Europe's Wile E. Coyote Moment
intellectual-detox.com
intellectual-detox.com
The same does not hold for Eurozone governments, hence the debt crisis. In fact, Eurozone governments are more akin to US state governments, and the debt-to-GDP ratios of US states are much lower than those of Eurozone members. The debt crisis should not have been a surprise to anyone, and the fact that it was shows how little the monetary system is understood even by most economists.
That said, I disagree with the last statement made in the article. There is in fact a very good reason for governments to go into debt at least under current institutional arrangements. (Monetarily sovereign) government debt is just another form of money, and in fact money is a debt of the government (via the central bank, which is really just a branch of the executive when push comes to shove). And the private sector really likes holding on to money.
Private entities that are economically successful like to collect those shiny numbers in their bank accounts, and hence they accumulate monetary assets without spending them. They have lots of income, but spend only a part of that income. This means they effectively act as a money sink. The money that is kept out of circulation needs to be refilled somehow, and government is the only entity that can do so.
So there are really three options: 1) Accept that, under current institutional arrangements, the private sector accumulating monetary assets means that the government has to go into debt; and accept that this is not a bad thing.
2) Change the institutional arrangement so that the government can just finance its deficit by creating money outright (and use taxes to control inflation).
3) Raise taxes on wealth to the extent that the accumulation of assets in the private sector simply is not possible anymore.
Personally, I believe 1) and 2) are the best options. 2) has the added benefits that it eliminates interest payments by the government; I consider this a benefit, because those interest payments tend to be a hidden subsidy of the rich.
So what? Ctrl+P is cheap, but that's besides the point. The reason USA is not Ctrl+P-iing now, but is borrowing instead should at least serve as a hint.
My point: If it is OK to Ctrl+P at later date as the Is-Safe-To-Borrow propaganda wants us to believe why is not safe to Ctrl+P now? Why borrow when you can print?
So, no. No such thing as free cookies or risk-free debt. At least this side of the Jupiter orbit.
Yes, it would be a different endgame, as the one for Greece, but this is not the same as risk-free.
Actually, the US is Ctrl+P-ing now. That's what QE is all about: from the perspective of the private sector, QE is equivalent to the government creating money out of thin air to pay back the debt. This is only obfuscated a bit by the fact that treasury and central bank have separate balances.
Why borrow when you can print?
My guess is a combination of (a) most people are afraid of change (case in point: you), (b) the people owning treasury bonds effectively get a hidden subsidy via the interest paid by government, and (c) the problem is framed in such a way that most people never even question the existing institutional arrangement - and when they do, they tend to do it in terribly uninformed ways.
No such thing as risk-free debt.
Please explain under which conditions the US government would become unable to fulfill the promises implied by its debt.
> Please explain under which conditions the US government would become unable to fulfill the promises implied by its debt.
At the point where the choice would be a) currency destruction (10-15% inflation), b) default.