Practically speaking, at this point only debt default gets us back on our feet again. This begins with the USG Treasury bill default on about $15-20T. Comparatively, this was done before at the multi-State level, in the Panic of 1837.
The effect is to destroy our “credit rating”, which means that international trade is limited to commodity swaps. But otherwise it is the least painful, limiting government to only paying for what it has tax revenues to pay for. If government can no longer borrow money, it cannot deficit spend.
It is more interesting at the commercial level, because it means dividing our economy, and likely our currency, between “real” corporations with “real” debt, and leverage corporations with imaginary debt. With the idea that the latter collapse without taking down the former with them.
One way of doing this is to essentially declare that only our paper currency is legal tender. That electronic money is only worth what you can get for it. Because only 5% of our daily retail is backed with paper, and we cannot practically print more, with an odd exception, it is already massively deflated. It becomes our “real” currency.
This gets very bizarre in a hurry.
The US Bureau of Engraving and Printing (USBEP) has only two printing offices, both of which are at 100% capacity to print just that 5% of our retail currency, which only lasts about six months before it has to be replaced. There are about 560B $1 bills in print, but only about 160M $100 bills. So even if the government tried to print $1000 bills, nobody could make change for them.
However, the USBEP could print very high denomination (VHD) bills, from $10,000 to $10,000,000, that would not be circulated, but used to protect “real” corporations. Such bills could only be spent with US Treasury permission, to another authorized corporation, and would guarantee 100% collateral to keep corporations operating. A company literally could not go bankrupt if it had such bills backing part of its money.
Nobody, such as an individual or leverage corporation, could take these bills from a real company, and they could only be used to keep it functioning.
So leverage companies with billions of dollars in debt would collapse, yet could not buy much smaller real companies to loot them.
This divides our economy, divides our currency, and gets our much smaller government working again.
I suspect a debt default by the federal government would result in a severe and negative reaction from the bond holders. Those bond holders are represented by nations that are or will become very hostile to the US if debt default becomes a possibility.
Do you think the US federal government would offer to ignore Taiwan’s pleas for defense as a partial recompense? You bet it would. And, I suspect that is not all. Which would become more vulnerable—NK or SK? SK would become vulnerable to the starving 19th century dictatorship in NK.