Right, the US isn’t going to go bankrupt, but there is a real consequence within the framework of the way the system is set up to work While they can issue infinite currency, the two problems they have are inflation and debt payments. Inflation devalues the currency, while higher debt payments mean that there’s less operational budget available. So, end result ends up being less money available for productive purposes as more and more of the budget ends up being allocated towards interest.

The government doesn’t just print cash and hand it out. Typically, what happens is that they issue Treasury bonds instead with the understanding that the government will pay back later with interest. These bonds are then bought up by pension funds, foreign governments, big financial institutions, etc.

When the government prints too much money or issues too many bonds, the bond holders start getting awful nervous about their investment. They wonder if the dollars they get back in ten years will be worth the paper they’re printed on. So they demand a higher yield to cover the risk. It’s not unlike a credit card company jacking up your rate when you miss a payment.

Rising bond yields, in turn, make the government’s interest payments go up. Bigger and bigger checks need to be paid to the people who lent the money, which reduces the operational budget. Today, that sum is sitting at something like a trillion dollars a year. It’s money that’s just flowing out of the treasury and straight into the accounts of bondholders.

And of course, as you note, the other problem will be that the rest of the world will start dumping dollar because holding US bonds will mean losing money as the dollar continues to depreciate in value.