> defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation).
The real constraint isn’t solvency, it’s inflation and currency value. If deficits are monetized well beyond the economy’s capacity, inflation will rise and long term yields will climb, unless the central bank caps them, which then shifts the pressure to prices and the currency.
> defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation).
The real constraint isn’t solvency, it’s inflation and currency value. If deficits are monetized well beyond the economy’s capacity, inflation will rise and long term yields will climb, unless the central bank caps them, which then shifts the pressure to prices and the currency.