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The fact that other countries have defaulted and the US never has is one of the key reasons why US govt bonds are considered "riskless", and contributes hugely
by ajsharp 3y ago
The fact that other countries have defaulted and the US never has is one of the key reasons why US govt bonds are considered "riskless", and contributes hugely to reserve currency status. Which is to say, market actors use it for lots of stuff they don't even think twice about b/c there is an implicit assumption that the US will never default on it's obligations.
- simple-thoughts 3y agoOther countries continued to use the dollar even after the Usa defaulted on its obligation by closing the gold window. There’s a bit more going on that trust in USA - most dollars are issued by private entities in overseas markets.
- marcosdumay 3y agoThey didn't. They mostly didn't use US govt bonds at that time, and the change was made by disconnecting other currencies from the dollar (but, granted, not at once).
- peoplearepeople 3y agoWhat does it mean to privately issue a dollar?
- simple-thoughts 3y agoRun an offshore bank or shadow bank with dollar accounts then credit the account with dollars. Ideally backed by dollar denominated assets so you don’t get a bank run.