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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

#51

Post by mamon »

howeyc wrote: post #32

This misconception needs to die. The government doesn't borrow money. The government doesn't need your money. The government prints money. They could stop accepting taxes tomorrow and still be able to keep spending. They print the money. Treasuries exist as an accounting fantasy for people to believe the government needs to borrow, they don't. Any treasuries outstanding today basically just represent dollars to be pr…

Another misconception that has to die is that governments can get away with printing money indefinitely. The concept itself is not new: Roman Empire also did the same, shortly before its fall. Soviet block countries did that before 1989. Venezuela and Zimbabwe also did it. See the common theme here?

Re: No one knows how much the government can borrow

#52

Post by xxpor »

dharma1 wrote: post #28
xxpor wrote: post #16

Earlier quoted context omitted.

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.

I do wonder what will really end up as the alternative though. The yuan and euro both have major structural issues of their own.

Re: No one knows how much the government can borrow

#53

Post by pstrateman »

farseer wrote: post #37
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…

For the average Joe, inflation is usually the price of milk, bread and eggs going up. America being an agricultural colossus with plenty of farm subsidies mean the price of essentials will not rise. Hence the unique manifestation of inflation in asset prices will not bring masses on the streets unlike most other countries. Coupled this with the fact that other countries are also printing money and are in worse shape…

The true increase in the cost of living is much higher than the official CPI.

CPI is nearly completely worthless for identifying inflation in the cost of living, which is what actually matters.

Re: No one knows how much the government can borrow

#54

Post by 1915cb1f »

titzer wrote: post #26
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…

This is untrue. Housing is part of the CPI, and you can see everything that's included here:

https://www.bls.gov/cpi/tables/relative-importance/2019.txt

Re: No one knows how much the government can borrow

#55

Post by [deleted] »

SpicyLemonZest wrote: post #48
Supermancho wrote: post #41

Earlier quoted context omitted.

https://chapwoodindex.com/ There are resources outside the CPI or individual verticals, to measure inflation.

This index doesn't pass the sniff test. 10% annual inflation would mean that someone making $100k today has the same standard of living as someone making $40k in 2010.

[deleted]

Re: No one knows how much the government can borrow

#56

Post by trident5000 »

newacct583 wrote: post #49
trident5000 wrote: post #20

Earlier quoted context omitted.

Inflation is not low, have you checked stock market lately? Have you seen home prices up 15% yoy? Education costs rising, auto, etc. There is a left and right tail of the inflation bell curve. High impact items are increasing in price rapidly while things like flat screen tv's stay low from certain market dynamics. Also because wages are not rising, inflation is rising faster than people understand even on left tail…

Asset price increases and inflation are entirely different things. The former represents growth, the latter is a dilution (sort of "good" vs. "bad", but not really, economics is complicated, yada yada). Education costs are indeed part of inflation, as are car prices. And yes, those are rising, but they're being offset on balance by other things (phones, say) getting cheaper. Look, inflation indexes are complicated an…

Yes my underwear is going to offset the rising prices of homes, education, healthcare, etc. Also even your example is incorrect, the iphone price keeps rising at a healthy clip. They can now be $1300.

Re: No one knows how much the government can borrow

#57

Post by throw0101a »

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.

> What happens to your currency in that process is debasement/hyperinflation.

Japan may disagree with that assessment:

* Interest rate: https://fred.stlouisfed.org/series/INTDSRJPM193N

* Inflation: https://fred.stlouisfed.org/series/FPCPITOTLZGJPN

* YEN-USD: https://fred.stlouisfed.org/series/EXJPUS

Re: No one knows how much the government can borrow

#58

Post by throw0101a »

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…

> 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.

Which is also why the US tends to have a trade deficit:

> The Triffin dilemma or Triffin paradox is the conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies. This dilemma was identified in the 1960s by Belgian-American economist Robert Triffin,[1] who pointed out that the country whose currency, being the global reserve currency, foreign nations wish to hold, must be willing to supply the world with an extra supply of its currency to fulfill world demand for these foreign exchange reserves, thus leading to a trade deficit.

* https://en.wikipedia.org/wiki/Triffin_dilemma

Re: No one knows how much the government can borrow

#59

Post by SpicyLemonZest »

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…

Under the conventional definition, "inflation" exclusively refers to an increase in the general price level, so it doesn't make a ton of sense to talk about "finding" the inflation or one sector or another. An increase in prices within specific industries isn't inflation, just a price increase.

(Of course, you're free to use nonstandard definitions if you'd like, but you can't just toss other perspectives out the window because they use the conventional ones.)

Re: No one knows how much the government can borrow

#60

Post by fastaguy88 »

snomad wrote: post #45
MrRiddle wrote: post #29

Earlier quoted context omitted.

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.

A McDonalds double cheeseburger meal costs $8. I remember when that was 3.99 not too long ago. Somehow I doubt that price difference is captured by the official 1 - 2% inflation rate.

Prices vary. While the price of a McD's meal may have doubled over some period of time (or space -- compare your neighborhood McD vs the one at OHare airport), MIT's billion prices project shows pretty conclusively that prices on average have been going up very slowly (< 2%/year) since the 2008 Great Recession.
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