The US is already bankrupt and the only way it can ever hope to repay this gigantic sum is through monetary inflation and debasement. Allow me to explain:
Suppose your grandparents borrowed US$100,000 from their friends roughly 50 years ago. Back then, US$100,000 was a lot of money and the chances of your grandparents ever repaying this loan were slim at best. However, thanks to monetary inflation and the debasement of the US Dollar, today, US$100,000 isn't a very large sum of money and your grandparents would find it much easier to repay their debt.
Turning to the present situation, the US owes its creditors a gigantic amount of money and a debt so large that it can never hope of repaying it in today's dollars! So, the US has two options:
- Default or bankruptcy
- Monetary inflation
Given the fact that the US is still the world's largest economy, owns the world's reserve currency and has a democratically elected government, I think we can pretty much rule out the possibility of sovereign default. Therefore, you can bet your bottom dollar that the US will try its best to inflate its way out of trouble. Remember, politicians borrow money when it buys them a loaf of bread and they repay it when the same money is worth only a slice of bread!
is an investment adviser based in Hong Kong, he is a regular guest on CNBC, BBC, Bloomberg, NDTV Profit and writes for several newspapers and financial journals. He is the editor and publisher of Money Matter - an economic report, which is read by professionals and investors in numerous countries all over the world.
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