One e-mailer thinks Uncle Sam can’t default because he can print money to pay off debts. Yes, he can print money and pay debts. But he’ll still default. The context here is not the same as for a company.
Default is broader for the government than not paying its bonds off, and I am thinking in real, not nominal, terms. To do otherwise is to be playing with words, not the substance of the matter. In substance, the government will default.
The government has made legal promises that are the equivalent of debt, as in Medicare promises. It cannot keep these. They are too large in amount. This is where the default will occur. It will renege. It will break these promises. That’s a default. Inflation is another way to break these promises, by paying money that doesn’t have the promised or expected worth in real terms.
So, one should not misconstrue the meaning of default in this broader context. This isn’t like a company defaulting.
4:05 pm on September 20, 2012
