Of course there are some practical and technical differences, but on the level of public discourse, those differences are much smaller than the similarities.
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
This scenario:
deliberately devaluing/greatly inflating your currency to dispose of debt to foreign creditors that is denominated in your own currency
While decisions to default on obligations to creditors have been happening time and again, in Europe since the Middle Ages, deliberately deciding to wreck your economy as a way to slip out from under your debt burden is much less common. What more typically happens is that there is a structural imbalance that drives the hyperinflation.
In some cases, it is the effort to meet international obligations that cannot be met that drive the hyperinflation, as in Weimer Germany facing reparations payments when WWI had crippled the economies of its primary pre-WWI export markets. In others, as in the Confederate States hyperinflation, there is a structural imbalance on the current accounts side. The hyperinflationary risk looming over the horizon for the US$ would be more similar to that one.
If meeting the interests of Wall Street takes first billing, and the opportunity to pursue a brawny recovery is not taken because it involves a reversal of the fight against income growth for 90% of the US population, then prolonged stagnation punctuated by recession seems the more likely outcome.
Social insurance schemes always involve at their heart the sharing of the national income of that year, and if real national income drops, the standard of living that goes with that share will normally drop. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
Pointing to a non-negligible risk of sovereign default in the US and the UK does not, I fear, qualify me as a madman. The last time things got serious, during the Great Depression of the 1930s, both the US and the UK defaulted de facto, and possibly even de jure, on their sovereign debt. In the case of the US, the sovereign default took the form of the abrogation of the gold clause when the US went off the gold standard (except for foreign exchange) in 1933. In 1933, Congress passed a joint resolution canceling all gold clauses in public and private contracts (including existing contracts). The Gold Reserve Act of 1934 abrogated the gold clause in government and private contracts and changed the value of the dollar in gold from $20.67 to $35 per ounce. These actions were upheld (by a 5 to 4 majority) by the Supreme Court in 1935. In the case of the UK, the de facto sovereign default took the form of the conversion in 1932 of Britain's 5% War Loan Bonds (callable 1929-1947) into new 3½ % bonds (callable from 1952) on terms that were unambiguously unfavourable to the bond holders. Out of a total of £2,086,000,000 outstanding, £1,500,000,000, or something over 70%, was converted voluntarily by the end of 1932, thanks both to the government's ability to appeal to patriotism and joint burden sharing in the face of economic adversity and to ferocious arm-twisting and `moral suasion'.
In the case of the US, the sovereign default took the form of the abrogation of the gold clause when the US went off the gold standard (except for foreign exchange) in 1933. In 1933, Congress passed a joint resolution canceling all gold clauses in public and private contracts (including existing contracts). The Gold Reserve Act of 1934 abrogated the gold clause in government and private contracts and changed the value of the dollar in gold from $20.67 to $35 per ounce. These actions were upheld (by a 5 to 4 majority) by the Supreme Court in 1935.
In the case of the UK, the de facto sovereign default took the form of the conversion in 1932 of Britain's 5% War Loan Bonds (callable 1929-1947) into new 3½ % bonds (callable from 1952) on terms that were unambiguously unfavourable to the bond holders. Out of a total of £2,086,000,000 outstanding, £1,500,000,000, or something over 70%, was converted voluntarily by the end of 1932, thanks both to the government's ability to appeal to patriotism and joint burden sharing in the face of economic adversity and to ferocious arm-twisting and `moral suasion'.
