The debt can be inflated away (which is the only plausible way this is going to go) but it might cause the dollar to be dropped as the world reserve currency. I don't know for sure what happens in that case..

I suspect that imports would become enormously more expensive, which would reveal the catastrophic erosion in worker rights and pay due to neoliberalism. People would be suddenly aware of how much less they are making and how much more the wealthy are taking than was the case 40 years ago. This in turn might result in political instability. But who knows.

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noir_lord 4 hours ago | parent [-]

> I don't know for sure what happens in that case..

One thing would be that GDP per Capita would fall to something like Germany (and I'm been kind there assuming it would only drop that much) there isn't inherently anything about the US that says it's GDP per capita has to be ~50% higher than Germany.

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jpadkins 3 hours ago | parent | next [-]

> One thing would be that GDP per Capita would fall

Why? What is the mechanism that links being the reserve currency and (real?) GDP per capita? I can see why being the reserve currency is an advantage for the finical sector, maybe international trade. But I don't understand how if the world stopped trading in dollars and switched to gold or Bitcoin or some basket of currencies, GDP per capita would be majorly impacted.

	▲	everforward an hour ago \| parent [-]
		Being the reserve currency props up our currency conversions because everyone wants USD to trade with. If we lose that, the value of the USD falls relative to other currencies (and especially relative to the new reserve currency). Our GDP would presumably be measured in whatever the new reserve currency is, and that alone would cause a GDP drop just due to unfavorable currency conversions. Being the reserve currency also makes imports cheap but exports unappealingly expensive. Losing that means the inverse; imports are expensive and exports are more appealing internationally, but our economy is set up for cheap imports and not exporting much. It would take a while to realign to doing manufacturing for domestic supply and GDP via exports.

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fallingfrog 4 hours ago | parent | prev [-]

And assuming that median salary drops the same percentage as gdp per capita, it would drop to 41k, which puts a lot of people beneath the threshold to pay their mortgage.

Of course taking a huge pay cut is not something most people are willing to do, so you'd probably actually see mass unemployment and salaries being inflated away.

In response the fed will do the only thing it knows, which is to rev up the money printer even more. But thats going to make all these problems worse, leading to a vicious cycle.

And in the midst of economic chaos, people's danger switches get activated and they will turn to an authoritarian strongman who will make them feel safe.

And generally speaking, once such a person is in power, they can only think of one way to solve their problems, which is to plunder their neighbors by going to war. Thats basically the imperial cycle.

It sucks to be able to see all this coming and yet be powerless to stop it..