

> The claim that printing away 127% debt-to-GDP won't lead to hyperinflation is very extraordinary

That's not the claim. Government bonds are like 30 years, so it's not 127% of the GDP all at once. Second, the context was not all debt everywhere, it was Chinese held debt, which is at about 5% of GDP, without spreading it across the duration of the bonds.

> you still haven't posted evidence from an authoritative source.

https://www.theonion.com/fed-raises-interest-rates-in-effort...

If you don't have an authoritative source, then you're spreading misinformation.

Can you cite a source for that claim? Because it sounds false. I suspect you may be the one spreading misinformation?

defaulting is worse than inflation. It means some people get 0 - whereas inflation spreads the pain.

Source: Argentina.

They could also just default on just the portion of the debt that China holds. I never really understood this fear. If you go to war with a country and burn it's debt holdings sure you get a knock on your trustworthiness a touch, but it is literally war. Bond holders in, I don't know, Brazil aren't going to bat an eye.

It's not just the economic factors, though of course those are very important, it's the other stuff that comes with trade like stronger familial and social ties, joint cultural appreciation, and so on, that bind together countries more closely. Absent boarder disputes or mass immigration countries with trade and joint problem solving (e.g., climate change) tend to get closer over time.

> China as of this September holds $3.055 trillion in foreign currency reserves.

US could just freeze/seize those assets, just like it did with the Russian ones hold oversees. And it can forbid accepting the other ones.

As the saying goes, when you owe the bank $100 mil, the bank has a problem.

Of course, as retaliation China could stop all exports to US. This is the real mutual assured destruction.

And this MAD was the entire thesis for globalization after WW2. Let the wars be economic and not human.

But what happens when people start dying because of economic war. What's the difference between 1 million dead because of a nuke or 1 million dead because you are out of energy due to economic war.

If you hold harm constant, of course they're the same.

What weighs more, a kilogram of iron or a kilogram of feathers? Wrong question!

Which is more likely (not “possible”, “more likely”) to injure you: a kilogram of iron falling overhead, or a kilogram of feathers?

This of course does happen in some places in the world, but there's no conceivable route to this happening in developed countries, and certainly not due to sanctions. Europe's in for a hard winter, but millions of people aren't going to die from the cold.

I was actually thinking about China.

It's supply routes are highly vulnerable. It's called "The Malacca Dilemma".

1 minute video: https://www.youtube.com/watch?v=B-u3saTerYU

I agree for the most part with a detail: In case the last 6 months didn't make it obvious: Massive recession as a result of war can go both ways and that wall to echonomic MAD can also cause a lack of peace. If the cost of sanctions can hurt both countries, then it will cause other countries to turn a blind eye to bad acts because the cost of action is not just militarily but also econamic.

Example: The US is all A-OK with China's Hong Kong, Taiwan, and various Human Rights violations and realisticly refuses real action on it. In fact...we bankroll it.

In addition, despite hostilities, countries can continue to engage in trade. So, yes trade can make war between two countries who benefit from mutual trade less likely, but as you state, it will not prevent it. In addition, war between two states does not mean trade goes from 100 to 0 overnight.

This argument was largely discredited by WW1. Lots of theorists, Angell, iirc quite a few academics in the US made this argument pre-WW1...and, ofc, it was wrong.

So you don't really find many people making this argument anymore (outside of the ignorati, like Thomas Friedman), because evidence suggests this theory is incorrect (and, to be clear, this theory was huge: Angell was one of the most famous academics in the world, he won the Nobel Peace Prize, it was probably the prevalent theory of international relations pre-WW1).

And Jacob Soll, being a relatively well known historian of economic and political thought, is aware of that.

Also, your economics is not accurate. Before WW1, the economy was roughly as interdependent as it is now. The world kept turning, and it would in the case of another world war. All that happens is that economies re-orient towards domestic production and everyone gets a bit poorer (and this has already been happening with China and the US, the world economy did not go up in flames). The scenario where the US is unable to fund itself has already happened in the recent past with the UK (which was actually relatively larger than the US today), with any financial shock there is a way through.

I think the point is Soll is making, quite correctly, is that markets are situated within a political context. One man's "free markets" are another man's colonialism (a point Putin demonstrated a few weeks ago). So you saying there is interdependence is actually the exact problem that some people have, and the reason why strategic errors have been made repeatedly.

