Our Government when bankrupt in 1933, assuming it may never happen again is both irrational and naïve, especially since it's happing RIGHT NOW.
I have posted on this extensively in the economics forum. Please do a search on Piezoe in the economics forum. I can summarize here though: "U.S. Treasuries serve entirely different purposes than that of borrowing." It is simply an unfounded myth promulgated by politicians, primarily Republican politicians, that the U.S. borrows to fund its deficit spending. Long before the U.S. Treasury issues Securities the money to cover the principle has been printed and spent into the economy. The later sale of Securities is just the exchange between the private sector and the Treasury of one kind of Treasury liability, the newly printed money, for another kind of Treasury liability, the Treasury security. The U.S. always money funds its deficits, it never borrows.
Debt is just some people's claims on the labor of other people. It's not a holy commandment from God, or a law of physics. Debts can be inflated away, renegotiated, swept under the rug, paid off by financial repression, or reduced via countless other tools and methods which many countries (including the USA) have used over the years. Debt could be a problem if the USA was completely dependent on imports for basic necessities or critical inputs, and pursued economically destructive policies which impaired our ability to pay for those imports. As it is we in fact produce a surplus of basic necessities (like food and fuel) and the modest 3%-of-GDP trade deficit is mostly plastic crap from China, which China desperately needs us to buy to sustain her own economy. This is BTW exactly the same reason why Japan just keeps chugging along despite government debt of 266% of GDP: she enjoys a trade surplus, and 87% of the debt is owned by Japanese people. The idea that the Japanese taxpayer can go bankrupt or otherwise end up in economic distress by being unable to pay back the debt he owes to himself, is obviously nonsensical. The worst consequences we're likely to face are a few years of moderate to high inflation, an unemployment rate a few points higher than today's historic lows, and a bear market in risk assets. All in all a pretty good time to be a trader.
The point (which Piezoe may or may not say in the same terms) is that a government with the power to print money and confiscate your labor (taxes) at the point of a gun, cannot realistically experience 'bankruptcy' in terms of the domestic economy. About the very worst that can happen in an even halfway-functional economy is the Argentina experience of 50% inflation, and even that takes pretty significant effort. A country can certainly "go bankrupt" in the sense of being unable to pay for imports, if the country does not produce sufficient exports to trade for those imports and its trade partners won't extend credit. But the USA has a very modest trade deficit, and American demand is so critical to the economies of net-exporter nations that we're a very, very long way from being cut off.
With all due respect, I think you're exemplifying the problem the Fed and conventional/neoclassical economists have. Whenever they contradict their own fundamental definitions and assumptions, or those assumptions are questioned in a basic and critical manner, they create caveats or qualifications out of whole cloth and simply appeal to authority as an argument to do so. For example, the Fed has a mandate to insure price stability and full-employment, yet every few years there's some kind of crisis that requires a bigger and bigger monetary intervention. Rather than admit defeat and conclude they're no good at attaining those goals... they come to the podium, hem and haw, and give off a response that's no different than a politicians. I believe it's the nature of the beast and the fact is, for better or worse, that even empires can repeatedly fall prey to the natural flaws inherent in mankind. Rome was not built, nor did it fall, in a day... there were ebbs and flows. Don't think for a moment we won't experience the same. Ultimatelyl, if you apply Occams's razor, it's easy to conclude that central planners of any kind can and will royally mess things up when given time and opportunity. ¯\_(ツ)_/¯
I understand completely. What I'm simply pointing out is that the phrase "a very, very long way ... off" is highly imprecise and largely subjective when you consider a single individual's welfare.
This is interesting, but of course it is silly in at least two places: a) the Fed is not like Credit Suisse, Credit Suisse is a private bank. The Fed is a thoroughly Government Bank, i.e., it is not in the private sector; it's in the government sector!; b) Treasuries no longer represent debt, (The war bonds of WWI represented true debt because of the way the U.S. choose to pay them off) Treasury securities today do not represent true debt. True they are structured like debt instruments, true they look like debt; yet they are not debt. They serve an entirely different purpose then borrowing. The federal government funds its deficits with money; not by borrowing! The Fed can not go bankrupt any more than the U.S. government can. The fed is an agency of the U.S. Government. I can't go bankrupt.