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Will America's debt doom us?

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Re: Will America's debt doom us?

#241

Post by neilwilson »

Apes wrote: post #111
neilwilson wrote: post #96

The US debt is a problem in the same way that the earth constantly falling into the sun is a problem. You've missed a velocity vector in your analysis. Ask yourself this: if you get dollars for your maturing Treasury, where do those dollars end up in aggregate? They are either taxed away due to them circulating past tax points as they are spent and respent, which eliminates the need for a bond, or they are saved whic…

Your analogs are poor fits: The solar system is an extremely stable system, while our economic system is not at all stable. Your proposed money cycle is based on the concept of a closed system, which the US economy is definitely not. If the US government starts having to pay an unbearable amount of debt, money is going to outflow to other countries and make it harder for the US to issue new debt. If the US just issue…

The dollar economy is a closed system. Dollars cannot be converted. They are always exchanged. So where do they go and what do people do with them? A paper dollar is just a receipt for a liability entry in the US treasury - wherever you are in the world.

For interest rates to go up, bond prices have to go down. If the Fed just buys up bonds that drop below par with new dollars, how can interest rates go up?

Re: Will America's debt doom us?

#242

Post by Retric »

wang_li wrote: post #239
Retric wrote: post #223

Earlier quoted context omitted.

70k is in the top ~16% so by your description they are net contributors to the tax base. https://graphics.wsj.com/what-percent/ The cutoff for top 40% is around 40k/year. PS: Numbers are 5 years old but should be a good ballpark.

According to google te median 2019 household income is $63k. And according to the CBO the median income of the middle quintile of households filing tax returns was $72k. That seems to disagree with your wsj link.

Households can contain multiple people filing separately. Did you mean only 40% of households or 40% of taxpayers?

Anyway, people getting Social Security should really mess with this calculation as someone could be making 150k, but up to 45k of that is from the government.

Re: Will America's debt doom us?

#243

Post by blaser-waffle »

theflyinghorse wrote: post #60
dustingetz wrote: post #20

Earlier quoted context omitted.

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?

The Russian military is a shadow of what the Soviets brought to the table. Their main aircraft carrier has a habit of catching on fire. However their ability to spew propaganda, and to bribe businessmen with penchants for East European women, is unsurpassed.

The real counter to the US military is China, both in a direct military sense, as well as economically/softpower-y.

Re: Will America's debt doom us?

#244

Post by DFHippie »

zosterops wrote: post #205
inscionent wrote: post #63

Earlier quoted context omitted.

Forget the candidates, what about our current president. He seems plenty happy spending away. Billions in Agriculture subsides to prop up his trade war, just as a start.

While I don't think that subsidies and trade wars are good things. The tariffs collected a lot more than was spent on those agriculture subsidies.

You are aware that the money collected by the tariffs was extracted from American pockets, right, not Chinese? So you are describing a tax and transfer program: Americans who buy Chinese goods are taxed to compensate Americans who are losing income due to the trade war with China.

Re: Will America's debt doom us?

#245

Post by kevin_thibedeau »

matthewdgreen wrote: post #219
alfromspace wrote: post #194

Earlier quoted context omitted.

Say what you want about him, but Trump did run an anti-war and anti-military spending campaign. The budgets he's approved are a huge betrayal to his base. There's spending on border security and the wall that's not really happening, but that's chump change compared to entitlements and broader military spending. So it seems like we have the choice of voting for left-wing politicians who run on increasing spending on n…

The Senate is largely tilted towards rural areas, and hence Republicans. This provides a pretty natural check on the spending ambitions of Democratic presidents, except in rare circumstances. No such check exists for Republican presidents, which is why our deficits are soaring despite the current record economic expansion. Take that into account when you vote.

The rural Republican base are just the pawns used to build a voting block that can win elections. The party doesn't actually serve them. That's why it makes so many appeals to them on election cycles and then always turns around and only favors policies that benefit wealthy business owners.

Re: Will America's debt doom us?

