Quote from: makomk on July 09, 2011, 10:10:03 PM

A good argument, with only one minor issue... why would the US need to pay the debt off in the first place, and how would this lead to a default?

If the US says they aren't going to pay the Chinese, or invent some financial vehicle around it (like inflating the USD into nothingness), the Chinese will retaliate by dumping US treasury bonds. That will default the US without any US say in it. If you say that doesn't matter, then what do you think will happen to Chinese imports? What will happen to the US economy if all the shelves start to resemble the soviet era eastern block? The only thing preventing this is China not wanting a sudden manufacturing collapse either. But eventually they will get to a point where they don't need the US export anymore and other interests will matter more (Taiwan for example).

Quote from: makomk

US national debt is actually relatively small as a percentage of GDP right now,

That depends on whose numbers you believe. Even the cooked numbers say 85% in 2009, 95% in 2010. QE and raising the debt ceiling makes sure it will be over 100% this year.

http://upload.wikimedia.org/wikipedia/en/thumb/7/74/Federal_debt_to_GDP_-_2000_to_2010.png/300px-Federal_debt_to_GDP_-_2000_to_2010.png

Quote from: makomk

both compared to historic levels and to other countries.

Heh, the US debt is at a historic high, the US has the largest amount of debt in absolute terms (larger than the whole Euro zone together) and if you exclude tax havens and maybe the UK only a few catastrophies like Iceland, Greece and some IMF colonized African countries come near in relative terms. If you believe some conspiracy sites, the US debt per person is something like 400,000 USD currently. Good luck repaying that by going into more debt (what do you think raising the debt ceiling is good for?).