Because it won't just happen over time what you are suggesting. You are suggesting a brisk and fast rate movement in the FFR to 10%+ with the additional insane spending idea of getting companies to produce as much goods as possible for the government to buy for the war effort. If am a US creditor, I say fuck this - I'll go and get something safer and park my cash in a government that will remain solvant for longer. The US government can do all the business it wants in dollars, it's also the largest importer of goods in the world, so they better have a currency people accept before going rogue.

So yes, the largest creditors would dump US bonds, and thus the dollar will go down with it. If you intend on spending, you won't be able to raise new debt for this spending. The old debt won't be your problem, the US government NEEDS new debt to operate, plain and simple. This is what happens in the EM world, and the US is not protected from this either. Sure thing 60% or more of global trades are done in USD, but as with Russia, we see how countries can adapt VERY fast at the new reality of being cut out from the USD.

Again, "it's such a cliche to predict its collapse" - your scenario IS bringing its collapse, so I am not even arguing today about the collapse of the US, because the US is not in your hypothetical situation thank goodness.

Average debt to equity for the S&P is 1.6 - raise rates to 10% or above and you are about to find out that you don't have many companies left that will be able to be "good". Unless you qualify as good any company that does not have any debt, but that makes no business sense given the tax incentives associated with debt in the current system. Look at PE shops that have bought out the US, their business is to overload companies with debt, and they are everywhere.

You did not answer u/sanfrantokyotron main premise: the US is under a shit load of debt - if its creditors see that they will be unable to repay their debt they will stop buying its bonds. New issues will start having to print at much higher rates, and that's what happens in EM markets... Taxes can arguably be raised - but when your country is going through a gigantic wave of bankrupcy due to insane rates, you will be bringing economic collapse to your civilisation. I doubt that's what the Fed is mandated to do...

So if I see the Fed raising rates so drastically, will I prefer to hold one of your "good" companies with low debt and a sound business model that will likely outlast a government that's hell bent on destroying its credibility? Probably, in other words, some public companies might be ok. Companies are global, and fetch capital abroad - you are also talking about the collapse of the USD in your instance. So a domestic producer exporting abroad would do particularly well in this scenario. As the USD collapse they could repay their debt in EUR or Rimnibi in a heartbeat.

I am afraid while interesting to read, your arguments do not hold. We do not live in a vacuum and killing your credibility by aiming to bankrupt your country is probably not the smartest move. The ECB, the Fed, the BoE etc... work together, that's why the system works - no bank can simply go rogue otherwise the repercussions on its economy could go horribly wrong, just look at that idiot in the UK in the fall as an example...