Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Will America's debt doom us?

usatoday.com

Post reply on HN
Print view View original

51–60 of 251 posts

Re: Will America's debt doom us?

#51

Post by EGreg »

After Bretton-Woods, there is a lot of demand for US dollars as a reserve currency. And due to the petrodollar, US dollars are also needed to buy oil.

The US is in a unique situation that lets it print a lot more money than other countries. At the end of the day, we will end this debt by printing money. Anyone buying bonds has to factor in the possibility that the US dollar the coupons are paid in will be devalued. It's not a "risk-free asset". It just depends on when and how the US will start printing money, and where that money will go. We did quantitative easing for years, but the banks didn't increase lending very much.

A good economy is when we should have been raising taxes and paying down our debt. But instead, the Trump administration presides over the biggest debt, deficit and trade deficit in our country's history. So it seems to me that the next Bernie administration will absolutely need to do large infra projects a la FDR, Green New Deal etc. because the recession may be severe.

Re: Will America's debt doom us?

#52

Post by dpc_pw »

Low rates are a result of boomeres all over the world saving for retirement (+ CB manipulation). As soon as they start using that savings, instead of accumulating them both inflation and yields will tend to naturally raise again. More people to care for, less people to do the work -> inflation. Inflation expectation -> higher yields.

That $175T wealth figure is measured at the peak of everything bubble in the US. Real estate, stock market, bonds - everything is at the all time highs, after debt and low yields fueled decade. And yet still, according to the article government would have to confiscate 10% of all wealth in the America to pay the debt.

And that's just the official debt. What about unfounded liabilities, which are many, many times higher? https://www.forbes.com/sites/johnmauldin/2017/10/10/your-pen...

So basically optimists here say, that to pay the debt the government will need confiscate more than a half of all the total wealth in US, at its peak, without causing economic slowdown and without causing inflation (and thus yields) to spike. And that assuming the government doesn't accrue any new debt as it is running a balanced budget. And considering that fiscal spending is an important part of keeping this struggling economy going ... that balanced budget would have to come from the tax... like you would never seen before (basically double?). And again... all these taxation without crippling the economy.

And all that inflation and taxation, without people noticing and trying to counteract to preserve their wealth (tax avoidance, running into PM, crypto, foreign assets, whatever.)

Yeah... whatever keeps you sleep well at night. :D

Re: Will America's debt doom us?

#53

Post by simplecomplex »

Some say debt to GDP does not matter, because we can print dollars. My question to them is: Would a 1000% matter? 100000%?

At some point people will start demanding the government provide everything because they’ve been told debt doesn’t matter and we can print money. It looks like we’re reaching that point because “Main Street” seeemingly realized in 2008 that there was no limit. That it’s a game of chicken with the Fed. Let’s give everyone $2000 / mo and free healthcare and education. Why have any limit on government spending? The Fed will monetize it after all!

Yang might not win this time around, but Yang #2 will be more popular and have bigger demands. Especially when another downtown and another bailout occurs. It’s getting very hard to convince Joe Sixpack that the printing press should only be used for the banks. Yang is the canary in the coal mine.

Re: Will America's debt doom us?

#54

Post by plantain »

dpc_pw wrote: post #52

Low rates are a result of boomeres all over the world saving for retirement (+ CB manipulation). As soon as they start using that savings, instead of accumulating them both inflation and yields will tend to naturally raise again. More people to care for, less people to do the work -> inflation. Inflation expectation -> higher yields. That $175T wealth figure is measured at the peak of everything bubble in the US. Rea…

>Low rates are a result of boomeres all over the world saving for retirement [citation needed] How did you come to that conclusion?

Re: Will America's debt doom us?

#58

Post by Retric »

mdorazio wrote: post #49
decoyworker wrote: post #30

Earlier quoted context omitted.

Bill Clinton accomplished that but at some cost. My father still laments the cancellation of the superconducting supercollider that he had the pleasure to work on.

Worth noting is that Clinton was president during the dot com bubble, which enabled that surplus... until the economy came crashing down a short while later. Also worth noting is that some of the policy changes of the Clinton white house + Greenspan federal reserve enabled the housing crash as well. I personally feel like we got a surplus only by taking out a mortgage on the next ~15 years of America.

The 2000 crash was mostly a stock market drop. The actual economy never constricted, just approached 0 growth. http://visualizingeconomics.com/blog/2011/03/08/long-term-re...

If anything it was how weak the 2000 correction was that lead to the housing bubble.

Re: Will America's debt doom us?

#59

Post by treis »

0x445442 wrote: post #48
treis wrote: post #39

Earlier quoted context omitted.

>It tells us how many years of productivity we owe. That's not accurate though. We can pay off the debt tomorrow and skip the years of productivity. It really is an apples to oranges comparison. The debt isn't denominated in productivity. It's denominated in dollars that the government can create for "free". Of course there are knock on effects of creating enough dollars to zero out the debt, but it's not equivalent…

> that the government can create for "free" One of the very smart things the U.S. has done is take a good portion of those printed dollars and invest in weapons which allow us to force the world to accept the same printed dollars. That's what really allows our government to be in that globally unique position. Resistance to this by other nations has various consequences. If you're a country that doesn't have a certai…

That's not really accurate either. Switzerland and Japan aren't out there regime changing countries but their currencies are valued. The dollar is valued because the US is the largest economy and has a history of sound monetary policy.

Re: Will America's debt doom us?

#60

Post by theflyinghorse »

dustingetz wrote: post #20
_edo wrote: post #11

> Because debt-to-GDP is apples-to-nonsense. No it's not. Debt is measured in dollars. GDP is dollars per year. Debt/GDP is $/($/yr)=yr This ratio converts debt, a number it's hard to have intuition for, to years. It tells us how many years of productivity we owe. For those of us who don't manage $30 billion in assets years of productivity probably carries more meaning than big numbers with 12 zeros.

The book "Looting Greece" by progressive economist Jack Rasmus explains in technical detail the "twin deficit" strategy budget deficit is balanced by trade deficit, which hints at why USA has aircraft carriers stationed around the world, projecting power that tilts the free markets in its favor which is what makes this strategy work. Here is an excerpt: http://www.dustingetz.com/:rasmus-usa-twin-deficit/

I don't understand why US having military presence around the globe tilts the free markets in their favour. Realistically, no military outside of perhaps Russian could stand up against the US but I don't think US are outright forcing trade agreements at a gun point, or am I wrong?
Post reply on HN