Here’s what would happen:
The interest rate at which investors would be will ing to buy our bonds would go up. Perhaps 4 to 5% or more.
Alternatively, the cost of the bond would be discounted to reward risk taking behavior.
Example:
East St. Louis offered a 30 year bond at 45 with 7% interest.
So for every 450 bucks you sent them they would give you a 30 year 1,000 buck bond. You were paid 7% on the 1,000 face value.
I doubt that they were ever paid off. This was in the 70s.
When we start to ‘default’ (if we stay on the same ‘greek’ path we’re on now) it would be MUCH worse than what you’ve outlined. Besides, I suspect you’re overstating a tad...