In doing research on how common it was that Countries defaulted on its debt, I found an excellent book titled: "This Time is Different" by Reinhart & Rogoff. As you can see from the table, defaults, rescheduling and banking crises are quite a common occurrence. The years between 1300 and 1799 also saw numerous defaults: Austria (1), England (2), France (8), Spain (6), Germany (Prussia) (1), Portugal (1).
Literature suggests that the main driver of whether a country defaults is the level of external borrowings a country has, ie How much foreign currency has a country borrowed. As pointed out here previously, Domestic debt is not as of a great concern since any demands on the Government to repay its domestic debts simply allows them to print the money as needed. The US Government has no external debt. Reinhart and Rogoff go to some lengths to explain that Governments allowing inflation into the economy is actually an indirect form of defaulting by a Government. So an official default may not occur, but inflation may be pervasive. As assets prices inflate, and tax revenues increase, the Government effectively reduces the value of its fixed term outstanding debt.
With US domestic outstanding debt above $13 Trillion, nearly 100% of GDP, the last thing the US need is a sustained bout of deflation. Unlike the UK and the EuroZone, the US will possibly favour another round of Quantitative easing. The Federal Reserve also have large deposits from Commercial Banks sitting on deposit, earning .25% interest, rather than lend into the economy. If the Reserve dropped its rates for deposits, it would be more attractive for the Banks to starting lending more. Congress has extended further unemployment benefits until later in the year, as a continuance of adding income to the household sector. If the US can create some inflation, as the economy splutters along, it will create some upside impetus for the market. The next pullback would be when the Government tries to tame inflation, and extract the excess liquidity from the economy.
Michael Cornips