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(The Year 2012 In Review)
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|User Info||Heh, Someone Gets It (Buiter); entered at 2010-04-29 10:10:58|
Registered: 2009-10-12 UK
Looks to me like the US does have too much debt, it will have to monetise.|
Those debts that arent linked to inflation, can be inflated away. But if the index linked debts are too large in proportion to the real output of the US, then America has one of two choices.
a) Renege on those debts. This might be difficult legally, but if a legal way is found then this could be achieved.
b) If the US doesnt renege on its debts, then the dollar collapses. Mathematically there is no other way out.
So its either default via inflation, or default.
Given the certainty of one of these two outcomes, it is difficult to understand why a rational market would hold either dollars or US government debt.