From my limited understanding of how nationap debt works, it also matters a lot whom the money is owned to. If it is mainly citizens of said country, the situation is very different from foreign investors holding the bonds. Just ask Greece (which, surprisingly, wasn't mentioned in the summary, and I assume the book, as a poster child of austerity going wrong).

greece defaulted on some of its debts -- it's more about whether that's happened. To my knowledge the UK has never in its history defaulted on its debts, and I'd imagine neither has the US since at least the civil war (but i assume never).

The debts of governments of this type is about the lowest risk investments its possible to make, and they're treated that way.

But that also means severe economic crises in those countries has an outsized impact. If the US debt were to increase 12.5% of GDP YoY for years, the entire global financial system would melt down -- as US debt is basically the baseline of the entire system

A country that issues its own currency never has to default. The only question is does the country produce enough goods/services that the rest of the world wants such that the currency (or its debt) stays in sufficient demand.

The above goods and services can simply be “stability” relative to the rest of the world, such that wealth seeking a safe haven continues to choose assets denominated in they nation’s currency.

> A country that issues its own currency never has to default

That is really a statement without a real point. Countries can of course print currency to keep covering their debt obligations but that just impoverishes their citizens and means they lose access to debt markets (effectively).

I know people make this statement a lot, but I never really understand what point they're trying to make.

It sounds like they're trying to claim "free lunch" but I don't really know.

I was alluding to Greece’s default being inevitable due to it not controlling its currency, a situation different from US/UK/etc.

And yet they often do default. Look up sovereign defaults. Possible reasons why include things like “inflation is out of control because we’re printing money to cover the debt, and we’ll get voted out if we don’t do something”.

>often

Can you name an instance in which a developed country, borrowing in its own currency, has defaulted? I can't, at least not since the end of the gold standard.

A country that issues its own currency never has to default. But Russia chose to default on ruble denominated bonds in 1998. Sometimes default is preferable to high inflation.

Mostly true which is why worrying about US debt figures is hilariously stupid. It's like worrying about China holding an unloaded water gun to your head.

Over 40% of government debt is held by other branches of government. If your right hand owes your left hand money, your net debt is $0. That 40% should not be counted.

I think both are important figures. Cost-of-repayment tells you how much your debt currently drags your budget down. Total debt in relation to GDP tells you how quickly you could pay it off if the cost of new debt skyrockets in the future.

If for some internal or external reason people are suddenly only willing to lend to you at 4x the previous cost, your cost-of-repayment will quadruple over the next ~20 years. Having a lower debt-to-gdp ratio gives you more flexibility on how to react to this because lowering your debt by a significant margin becomes one of the viable strategies.