I’m a United States citizen. Moody gives the US a AA+ credit rating (it was downgraded from AAA in 2011).
How can this be, despite the substantial amount of debt the US holds that only continues to grow?
Is it GDP, defense capabilities, the dollar being the de facto currency almost worldwide? A combination of these? Or is there another huge factor(s) I am missing?
In: 54
Nations are different from people. The US prints money. You will always get your debt paid, because the US will just print enough money to pay you, and there’s no conceivable way you would ‘refuse’ that payment. If you refused, they would laugh at you, and if you tried to force them, well you’d have to fight the US army.
Now, if Zimbabwe owed you say, 100 billion US dollars, there’s a pretty decent chance you would not accept the Zimbabwe currency they printed to pay you, as you might doubt your ability to exchange that 100 billion Zimbabwe currency to US dollars. If you were a powerful nation and Zimbabwe owed that money, you might even declare war to force them to pay.
So a nation’s debt it is strongly tied to whether they control a currency and if so, if people will accept it. It’s also tied to whether they can force you to accept the payment.
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