THE RICHARD J MURPHY YOUTUBE CHANNEL
DEBATE AMMUNITION
Can the USA Go Bust?
Funding the Future | August 2026
Topic
Whether the US government can go bankrupt, and why the real danger is not government insolvency but a financial market collapse that could trigger recession or depression, absent any government plan to prevent it.
The video that this Debate Ammunition supports is available here.
The Core Argument
The USA cannot go bust. Every cent of US government debt is denominated in US dollars, which the US government can always create. Modern monetary theory provides the simple, correct answer here: a currency-issuing government is never technically insolvent in its own currency. Neoliberal economics cannot explain this, but the operational reality is clear.
The real danger is not government insolvency but the impending collapse of US financial markets. Share prices are near all-time highs, investment funds have almost no cash left, government bonds are being sold to fuel share purchases, and the FT has concluded that US markets have lost touch with reality. A US hedge fund lost $15 billion in July, an all-time monthly record for a single institution. These are the conditions in which bubbles burst.
When financial markets crash, 'animal spirits' collapse with them. Spending falls, companies fail, banks need bail-outs, and the real economy is dragged down. Only governments can break that spiral, but governments currently show no awareness of, or preparation for, the coming crisis. Without intervention, a 1930s-style depression is a genuine risk.
The Argument Structure
Step 1 — Currency sovereignty settles the debt question:
Every cent of US government debt is denominated in US dollars. The US creates dollars. It can therefore always settle its debts. This is not a policy choice or a magic trick; it is the straightforward operational reality that modern monetary theory describes. Neoliberal economics cannot account for it, but the fact remains: the USA cannot go bust.
Step 2 — US financial markets have lost touch with reality:
Share prices are near all-time highs. Investment funds hold a near-record proportion of assets in equities and have almost no cash left. Government bonds are being sold to fuel further share purchases. A US hedge fund lost $15 billion in a single month in July, an all-time record for such an institution. The FT has concluded, in its own language, that US financial markets are 'nuts'.
Step 3 — Bubbles always burst; a trigger point will be reached:
The current bubble will burst, because bubbles always do. The trigger could be something Trump does, an Israeli military escalation, the collapse of a major financial institution, a share price correction, or a major tech accounting scandal. The specific cause is unknowable; the eventual outcome is not. The promise that 'this time it's different' is always made and always wrong.
Step 4 — The real risk is a depression, because governments are unprepared:
When markets crash, “animal spirits”, as Keynes called them, crash with them. Spending falls, companies fail, banks require bail-outs, and the real economy is dragged down. In 2008 governments intervened. This time, neoliberal ideology has deepened since 2008, and governments currently show no sign of planning for a crisis. Without coordinated government action, a 1930s-style depression is a genuine and preventable risk.
Their Argument → Your Rebuttal
|
They Say |
Your Response |
|---|---|
|
The US debt burden is unsustainable. Eventually markets will stop buying US bonds and the government will be forced to default. |
This confuses a currency-issuing government with a household or a eurozone member state. The US does not need markets to buy its bonds to fund its spending. It creates dollars. Bond sales are a monetary policy tool, not a funding mechanism. There is no technical limit on dollar creation. A government that issues its own currency cannot be forced to default on debts denominated in that currency. That is not opinion; it is operational fact. |
|
If the US just prints money to cover its debts, hyperinflation will inevitably follow. |
Inflation follows excessive spending relative to available productive capacity, not money creation per se. The relevant question is always whether real resources, whether workers, goods, energy, materials, are available to absorb new spending. When financial markets crash and demand collapses, the risk is deflation, not inflation. The 2008 crisis saw enormous monetary expansion with very little resulting inflation precisely because spare capacity existed. The same logic applies here. |
|
This time it really is different. AI and the tech sector have genuinely transformed US productivity and justify current valuations. |
This is exactly the argument made before every bubble burst in history. It was said before 1929, before the dot-com crash of 2000, and before 2008. The FT has itself concluded that US financial markets have lost touch with reality. That is a significant judgment. The promise that 'this time it's different' is always made. It has never once been right. |
|
Governments bailed out banks and the real economy in 2008. They can and will do so again if necessary. |
The political and ideological context today is radically different from 2008. The neoliberal belief that governments cannot afford to intervene is now far more entrenched than it was then. There is currently no government discussion of crisis preparation, no contingency planning, and no public indication even of awareness that a crisis is approaching. Without political will to act, a financial crash can become a 1930s-style depression. That is the central risk, not a technical inability to respond, but an ideological refusal to do so. |
The One-Liners
“The USA cannot go bust: every dollar of its debt is denominated in a currency it can always create.”