#246

Post by AnimalMuppet »

neilwilson wrote: post #240
AnimalMuppet wrote: post #118

Earlier quoted context omitted.

If your velocity enables you to stay in orbit, there's no problem. If not, then you're just falling, which is also fine... until you hit the ground. As for your analysis of what happens when you receive payment for a bond, you seem to be saying that the government gets the money back, either by taxing spending or by you buying a new bond. I don't buy that analysis, for two reasons. First, I could receive payment for…

"First, I could receive payment for a Treasury, and buy some other investment with it." You could. But that is just an asset swap. The person who gets your cash is then faced with the same choice you were - spend it (which will result in taxation) or save the money (which ends up with a bond purchase). Always remember that money doesn't stop at the first use.

No, they are faced with the same choice I was - spend it, or invest the money in a bond, or invest it somewhere else.

In particular, people in aggregate can decide to invest less money in Treasury bonds. This has in fact been happening - there have been Treasury auctions that have "failed", which in practice means that dealers buy the remaining bonds. But they can't do that forever, because the dealers don't have infinite money.

And even the static picture that you present isn't enough, because the government is running a deficit, and therefore needs more money to come into Treasury bonds. The same amount isn't enough. Even the same amount plus the interest earned isn't enough.

Re: Will America's debt doom us?

#247

Post by turk73 »

istjohn wrote: post #64
Apes wrote: post #50

It's always great to see an extremely intelligent person try to rationalize a core belief that's at direct odds with the cold, hard, and unforgiving reality they live in. The amount of mental gymnastics done here are Olympian, and this guy deserves a gold medal. However, even the fanciest mental tricks are never going to change the fundamental laws of reality. In the entire article he dances around second order effec…

On the other hand, top marginal tax rates are a fraction of what they were at their peak last century. We could double tax revenue at the drop of a hat, paying down our debt and ameliorating toxic wealth inequality simultaneously.

Did anyone actually pay those top rates ever? It seems to me that the wealthy had enough brains and resources to avoid ever landing in those absurd 90% tax brackets or whatever they were.

Re: Will America's debt doom us?

#248

Post by marcosdumay »

electricviolet wrote: post #215
marcosdumay wrote: post #175

Earlier quoted context omitted.

There may not be much difference. Extinction of the human race is an exaggerated prediction, but more importantly, what do you expect the consequences of global economic disruption (to the level of taking the US down) to be? Take a look at history if you may.

Not trying to minimize the human cost of global economic disruption, but it's almost certainly less than total extinction.

A global nuclear winter is very likely much more impacting than global warming.

Re: Will America's debt doom us?

#249

Post by zosterops »

DFHippie wrote: post #244
zosterops wrote: post #205

Earlier quoted context omitted.

While I don't think that subsidies and trade wars are good things. The tariffs collected a lot more than was spent on those agriculture subsidies.

You are aware that the money collected by the tariffs was extracted from American pockets, right, not Chinese? So you are describing a tax and transfer program: Americans who buy Chinese goods are taxed to compensate Americans who are losing income due to the trade war with China.

In the case when prices are increased to cover the tariffs, yes. However, right now the Chinese manufacturers are eating the costs.

Re: Will America's debt doom us?

#250

Post by citiguy »

caseysoftware wrote: post #98
MuffinFlavored wrote: post #68

Earlier quoted context omitted.

This is a dumb unrelated question on my end but are the returns of Social Security very bad? If you put 6.2% (12.4% total with employer contribution) of your income away into index funds that grew at 7% per year, at $100k/yr gross salary ($12.4k/yr) from ages 25 - 65 (40 years), you would end up with $2.6m (in today's dollars). $2.6m converted into dividend funds with a 3% yield would be $6.6k/mo. I don't know anybod…

$100k/year is way above what most people will ever make. The average person will peak in the $50-60k/year range. If you exclude the top percent or two as extreme outliers, it's even lower. Ref: https://smartasset.com/retirement/the-average-salary-by-age

I think it depends on where you live. $100k / year here in New York City is not a huge amount of money.
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