No one knows how much the government can borrow • Hacker News Board

Re: No one knows how much the government can borrow

#21

Post by xxpor » Sat, Jan 23, 2021, 8:32 PM UTC

trident5000 wrote: post #9

The 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.

There were some responses on Twitter to this post that basically said every historical case of hyperinflation was due to behavior and governmental instability rather than pure economics of the supply of currency. I'm not sure how true that is, but it does seem odd that we don't really have a model for hyperinflation if it results directly from sovereign debt and money creation.

Re: No one knows how much the government can borrow

#22

Post by anm89 » Sat, Jan 23, 2021, 8:32 PM UTC

amelius wrote: post #17

If you owe the bank $100, that's your problem. If you owe the bank $1000 billion, that's the bank's problem.

That metaphor works better for huge businesses. There's really no bank here(yes I'm well aware of central banks, but that's not really how bank is being used here from a balance sheet solvency perspective).

It's more like if you issue currency and owe trillions, that's the currency and the currency issuers problem.

Re: No one knows how much the government can borrow

#23

Post by jldugger » Sat, Jan 23, 2021, 8:34 PM UTC

Seems like they can easily borrow 100 billion in one shot.

                     Tendered          Accepted
  Primary Dealer      $77,850,000,000  $10,790,550,000
  Direct Bidder        $6,350,000,000   $2,009,150,000
  Indirect Bidder     $20,935,350,000  $12,193,340,000
  Total Competitive  $105,135,350,000  $24,993,040,000

https://www.treasurydirect.gov/instit/annceresult/press/prea...

Re: No one knows how much the government can borrow

#24

Post by cercatrova » Sat, Jan 23, 2021, 8:34 PM UTC

xxpor wrote: post #16

dharma1 wrote: post #11

As long as much of the world’s trade is settled in US dollars, there is a demand for them, and some demand for US treasuries. The merry-go-round of the Fed increasing the money supply and buying US government debt with the newly created money can keep going for a while, but it will lead to a steady decline in the value of the dollar vs other currencies and some official inflation over time, as the cost of imported go…

Folks like to talk about what really keeps the world at peace (relatively speaking compared to pre-ww2), and while I think nukes are a large part of it, another huge part is dollar based settlement and the absolute devestating sanctoning power the US derives from it. That isn't to say sanctions are morally pure: they exact a huge cost on the regular people who live in the countries subject to them. However, they're s…

Pax Americana is the term you're looking for.

Re: No one knows how much the government can borrow

#25

Post by xxpor » Sat, Jan 23, 2021, 8:36 PM UTC

trident5000 wrote: post #5

newacct583 wrote: post #3

I 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 con…

It's not that there are no consequences, it's a question of the trade off of those vs if you don't borrow/print money. The experience from the recovery of the great resession have moved the consensus largely over to the print more money camp.

Re: No one knows how much the government can borrow

#26

Post by titzer » Sat, Jan 23, 2021, 8:36 PM UTC

drtillberg wrote: post #14

> Remember that some people thought that government borrowing ... facilitated by quantitative easing (Fed bond-buying) ... was going to lead to substantial inflation. But it didn’t. Every time someone says "but where's the inflation" I sigh. Look at literally any financial asset, SP500, stocks, real estate, even bond values (the inverse of interest rates). There is your inflation. Maybe we like asset inflation, maybe…

"Official" inflation is based on the CPI, consumer price index, which is based on a basket of goods, not including CoL things like housing.

edit:

I stand corrected. It does include housing, but this "Owners' equivalent rent of residences" counts the cost of a Mortgage, which of course is majorly impacted by interest rates. It doesn't include the value of the housing market directly, though.

Does anyone actually think that the housing market is counted correctly? It is clearly outpacing inflation by a lot:

https://dqydj.com/historical-home-prices/

Re: No one knows how much the government can borrow

#27

Post by njarboe » Sat, Jan 23, 2021, 8:36 PM UTC

Ray Dailo has been thinking about this idea for most of his life. He has had the resources and status to access any scholar on the topic he would like. Smart and motivated to understand the answer, he has written a book about this topic that is coming out soon, but is also available in full on-line for free[1]. I'm half-way through and it is very good so far.

[1]https://www.principles.com/the-changing-world-order/#introdu...

Re: No one knows how much the government can borrow

#28

Post by dharma1 » Sat, Jan 23, 2021, 8:38 PM UTC

xxpor wrote: post #16

dharma1 wrote: post #11

As long as much of the world’s trade is settled in US dollars, there is a demand for them, and some demand for US treasuries. The merry-go-round of the Fed increasing the money supply and buying US government debt with the newly created money can keep going for a while, but it will lead to a steady decline in the value of the dollar vs other currencies and some official inflation over time, as the cost of imported go…

Folks like to talk about what really keeps the world at peace (relatively speaking compared to pre-ww2), and while I think nukes are a large part of it, another huge part is dollar based settlement and the absolute devestating sanctoning power the US derives from it. That isn't to say sanctions are morally pure: they exact a huge cost on the regular people who live in the countries subject to them. However, they're s…

Absolutely, the result of de-dollarisation of world trade will be a shift in the world’s power dynamics. I think it’s pretty inevitable by now. I hope we have learned enough about history to be able to have economic competition/conflict without military conflict.

As a silver lining for some parts of America - a weaker dollar together with onshoring of some industries probably means some jobs will return to the US.

Re: No one knows how much the government can borrow

#29

Post by MrRiddle » Sat, Jan 23, 2021, 8:38 PM UTC

drtillberg wrote: post #14

> Remember that some people thought that government borrowing ... facilitated by quantitative easing (Fed bond-buying) ... was going to lead to substantial inflation. But it didn’t. Every time someone says "but where's the inflation" I sigh. Look at literally any financial asset, SP500, stocks, real estate, even bond values (the inverse of interest rates). There is your inflation. Maybe we like asset inflation, maybe…

How can you have inflation while most of the services and commodities people are using are not increasing in price? Sure, you have equities rising, but that’s about it. Inflation because call options are flooding the market? Bonds are going down, real estate market is stagnant.

Re: No one knows how much the government can borrow

#30

Post by alexpetralia » Sat, Jan 23, 2021, 8:39 PM UTC

drtillberg wrote: post #14

> Remember that some people thought that government borrowing ... facilitated by quantitative easing (Fed bond-buying) ... was going to lead to substantial inflation. But it didn’t. Every time someone says "but where's the inflation" I sigh. Look at literally any financial asset, SP500, stocks, real estate, even bond values (the inverse of interest rates). There is your inflation. Maybe we like asset inflation, maybe…

Yes this failure to distinguish different types of inflation (wage inflation, financial asset inflation, consumer goods inflation) is a big analytical oversight.