The S&P rating downgrade was deservedly greeted as a big joke.

Can the US default? Technically, the US defaulted twice in the 20th century, when it devalued the dollar against gold in 1933 and when it went off the gold standard completely and officially in 1971.

But can a sovereign nation default on domestic fiat currency debt? In theory, it can always print money to honor the obligations. In practice though, it has happened, in two scenarios. One is a change in government, like Vietnam, Burma, and Russia (1993). Another is as part of radical shock measures against hyperinflation or similar turmoil, as in Argentina, Brazil, Russia (1998).

Hard to argue that fiscal deficits > 10% of GDP are sustainable. Getting on a sustainable path needs a combination of growth, spending cuts, tax hikes, and inflation. Also hard not to notice the people making the biggest noise about it just held up the President to get tax cuts for the rich extended, and the overall tax burden in terms of receipts as a percentage of GDP is at a historical low.

Logically, default seems like an impossibility. But economic models, by definition, don’t take account of human idiocy.