Because the economies are interlinked and so a major economy defaulting starts a domino process where almost all debt goes into default. The currency of any country is legal note that says that country will pay that. What happens when the country can't? And other countries are in a similar situation?
Let's say that you're wealthy and bought three houses for three families and they all owe you that money. You don't want a bunch of paper in return, you want to get the value back that you invested. How? If all currencies have lost their value, where will you turn? You'll want something that can't be printed.
So? If someone can't pay me, it doesn't matter how much I want my value back, I'm not going to get it. That's what happens with bad investments - you lose your money.
And if a country can't pay me in fiat currency, how in the world are they going to be able to pay me in gold?
The assets don't disappear. Gold doesn't disappear. People will still want to trade. They'll have assets and want different assets. Barter stinks. Countries will have surplus grain but want, say, tech. They can use a stable currency, say the Swiss Franc. Or they can use a scarce resource with a historical use as a currency, like gold.
And defaulting doesn't mean you get off, scott free. When you default and go bankrupt, there's an effort to recoup losses. Germany was encumbered with huge debt from World War One and went into full hyperinflation and eventually paid it off... in 2010.
Please, read that essay. It's fascinating and talks about things much better than I can.
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Because the economies are interlinked and so a major economy defaulting starts a domino process where almost all debt goes into default. The currency of any country is legal note that says that country will pay that. What happens when the country can't? And other countries are in a similar situation?
Let's say that you're wealthy and bought three houses for three families and they all owe you that money. You don't want a bunch of paper in return, you want to get the value back that you invested. How? If all currencies have lost their value, where will you turn? You'll want something that can't be printed.
This essay talks about it in more detail: https://blankpoole.com
So? If someone can't pay me, it doesn't matter how much I want my value back, I'm not going to get it. That's what happens with bad investments - you lose your money.
And if a country can't pay me in fiat currency, how in the world are they going to be able to pay me in gold?
The assets don't disappear. Gold doesn't disappear. People will still want to trade. They'll have assets and want different assets. Barter stinks. Countries will have surplus grain but want, say, tech. They can use a stable currency, say the Swiss Franc. Or they can use a scarce resource with a historical use as a currency, like gold.
And defaulting doesn't mean you get off, scott free. When you default and go bankrupt, there's an effort to recoup losses. Germany was encumbered with huge debt from World War One and went into full hyperinflation and eventually paid it off... in 2010.
Please, read that essay. It's fascinating and talks about things much better than I can.
I was done after the third paragraph:
It may be signalling that the dollar is inflating. That it's depreciating. But defaulting? How does a currency default? What would that even mean?
Nope. Done.