“The risk is not that the US government runs out of money: it is that it runs out of the political will to save us.”
“Every bubble in history has promised that this time it's different. That promise has never once been right.”
“When markets crash, animal spirits crash with them, and only governments have the power to revive them.”
“We are in the summer of 1939: the storm is plainly approaching, and no one in power appears to be preparing.”
Questions to Ask
If the US government cannot go bust because it issues its own currency, why does mainstream economics keep treating its debt as though it could?
The FT has said US financial markets are 'nuts'. If that is true, who benefits from continuing to pretend they are rational and sustainable?
After 2008, governments intervened decisively to prevent a depression. What is your plan if governments this time are ideologically committed to not acting?
If a trigger point for a financial crisis is reached how quickly do you believe the contagion would spread to the real economy, and why?
Further Reading
|
Post |
Date |
What it covers |
|---|---|---|
|
30 Dec 2024 |
Examines whether the US faces a genuine debt crisis and applies MMT's core argument that dollar-denominated debt is always settleable by a currency-issuing government. |
|
|
28 Jul 2026 |
Argues that Trump's fiscal decisions validate MMT's core claim that currency-issuing governments are not revenue-constrained in the way neoliberal economics assumes. |
|
|
25 Apr 2026 |
Directly addresses the overvaluation of US financial markets and the conditions, such as excess leverage, low cash reserves, detachment from reality, that make a crash increasingly likely. |
|
|
22 Jan 2026 |
Surveys the warning signs building in global financial markets and asks whether 2026 will be the year the bubble finally bursts. |
|
|
13 Jan 2026 |
Analyses Trump's relationship with the Federal Reserve through an MMT lens, covering dollar sovereignty, monetary policy limits, and the political pressures on US financial institutions. |
|
|
19 Jan 2026 |
Explains why MMT describes how monetary systems actually operate, including why tax does not fund government spending, making the case for why the US can always settle its dollar-denominated debts. |
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Indeed, the costs of doing nothing will be huge. People can feel another crash coming, and this one’s got hyperscalers written all over it. I believe that’s going to build a real appetite for ideas that actually fix what’s broken, instead of patching over it again. Getting hit by both at the same time is ugly, but it’s also an opportunity to rewire how the economy works and finally break the cycle.
Once AI starts automating jobs at scale, an MMT-based Job Guarantee stops being a backup plan and becomes the thing holding society up. The idea isn’t to have the state race AI or invent make-work. It’s to pay people to do the jobs the market has always underpaid or ignored, because you can’t automate them, and you can’t easily profit from them either. Social care. Cleaning up the environment. Local arts. Mentoring kids. And crucially, building homes. Actual bricks, actual social housing, solving another crisis.
Here’s the part most people miss (myself included until recently): a government that issues its own currency isn’t paying for this out of tax revenue. It can keep funding living-wage jobs and public works for anyone AI pushes out of work; indefinitely. That keeps money in people’s pockets and gives them something worth doing, without needing a private company to want them first.
The question is, will we need the crash before people start to listen?
Hi
A £10 note is worth what users think it is worth is to them.
Surely we need to ensure the money we create at least benefits the poor in supporting them in a dignified lifestyle.
If it then drifts upwards to the rich just tax them on their income.
And then the government can re-inject it back at the bottom for it to drift upwards again.
And can stay in control of the economic activity.
Perhaps to simplistic.