What I had missed was that when debts are in the currencies that central banks have the ability to print and restructure, debt crises can be well-managed so they are not systemically threatening. Because the Federal Reserve could provide money to the banks that made the loans that weren’t being paid back, they didn’t have a cash flow problem, and because the American accounting system didn’t require the banks to account for these bad debts as losses, there was no big problem that couldn’t be worked out. I learned that
