Most Americans don’t know this: the United States technically defaulted on its debts not once but twice in the last century: once in 1933 and again in 1971.
Luckily, the country won World War 2 in between those two incidents, which counted for a lot in terms of international credibility and creditworthiness. However, as any consumer currently out over his or her skis will know, lenders do not make a habit of propping up unsustainable borrowing forever.
Not even the most powerful and successful country in world history can ignore this law of financial gravity forever. But the U.S. certainly seems to be trying, especially since the turn of the 21st century. The country’s debt to GDP ratio shot past 100% recently, and it’s now spending more on interest payments than defense. That’s never a good sign.
In this episode, we discuss the history of sovereign fiscal crises and debt defaults, the various pathways out of a looming debt trap, and where we think the US might be heading in the decades ahead.
