Federal debt is 20T, so what? At least corporations can be held responsible in court. When the federal government defaults on its debt (yes, that's a "when" not an "if") it's going to take a whole army to make it pay.
Governments can just print some more money to pay their debts. There are significant downsides to doing that (massive inflation, high interest rates..) but ultimately it is an option, and that gives lenders a level of security that businesses can't offer.
Also, you don't need an army to make a government pay. You just need to threaten to stop lending in the future. Then the government will pay, because the alternative is to stop spending on things the people want like military, police and services, and then they vote you out of power (or start a revolution and kill you).
It's an option that only works if there are buyers for that debt. That isn't always going to be the case. For instance, all new debt issued by Italy has been scooped up by ECB for years... The US is still a much more credible sovereign but that's just for now.
And no, governments don't always pay, they happily and often default - just remember Greece of recent years. And there is a word for stopping to pay for things the people want: austerity. Haven't heard of that happening around the world recently, I presume? The US economy is still the strongest in the world, but the debt crisis will get it too, no doubt.
I don't want to be a reductionist, but it seems like a lot of this comes down to policy makers (and really, just people in general) not having the courage or integrity to follow through on their beliefs. Keynsians say, "we need austerity, but TODAY is not the time for it" and then when the future arrives, don't have the courage to follow through on curtailing spending. Non-Keynsians say, "we need austerity NOW" and then lack the courage to effectuate real austerity (instead choosing milquetoast measures like taxcuts combined with trivial reductions in spending).
There seems to be this notion that society just doesn't have to pay-up now. Rather, we only pay-up at some point in the future (a point in the future that we define). That may be, but there has to be a trade-off, right? It seems weird to think that reality doesn't force a trade-off on us. It probably does, and it might come in the form of added complexity which reduces our ability to successfully engineer our way to a controlled exit of our collective responsibilites.
It is desired by some that we don't get ourselves out of debt.
Debt means credit somewhere.
Most people suffer the repayment of interests to those who mended. Those who lender are fine with the situation. Repayment of capital, or a brutal wipe of the debt would mean no interest gain, or worse, nothing at all, ground zero for the lender.
I think people's response to climate change shows that on average people would rather pass problems down to their children's generation than incur a mild inconvenience. It makes perfect sense if you assume people are self-interested.
Greece did not actually default apart from a 20-day delay on a payment to the IMF. No government will "happily" or "often" default; the closest to that is Argentina, which is mired in lawsuits as a result.
The people that got actually lose-your-money defaulted on in the 2008 crisis were (a) a lot of equity bank investors (shareholders) and (b) Cypriot depositors with over €100k.
Governments can't just print money (at least not those with central bank independence, like the EU, US, etc.). However they can raise taxes. Central banks can print money but their mandate is to use their tools for the benefit of the whole economy and not just the government. If the US government took over the Fed (to make an example) that would harm investor confidence in Treasuries and cause them to pay much higher interest rates on newly issued debt.
Agreed with you, but also worth noting the US gov would likely take over the fed in a time of crisis. If interest rates hit 10%, the fed was refusing to buy bonds because of inflation risk, and the US gov's choices were between 'default on debts' and 'take over the fed and make them do it' there would be some emergency clause pulled out by whitehouse lawyers and they would do it. My evidence for this is the extreme measures other governments have done in the past when faced with debt crises; they do print more, they seize private assets, the run price controls, etc. They'll do anything to survive and taking over a private monopoly over money printing (even if that loses the trust of the bond market and greatly reduces their ability to issue debt in the future) is well within things the US government seems willing to do.
If you look at the history the preferred way for the US government (and others) to raise lots of money in times of crisis was through "war bonds" (named "Liberty Bonds" in the US during WWI). Back then the government financed itself by encouraging people to safe more and invest that money into such bonds. Your scenario has definitely played out in other countries - for example by forcing banks to invest the money in saving accounts into government bonds.
Reserve currencies are in a somewhat better position to monetise their debt without defaulting. I think this is what will happen with USD over time.
I think this is also why many governments have been on a gold buying spree for the last couple of years, and are desperately looking into alternatives to USD as a global reserve currency.
In the short term USD is still seen as a safe haven, but long term I don't think there is any other way to get rid of the $22 trillion+ debt mountain than to slowly debase the currency
The trend is known as de-dollarization. The US has been able to go into massive debt because of the reserve currency status. As we have been losing that and will continue to lose it, our standard of living will continue to drop like a rock. https://www.investopedia.com/terms/d/dollarization.asp
Governments can also be held liable in court (see current lawsuits against Argentina for exactly this) and there is no evidence that a default is on the horizon for any reason other than a "voluntary" one imposed by a failure to raise the debt ceiling by legislation. Low interest rates are fairly convincing evidence that the market doesn't think a default is likely.
This kind of personal moral or accounting perspective to loan bubbles is not helpful. Whataboutism in general is disgusting way to argue.
When there is massive bubble that poses systemic risks, it can't be solved by just keeping people accountable because it's systemic. Those who did not take unnecessary loans or had no loans at all can lose big.
