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Yes, the likelihood of the US not paying its debt is basically 0 -- what they are really concerned about the US printing money (something that's already started under QE2).

Printing money is basically a way to default without calling it a default -- and as a bond holder it can be disastrous.



S&P's base case scenario assumes 2% consumer price inflation and a 3% nominal GDP growth rate. Their downside scenario assumes 1.5% CPI and 2.5% GDP growth. So inflating the debt away is clearly not the basis of their calculations.


If it leads to hyperinflation, yes it is a de facto default. However, the simple act of printing money isn't an act of default, and there may be valid reasons for it economically.


Valid economically, sure. That doesn't mean it wouldn't be disastrous to investors, which is what S&P cares about.




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