There is no "reserve" to reimburse your 10 € notes either. That does not make them phony money.
Of course, if you have a sovereign default, then that's a different story...
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
And it is still the most likely outcome for the US / the $ in the medium term. In the long run, we're all dead. John Maynard Keynes
Regardless, however, the point was not whether a sovereign default was likely or not.
It was that a sovereign default is hard to say anything general about, because it can take so many forms: Default on guarantees (as Ireland will be forced to), default on foreign debt (as Russia and Argentina did some years ago), default on the state's obligations towards its employees (as the French state attempted with its pension reform theft plan), default on the state's obligations towards its citizens (as the Bush regime attempted with its pension reform theft plan).
Only in the rarest of cases (Zimbabwe comes to mind) does a sovereign default encompass all these. So predicting that a sovereign default will happen is usually easier than predicting precisely where it will happen.