Imo, this is an angle that is not well understood (for example, most IR theorists aren't familiar with the mid-19th century market evangelists of Britain) precisely because we have passed through this unipolar period that strips political context from reasoning (i.e. this person is rational, we are interdependent, they won't do X or Y...this is exactly what people thought in 1910).

This is interesting. It reminds me of learning about Homo Economicus—the believe that humans behave rationally and will always behave in a way that optimizes their profits.

This myth has of course been thoroughly debunked within the scientific literature, but it has taken a long time to die within some economic circles. Just recently there was a post here on HN about nudge theory—a theory which seems as it is trying to patch up homo economicus.

Your post here seems to suggest that homo economicus is still alive in theories about international relations—at least among laypeople—the believe that states somehow will act rationally—even though individuals won’t—and always act in a way that optimizes their wealth.

Off course, there is always a reason to be skeptical about such absolute patterns in such a complex and dynamic system, especially if the same pattern has been debunked in other fields.

"largely discredited" depends which variant you mean: the utopian claim that countries with 'free markets' never fight each other which is clearly untrue, or the claim that openness to trade reduced the likelihood of conflict between countries which appears to be largely correct and along with its close cousin the "democratic peace hypothesis" has plenty of intellectual support from the tacit to the write bestselling books with bombastic titles (certainly it has substantially more support than the once-fashionable alternative: Lenin's "imperialism" in which capitalist countries become more aggressive than their mercantilist forebears in their attempts to capture increasing wealth on the battlefield rather than more preoccupied by maintaining trade).

> Before WW1, the economy was roughly as interdependent as it is now.

This is untrue. In 1913, exports were roughly 14% of economic activity. Today, it's at 24% [1]. This effect is exaggerated when you consider that people were a lot more self reliant back then, and most of this labor doesn't get recorded as economic activity (e.g. hand-washing clothes vs using a washer, subsidence farming vs buying food at a supermarket).

Today, there is also a lot more multinational corporations and international investments. For example, Foxconn is a Taiwanese company, but the vast majority of its over a million workers are Chinese. As far as I can tell, you never saw Austrian elites buy a ton of Serbian real-estate, which is what China's elites are doing. Had that been the case, you'd see a lot Austrian elites fight very hard to keep the peace to prevent their investments from going into flames.

[1] https://ourworldindata.org/trade-and-globalization#trade-has...

> In 1913, exports were roughly 14% of economic activity. Today, it's at 24%

Is it as simple as just comparing these two proportions? [let alone the fact that comparing proportions is generally a bad idea when there is a difference in absolute quantity/quality between the two samples]. In 1913 a huge proportion of the world’s populations were colonized. The economic activity within these colonies is something that is really hard to compare to today’s situation of global capitalism. I think comparing these proportions is not what your parent had in mind when they stated this, and honestly I don’t think they give a good insight into how global trade was back then compared to today.

Aside: Citing our world in data leaves a general distaste in my mouth. They seem to take Hans Rosling’s idea of needing a good visualization to an extreme. Throwing everything but the kitchen sink into these graphs. Missing the fact that a misleading graph can do more damage then a good graph can provide insight.

germany didnt have great experience this looking at the the invasion of ukraine and russian gas being exported to germany

Exactly. I would argue the world is divided between free democracies and authoritarian dictatorships. If the entire world were like Germany or Taiwan, it would be a far more peaceful place. Trade increasing is a small incentive. Democracy has checks and balances on power.

We need a League of Democracies rather than a United Nations.

Treating all nations as if they respect human rights the same is a major folly that experts like Henry Kissinger have made all of their lives. The world is not a game of Risk where it's power vs power. The system has a fundamental impact on the behavior of the state.

The democratic world should not do business with dictators or Communist countries. All we do is empower those with no checks-and-balances on power. Hard empire building as China and Russia are attempting is difficult to do in a democracy. Not impossible, but far less likely.

The problem is that it is hard to define what a "democracy" is. Obviously one-party states and countries without elections aren't democracies. But other countries, like Russia, have all the trappings of democracy, with elections, a parliament, multiple parties, and so on and yet obviously aren't really democratic. Then there are countries like Poland and Hungary which seem to be on a similar path to Russia. And Western European countries and the US aren't immune to these trends either.

That’s generally addressed with the democracy index.