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That's scary.

But it's already a de facto reality. If the US ever defaults on Treasury bonds, we will be transferring title to large tracts of government-owned western land to foreign bondholders to make good the loss. If that tacit understanding weren't already in place (with a wink and nod governments), I doubt that foreign governments would be continuing to buy as much US paper as they have in recent years. They aren't keeping our economy afloat out of charity.

"If the US ever defaults on Treasury bonds, we will be transferring title to large tracts of government-owned western land to foreign bondholders to make good the loss. If that tacit understanding weren't already in place (with a wink and nod governments), I doubt that foreign governments would be continuing to buy as much US paper as they have in recent years. They aren't keeping our economy afloat out of charity."

first of all the US isnt even close to being anywhere near the most indebted of the first world nations. Virtually all OECD nations have higher debt to GDP ratios than the US does. Some like Japan and Belgium have public debt well over 100% of GDP while the US is more like 60%. In fact in 1945, the US debt to GDP ratio was about 125% while in 1974 it was down to 20% (anyone want to go back to the mid 1970s???)

Since US debt is held is US Dollars, default is almost a 100% impossibility. Other nations like Russia, Brazil, Mexico are in danger of default because their debt is held in curriencies that arent local.

As for other nations lending us money they do so because it benefits them. Since most countries like Japan and Europe have economics that greatly punish consumption, they are overly dependent upon consumption growth in the USA. Thus they lend us money so they can export goods to us. If they didnt lend us moeny and called in their loans, presto no more imports would flow into the US and their unemployment rates would greatly increase. If the US ever did start liviing within its means, it would cause tremendous economic dislocation in the rest of the world.

The US will eventually have to begin to live within its means, but simutaneously, other nations have to being to live above theirs (ie cut taxes especially VATs and GST, in other countries) so that good that would be exported to the US are consumed locally.