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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: Maurice Winn who wrote (160919)	4/23/2005 6:07:23 AM
From: Hawkmoon	Respond to of 281500

Not really Hawk. It's merely the transfer of wealth from one person to another. Yes.. at the micro-economic scale, the debtor has received the benefit of someone else's wealth, without having to pay it back. But macro-economically, when the Federal Reserve buys and sells T-Bills to increase or diminish the money supply debt default has the result of reducing money supply which requires the Fed to eventually compensate to stabilize money supply. At the very least the interest payments on that debt is lost to the financial system forever, which equates to money destruction. And yes.. it shocks the international financial system as well.. if the default is large enough, such as the Latin American debt crisis of the early '80s, which led to the issuance of "Brady Bonds". Hawk