So we know that the USA can only avoid paying their debt because the USD is the world reserve currency, but once they actually have to pay it, it’s going to be hell.
How is China going to deal with their own debt? Because it seems like they have a lot to pay back.
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the same way all countries pay their national debt, by taking on more debt. a sovereign country’s debt is irrelevant, just a little trick of bureaucracy.
Exactly, a sovereign country debt is the private economy surplus. In order to “pay the debt”, the entire people would have to give back the currency.
Its literally dialectics!
China is just like the US in that it has fiat monetary sovereignty, so it can always pay any debt denominated in its own currency by simply willing it into existence. The deficit is simply sum total of money the state has created via spending minus the money it has destroyed via taxation. If it has significant debt in other countries’ currencies, that’s another matter, but I don’t think it has that problem.
- Second Thought: Why The Government Has Infinite Money
- PEGS Institute: Your [Federal] Taxes Pay for Nothing
- Finding the Money | BitTorrent magnet link
- Michael Hudson: The Use and Abuse of MMT
But if they will that money into existence, that would make the Yuan less valuable and lead to inflation.
It can if they spend enough of it without taxing any of it back out. However the relationship between the money injected into the economy and inflation is not as inevitable, mechanical, nor 1:1 as neoclassical economists claim. Finding the Money explains this a bit.
Another common trope is “hyperinflation,” which the PEGS Institute also dispels: What Caused Hyperinflation In Weimar, Zimbabwe And Venezuela?
