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Comment by skeledrew | Hacker News Reader

And who's going to hold the US responsible for repayment? Way I see it, US has the power to just tell any creditor that they won't be repaying, whether through structuring it as some economic package or just straight up saying go suck it. The former's been done before (1933); maybe eventually we'll see the latter, if a nation has the balls to ask. And talking about it is pretty pointless, like talking about how wet you'll get swimming in a pool.

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> US has the power to just tell any creditor that they won't be repaying

Sure, and what happens then? Nobody buys new gov bonds; non-gov debt rating stops making sense. For the financial system it's a shock so huge it's better to only do this if no other solution is possible, at which point the gov is bankrupt anyway.

> Nobody buys new gov bonds; non-gov debt rating stops making sense.

Sanctions, black-listing and potentially more for anyone trying to play cute and do anything that "disadvantages the US". The rest of the world is forced to comply in enforcing it all, because nobody has backing power to stand against the US in any way.

That's not how any of this works.

And anyway, most US bonds are held by US domestic entities.

Doesn't really matter whether domestic or international, company or country. Anthropic got black-listed for not giving unrestricted access to their AI tech. India was slapped with an extra 25% tariff just for trading with Russia. Venezuela was invaded and its president snatched for not playing nice for US interests for too long. The list goes on and on throughout history. What the US wants, the US gets.

Sure, see also Vietnam, Afganistan, Iraq, Iran, where they didn't get what they wanted.

Perhaps true 20 years ago, today I'm not so sure.

From across the pond, the USA looks like a has been who relies a lot on old merits. The world got bombed to pieces 80 years ago, but has step by step rebuilt itself.

The advantage the US had has been squandered by ineffective leadership.

They still hold the advantage no matter what. If diplomacy doesn't work, they can sanction or tariff or impose export controls. Or they can invade.

Invasion seems untenable given the leadership and strategy we are seeing in this giant Iran defeat.

Hmm let's examine how well the US sanctions against China and Russia are working, shall we?

Forget those, how well are the vaunted US sanctions working against Iran?

Why do you say "no matter what"? It's pretty clear things are going pretty badly for the USA? Last time they went into the Middle East, they steamrolled their enemy in weeks.

Now they're running low on ammo, without having accomplished anything of strategic value...

> Sanctions, black-listing and potentially more for anyone trying to play cute and do anything that "disadvantages the US". The rest of the world is forced to comply in enforcing it all, because nobody has backing power to stand against the US in any way.

You mean like the compliance of weak, sanctioned state of Iran with US demands?

> And who's going to hold the US responsible for repayment?

untrivial (vast majority) of debt holders are US corps, banks and citizens.

> talking about it is pretty pointless, like talking about how wet you'll get swimming in a pool.

Until the pool runs out of funding to do to replace the evaporated water.

It'll never run since they have the power to demand that it be kept sufficiently full.

Are we living in the same reality? The US can't even keep a single strait safe right now against a fairly "weak" state. We don't have the political willpower for American servicemen to die in defensive wars like Ukraine or to hold back ISIS in Afghanistan.

How, exactly, are we going to demand sovereignties like China or the EU give us trillions of dollars?

foreign gov treasury holdings are only some 9% (mostly Japan, UK, China, Belgium and Canada)

As a serious country you can just keep servicing the bonds with bonds. If the government is... well.... it starts to look more like one of those poker websites where you cant cash out?

The world is full of similar but poorly organized ..., trump is doing one hell of a job uniting them. It seems a lot like that outside, universal threat to make us recognize this common bond.

I combine some "hallucinated" numbers into a table here

https://chat.deepseek.com/share/bzam2y198qps3l2z4x

Yes, some sort of technical default is likely in a few decades. I expect that when debt payments become unsustainable the government will force bondholders to exchange their holdings with new bonds that have the same nominal face value but longer maturity and artificially low interest rates. The next step will be legislation that forces all retirement accounts such as 401(k) to purchase Treasury bonds for "safety".

80% of bonds are held domestically, and it's what US banks use to back deposits. If the US government stops paying its debt, your money in the bank will vaporize. And no, the FDIC won't be able to restore it. That's among the least bad things that will happen.

> Way I see it, US has the power to just tell any creditor that they won't be repaying

It does not. The Fourteenth Amendment forbids that. Section 4:

"The validity of the public debt of the United States...shall not be questioned."

US can always print currency to cover existing debt, the problem is convincing investors to keep lending money to the US and keep buying US bonds

You can always print money out of thin air and instead with debt, fuel spending with inflation.

if other people stop accepting your printed currency, it quickly turns into Weimar or Zimbabwe

USA is vast and endowed with resources enough to be self sufficient. And US citizens will always accept dollars by law.

US is running a more than a Trillion dollar trade deficit, what do you think happens when other countries will demand something real, like Gold, instead of freshly printed dollar?

does US have a trillion dollar worth of Gold reserves every year?

You’re confusing trade deficits with budget deficits. These are not the same thing. Bond sales pay for budget deficits. They have no bearing (heh) whatsoever on trade deficits.

You can end a budget deficit by simply not spending as much from the public purse. You cannot end a trade deficit without restricting freedom of trade.

Then US will just start making the things themselves and not import. Unlike Japan - for USA imports are optional.

Not so. We don’t have the capital investment or labor pool needed to replace China as a source of many goods, especially high tech goods, and it would take a very, very long time to catch up at this point, if we ever could.

https://www.wsj.com/tech/personal-tech/apple-iphone-us-manuf...

Fantasies of USA autarky are just that.

> US has the power to just tell any creditor that they won't be repaying

To think about it, we have the perfect president who has been telling creditors to go pound sand for decades: https://www.usatoday.com/story/news/politics/elections/2016/...

So what happens when people stop lending money? No more military spending? No more social security? Massive tax rises? Hyper-inflation?

They will be told "lend us money, or else" and that loan will get processed because the alternative is worse.

Or else what? The military can't keep a little water way open that's critical to international trade

I'd say if the trend continues: all the above and full federal governmental collapse.

Compound interest is one of the most powerful forces in the world. Currently interest on the debt is ~19% and is growing at a CAGR of 11.2% per year. At the current growth rate, how long until interest on the debt consumes 100% of all tax revenue?

A ray of sunshine & hope: Many state governments who are both low-debt and fiscally conservative will be fine. We also experience small amounts of this with each governmental shutdown.

Start planting fruit trees so the next generation can eat.

Social security is entirely funded through FICA taxes on payroll. Take a look at your paycheck. Legally money for social security cannot come from debt.

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