No one knows how much the government can borrow
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No one knows how much the government can borrow
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Re: No one knows how much the government can borrow
#2Directly related is "Modern Monetary Theory" or MMT.
Here's a 24 minute explainer from NPR, Planet Money.
https://www.npr.org/2021/01/20/958854717/modern-monetary-the...
And a brief explainer from The Conversation
https://theconversation.com/modern-monetary-theory-the-rise-...
Also known by its detractors as "Magic Money Tree." One of those detractors is of course the Adam Smith Institute.
https://www.adamsmith.org/research/the-magic-money-tree-the-...
I thought I remembered Freakonomics doing a fairly in-depth discussion on this, but I can't find it. Maybe I mis-remember.
Re: No one knows how much the government can borrow
#3I try to post this everywhere people want to start yelling about federal debt (which correlates much more closely to the thing the government wants to borrow for than the actual size of the debt):
Interest as Percent of Gross Domestic Product (essentially: how much money do we need to pay for our spending habits):
https://fred.stlouisfed.org/series/FYOIGDA188S
We are nowhere near the peaks that we saw in the 80's and early 90's. All those 30-year bonds issued at the start of the Reagan revolution matured and were paid off, no one seemed to notice, and none of the rhetoric seems to have changed at all.
This just isn't a problem in the modern economy. Interest rates have been sitting at or very near GDP growth for four decades now, which means that money is as close to "free" as it is possible to get (that is, if the US borrows $4 and spends it, it sees a $4 increase in GDP).
That doesn't mean that serious argument about sustainable spending can't be made in good faith, but it does mean that almost all arguments of the form "we can't afford it" are not. This is triply so if the argument includes a credit card metaphor.
Re: No one knows how much the government can borrow
#4I try to post this everywhere people want to start yelling about federal debt (which correlates much more closely to the thing the government wants to borrow for than the actual size of the debt): Interest as Percent of Gross Domestic Product (essentially: how much money do we need to pay for our spending habits): https://fred.stlouisfed.org/series/FYOIGDA188S We are nowhere near the peaks that we saw in the 80's and…
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Re: No one knows how much the government can borrow
#5I try to post this everywhere people want to start yelling about federal debt (which correlates much more closely to the thing the government wants to borrow for than the actual size of the debt): Interest as Percent of Gross Domestic Product (essentially: how much money do we need to pay for our spending habits): https://fred.stlouisfed.org/series/FYOIGDA188S We are nowhere near the peaks that we saw in the 80's and…
Buddy, the interest as a percent of gdp matches the 80's and 90's because rates are near 0%. Real yields are negative in europe. Its not even close to the same situation.
"Interest rates have been sitting at or very near GDP growth for four decades now" thats short-sighted and not really true: https://fred.stlouisfed.org/series/fedfunds
Theres no free lunch, you don't get to just print unlimited money and have no consequences.
Re: No one knows how much the government can borrow
#6I try to post this everywhere people want to start yelling about federal debt (which correlates much more closely to the thing the government wants to borrow for than the actual size of the debt): Interest as Percent of Gross Domestic Product (essentially: how much money do we need to pay for our spending habits): https://fred.stlouisfed.org/series/FYOIGDA188S We are nowhere near the peaks that we saw in the 80's and…
For US to have problems with borrowing will require a decade long downturn at least.
The best proof is the fact that Tbills keep flying like hot cookies during major downturns, which means people buying them at least plan for time spans exceeding them.
Re: No one knows how much the government can borrow
#7Directly related is "Modern Monetary Theory" or MMT. Here's a 24 minute explainer from NPR, Planet Money. https://www.npr.org/2021/01/20/958854717/modern-monetary-the... And a brief explainer from The Conversation https://theconversation.com/modern-monetary-theory-the-rise-... Also known by its detractors as "Magic Money Tree." One of those detractors is of course the Adam Smith Institute. https://www.adamsmith.org/r…
It's not really an economic question, it's one of politics, intimidation, and a global empire.
The "magic money tree" is backed by the full force of the United States. Heads of state who have suggested alternatives found themselves confronted with a sweeping range of responses, starting with bribes, then coercion, sanctions, and if those fail, hiding in a hole from US forces.
There's nothing magic, nor mysterious about it. We're the only ones (right now) with the system in place to hold the rest of the world hostage. When those in charge press their luck too far, or if by accident they let an idiot run the place for 4 years, that grip on things could loosen, and eventually our position could collapse.
When that happens, we'll be forced to use money from someone else's "magic money tree". Having to export hard currency instead of magic money, would cause prices on all things imported to double or worse in a few years or less.
The only real question is how many % of the value of the dollar when spent as an export is real, and how much is the "global reserve currency" status. I suspect it used to be %20 real, and lately it's more like 50% as our leaders fumble the ball too much for the rest of the world's liking.
Re: No one knows how much the government can borrow
#8Some counter perspective laid out by Peter Schiff, while I do not agree with everything said, I find it valuable and entertaining: https://www.youtube.com/watch?v=M6k0QEnYpSQ
Re: No one knows how much the government can borrow
#9The answer is you can borrow unlimited debt if you pin interest rates at 0% (though eventually you will lose control at the back end of the yield curve without heavy govt intervention). What happens to your currency in that process is debasement/hyperinflation.
Re: No one knows how much the government can borrow
#10The answer is you can borrow unlimited debt if you pin interest rates at 0% (though eventually you will lose control at the back end of the yield curve without heavy govt intervention). What happens to your currency in that process is debasement/hyperinflation.
> What happens to your currency in that process is debasement/hyperinflation.
Not if the vast majority of population lives paycheck to paycheck and food and basic necessities production are not disrupted.
In that/our case, you simply get the inflation of the assets the "elites" who have disposable income choose to spend that disposable income("investing" in real-estate, bitcoin).