[quote=dumbrenter]
To make things even interesting, the US can not only choose the interest rate, but the debt is denominated in paper that the US can print at will.
So where exactly is the problem? How can we be over-leveraged when we get to control the rate AND the denomination in which the debt is serviced?

We can keep issuing debt till there is no buyer at which point we cannot issue debt anymore which means there is no more debt problem.
OR we will reach a point of exchange rates / devaluation / inflation where it will become cheaper to make things here instead of making them overseas and shipping them here. Which means more jobs here and a vibrant economy.
Looks like folks holding dollar or dollar denominated assets will win in either case. Or so it seems to this dumb renter.[/quote]

The problem is that real wealth is the promise of future productivity. We put that debt in terms of dollars but a dollar in itself has almost zero tangible value. When you print too much and people lose faith in actually getting paid back in productive output and instead bags full of paper money you get hyper inflation.