I learned a lot from this thread. Thanks especially to ulytau.

"Why should I believe you you will take the dollar out of the money supply 10 years later?" Why should you believe that I will take the dollar out of the money supply when I repay you instead of just rolling the debt forward?
"Why should I believe you that was the last dollar you will print? Why shouldn't I expect more and more dollars getting printed?" Why should you believe that I will not take on more and more loans?
" How can I punish you if you won't take the dollar out of the circulation 10 years after? Or the dollars after?" By devaluing my currency.
"How can we accurately estimate how many dollars will you print? We can't, that's why our estimates will vary and the resulting uncertainty will not help fostering confidence in the economy." How can you estimate how much I will borrow at ever increasing rates?

"Anyway, a default will usually be followed/accompanied by (hyper)inflation..."

There were countless bankruptcies around the world but hyperinflation is almost exclusively a 20th+ phenomenon so the empirical evidence is against this statement. In fact, the South American hyperinflation of 1980s suggests hyperinflation can be incurred because of battling the inevitable bankruptcy. Once the foreign sources of financing dry out, turning to seigniorage is the only way to finance the public deficit bar admitting you just can't dig yourself out of the hole and default on your debt and start over.

"I bet Greece's default would have hurt them just as much, had the rest of the EU not jumped in to save the day."

The continued malaise of Greece is caused by their prolonged debt agony. An analogy could be made to Weimar Republic should the reparations be enforced. Greek default would hurt the rest of Europe much more than Greece itself. It is true that defaulting has been made much more serious business since the Bretton Woods conferrence but examples like Spain going bust 4 times in 40 years (1557, 1560, 1575 and 1596) or countries defaulting during Belle Epoque and returning to capital markets almost immediately show bankruptcy is much more natural than we are supposed to believe. Greece is bleeding out while its population is losing all hope because they rightly don't see how is it supposed to get better. A sharp resolution would at least mean Greeks could start cleaning up and actually govern in their own country.

"There was hyperinflation in Eastern Europe after the communist system collapsed and they were able to pull themselves out of it, with very limited outside help."

That hyperinflation was partially caused by the structural transition to market economy and was inherently tied to the reforms and partially caused by repressed inflation from the socialist era (and partially by security destabilization like in Yugoslavia). Yes, we pulled ourselves out of it but Russia lost the entire decade because of it and actually regressed a lot in its development.

"There were countless bankruptcies around the world but hyperinflation is almost exclusively a 20th+ phenomenon so the empirical evidence is against this statement." - I think this is also tied to the fact that fiat money was not the norm until the beginning of the 20th century.

"Why should you believe that I will take the dollar out of the money supply when I repay you instead of just rolling the debt forward?"

That dollar is now mine. You can't roll anything forward unless I borrow you once again.

"Why should you believe that I will not take on more and more loans?"

If you are borrowing from me, I can stop borrowing you once I feel you won't be able to repay me. Or I could demand higher interest to compensate the risk.

"By devaluing my currency."

I can't do that, for I'm not your central bank. That's the basic problem of seigniorage - economic agents have only indirect agency towards inflationary policies of the central bank while carrying all the costs of it screwing up the economy.

"How can you estimate how much I will borrow at ever increasing rates?"

I don't have to estimate that as I'm the one you're borrowing from.

"I think this is also tied to the fact that fiat money was not the norm until the beginning of the 20th century."

That is true. However, massive debasing of currency in imperial Rome is but a one example of serious inflation (not hyperinflation) in full-reserve banking systems that were not caused by bankruptcies. Defaulting on something like foreign loan had little links to domestic price levels, the money you borrowed was already in the country. Defaulting on domestic debt was the same as "nationalizing" the assets.

It's not the central bank that devalues the currency, it's the foreign exchange market. I thought "you" were the market.

At least that was what I meant by "devaluing", being able to buy less foreign currency with it.

That would be depreciation. Devaluation is the policy of central bank that leads to depreciation, either under fixed exchange rate regime or dirty floating.

So many great threads on the forum tonight.

You are right, ulytau, I used the wrong word, what I meant was depreciation.

I know Frank. The forum has been full of unusually high quality threads lately.

Agreed.

And just to answer the original question, some countries do exactly what is asked: they create sovereign wealth funds, or 'rainy day' funds to prepare for future budget shortfalls. Typically, this is possible only in countries that have a lot of a valuable but finite resource that can be 'stored' for future use once that resource had been expended- Norway and UAE (oil), for example. Taxpayers in most countries would not accept an ongoing surplus for many years before they demanded that taxes be reduced to negate the surplus. Moreover, governments tend to spend available money; therefore, a surplus leads to higher government spending, which negates the surplus independent of tax revolt. In addition, if you are the US governmnent, you are able to borrow at exceptionally low interest rates (typically below inflation) and are therefore 'making money' by borrowing now and paying later at a real value lower than that at which you borrowed. That being said, this approach generally leads to steadily escalating national debt, as exemplified by pretty much every nation on earth. Currently, we have China available to fund debt, as China is looking to invest its excess cash for modest but safe returns. However, when a nation loses its credibility as a safe investment (Greece), this can quickly turn into meltdown. So, the morale of the story: acting as an individual would, and saving for a lean future would generally be prudent for most, if not all, nations, it is generally politically impossible to do so,