Amadd wrote on Mar 20^th, 2010 at 8:58am:

What do you think would happen if the Greek government announced that it was striking out all its debt, and would no longer be paying interest on it?

What do you think would happen if the USA government announced that it was striking out all its debt, and would no longer be paying interest on it?

NorthOfNorth wrote on Mar 21^st, 2010 at 11:02am:


Bring it on. The EU is the triumpgh of the Soviet Union, from beyond the grave. European Union? A typical euro-weeny misunderstanding of Swiss and American (and Australian and Canadian) federalism. Europeans are sooo parochial, they wouldn't notice a misunderstanding until the  tanks are rolling down the boulevards.

Some of my best friends are European , though.i

If we can believe helian, a default, on all its debt by the USA would lead to Quote:


If there was any justice in the world, what should happen is other countries lose trust in the US$, switch to other currencies for oil (and other) purchases, stop borrowing US$ to fund development projects, and try to trade any US$ they have in exchange for anything of real value... all of which will cause a drop in the value of the US$ but have little effect on  the value of other countries' currencies. But the world is not always just in matters concerning superpowers, so perhaps the outcome might be completely different.

Whichever way it goes, I think it's obvious that just striking out debt and starting again is not a safe option for everyone.

Aussie economy outperforms the world

Of course it does and not for the first time either.

Successive governments contributed to Australian resilience in the face of the year-old threat to our prosperity.

Introducing the Australian Model Version 1

and the Australian Model Version 2

Gold Standard collapsed in the 30s (pegged standard) and the Bretton Woods system collapsed in the 70s (pegged standard) and ultimately gave us fiat money which exists by legislative fiat alone.

The modern monetary system is characterised by a floating exchange rate (so monetary policy is freed from the need to defend foreign exchange reserves) and the monopoly provision of fiat currency. The monopolist is the national government. Most countries now operate monetary systems that have these characteristics.

Under a fiat currency system, the monetary unit defined by the government has no intrinsic worth. It cannot be legally converted by government, for example, into gold as it was under the gold standard. The viability of the fiat currency is ensured by the fact that it is the only unit which is acceptable for payment of taxes and other financial demands of the government.

In other words $5 is worth $5 because the govt says it is.

The crux of what you ask relates to monetary policy having to defend foreign exchange reserves as this is what happens under a pegged standard.  There is little to no flexibility.

Debt is effectively paid as I have outlined here

Senexx wrote on Mar 26^th, 2010 at 9:03am:


Senexx is taking a lot of space to explain what the value of a unit of currency is said to be, but that is a separate matter from having a country pay an accumulated debt from the past.

Senexx wrote on Mar 26^th, 2010 at 9:03am:


All Senexx says there is"

"The Federal Reserve debits (subtracts from) China’s securities account at the Fed.

"And they credit (add to) China’s reserve (savings) account at the Federal Reserve.  

"That’s all debt paid!"

It's a limited outline at best, referring to the debt the USA owes China and saying nothing about other countries which don't have accounts with the American Federal Reserve.

From a commonsense point of view the debt referred to in the example above can not be regarded as paid until the Chinese Federal Reserve(or whatever they call their alternative) receive a shipment of $US currency (or equivalent agreed to by the Chinese) that the Chinese can immediately spend to buy something from places like Iran, Venezuala, Ukraine, or Vietnam.