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> how does that explain cases where countries have defaulted and other countries and their own citizens lose confidence in the currency?

Other countries cant issue dollars which is the world exchange currency. When you print out your countries cash, your currency exchange value drops and then you have to reduce your imports. Its easy for a country like argentina, for example, to keep a negative balance trade, run out of dollars and then it cant pay unless it devaluates the currency so much , outside money comes flooding in.

The US can print out its own money, but the major risk I perceive is that it wrecks its exchange rate. If the dollar loses value, first it actually adjusts the prosperty of the american people relative to imports/exports, but also risks its world-reserve status. It is often underestimated how profitable it is for the US to be financed by the entire earth on trade. If that changed..it would be a serious, irreversible economic damage.




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