What if we default on our debt? (Dylan,
“Subterranean Homesick Blues”)
Bill Barclay.
The debt ceiling,
the dollar and hegemonic currencies
Let’s begin
by clearing up a possible lingering misconception about debt and defaults. If Congress does not raise the debt
ceiling and we default, does that mean the U.S. is broke? No. The U.S., like any country that 1) controls the creation of
its own currency and 2) issues its debt in its own currency, cannot go
broke. However, political calculations
can impose deadbeat status on such a country.
What about
other countries, why don’t they have this problem? The answer is equally simple. With the exception of Denmark, no other wealthy industrial
society has a debt ceiling – and Denmark’s is set at over twice their actual level
of government debt – and it is not a political football. So yes, the U.S. is, as our national
meme says, exceptional. The debt
ceiling – and any associated problems – are our own creation.
