Former Federal Reserve Chairman Alan Greenspan on Sunday ruled out the chance of a US default following S&P's decision to downgrade America's credit rating. "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default" said Greenspan on NBC's Meet the Press
Everybody knows this already. That is why gold is now above $1700. When people talk about the U.S. defaulting on its debt they don't really mean that it won't pay the principal and interest. They mean that you'll be paid in dollars that are worth a lot less than what was invested in the first place. A default in practice, if not technically a default.
What he (Random.Capital) said. US has to "refinance", which means, rollover its debt. You only get to do that if everyone has confidence. Absent that, bye bye. This is what was being risked during that crazy debt ceiling debacle: loss of confidence. You lose that, and this would even be true for Germany (Germany has been over the eurozone debt limit longer than Italy; true fact) and the game is over. Done. Finished. ...and to those who are always carping about how "debt is bad": I don't know of any company that can exist for long without access to a credit line for "working capital". In the real world, invoices are paid net 30 or net 60, and if you get paid in that timeframe for real, it's because it's a longtime customer who knows, trusts, and likes you. Otherwise, you wait. And while you wait, you borrow. Because you have to meet your payroll, because you have vendors who absolutely have to be paid, because the landlord for your office building/mall/storefront ain't gonna wait; because the electric company will cut you off faster than a ho will blow a 5$ trick. No company can exist without credit. No country can for long either. That's just the way it is.
Printing Money = Defaulting Ask the Soviet Union half a century ago... Regarding the US, I believe we actually defaulting by printing once... I read it in "This Time is Different"