Japan is the champion nation in terms of budget deficits and government debt relative to GDP. Many have long argued (wrongly) that this is because holders happen to have addresses in Japan. Nonsense. A sovereign government that issues its own currency makes interest payments on its debt in exactly the same manner whether the holder has an address at the South Pole or on Mars: a keystroke to a savings deposit at the central bank. What matters is whether the country issues its own currency.

That is why the little spat between the UK and France—with France insisting that credit agencies ought to down-grade the UK before they downgrade France—is so silly. France can have a debt ratio under 15% of GDP and still be forced to default. The UK can have a debt ratio above Japan’s 200% and still face no chance of involuntary default. That is the beauty and utility of issuing your own currency. France is a currency user and its fate depends on Germany—which is busy sucking up every spare Euro it can lay its greedy hands on. France is no better off than the panhandler on the street corner begging for pocket change—a user of currency, not an issuer.

Read the rest here.