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Financial markets have been restructuring debt for many centuries, and they’ve gotten pretty good at it. From the discussion regarding T-bills, you’d think no one had ever heard of default-risk premiums before. (Interestingly, this seems to be a case of American exceptionalism: people aren’t particularly happy about Greek, Irish, and Portuguese defaults, but no one thinks the world will end because of them.)

A T-bill is a bond just like any other bond. Corporations, municipalities, and other issuers default on bonds all the time, and the results are hardly catastrophic.

While the first statement is true, it does not follow as a matter of logic that the second will also be true. The former were for a couple of billions of dollars. The US economy is $15 Trillion. A default of that size, while it may be absorbed in time [quite some time] the immediate effect however could be quite nasty for financial markets.

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