I would suggest reading This Time Is Different: Eight Centuries of Financial Folly by Carmen M. Reinhart and Kenneth Rogoff. It is quite academic, but it comes the closest to answering this question that I have ever seen.
No one knows how much the government can borrow
151–160 of 326 posts
Re: No one knows how much the government can borrow
#152let's find out
Re: No one knows how much the government can borrow
#153Earlier quoted context omitted.
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 abo…
Does MMT work if you're not the reserve currency? (Honest question; I don't know enough about the theory to say.) But it is really an economic question. What will be the results if you run your economy this way? What will be the results if you do so as the reserve currency, and what will be the results if you do so when you're not?
MMT doesn't even really work when you are the reserve currency. It's psuedoscience. It absolutely doesn't work when you aren't the reserve currency.
Re: No one knows how much the government can borrow
#154Ray 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/#i…
Probably an interesting read.
But, as always, predicting the future is not possible, even when looking at the past.
But we can, to some extent, predict the outcome of things that are already happening. Not too hard if someone jumped out of a plane without parachute, and even then you'll need an error margin.
Re: No one knows how much the government can borrow
#155Earlier quoted context omitted.
> Dean Baker goes after people who claim that Japan has suffered terribly from its debt burden, arguing that Japan has actually done pretty well. But he's wrong: Japan has done better than he says > Dean looks at GDP per capita. But Japan's aging population means that you really want to look at GDP per working-age adult. And by that measure Japan's growth has been essentially the same as America's […] > The truth is…
You can't just ignore all the people who aren't working though? One of Japan's specific problems (which will also hit much of the West in a decade or two) is that society is aging fast and the ratio of retirees to working people is increasingly unsustainable.
Exactly. Just reading those quotes (haven't read the linked article) leads me to think that you can't ignore the huge liabilities comprised of education, medical care and pensions.
Re: No one knows how much the government can borrow
#156Earlier quoted context omitted.
Does MMT work if you're not the reserve currency? (Honest question; I don't know enough about the theory to say.) But it is really an economic question. What will be the results if you run your economy this way? What will be the results if you do so as the reserve currency, and what will be the results if you do so when you're not?
MMT works so long as you've got the ability to conjure your own money. (Eg, not on the Euro, or a currency pegged to another currency.) The idea is that you create money to pay for things, and then pull back excess money through taxes. (As opposed to pulling in money through taxes, using it to pay for things, and whining that you don't have enough.) So it 'works' as long as you have your own independent national curr…
Another mind flip: the scarce resource isn't labor - but energy.
Edit: A gallon of oil is equivalent to roughly 400 hours of human labor. Manual work is nothing compared to the energy contained in fossil fuels (or external energy sources in general). An argument could be made that the economy is in decline due to this, that the sources of fossil fuels are getting more expensive. Most of the cheap sources have been used up already. There is still a lot of oil left, but it's a lot more expensive (offshore, fracking) to extract than it used to, and it's getting worse.
Re: No one knows how much the government can borrow
#157Without a debt ceiling I presume it’s until no one will loan it any further money.
Re: No one knows how much the government can borrow
#158I can't help feeling that the question is ill-posed. It's not "how much", but "why" that matters. Think about it: Would you borrow $10,000 to a friend who opens a dentist with a solid business plan? Probably yes. Would you borrow $1000 to a friend to cover an existing debt? Probably not, or, if you are very generous, you would gift them the money. If a government can demonstrate that it borrows money to invest in the…
[deleted]
Re: No one knows how much the government can borrow
#159Earlier quoted context omitted.
> Now start talking the top 1-2% and the story changes dramatically. Probably the top 5-6%. The numbers are lower but the behavior is similar. You’d be surprised how soon you hit the “More money than I know what to do with” line. Make 150 to 200k/year (not uncommon on HN) and what are you gonna do, buy a new car every year? Rent is paid, food is paid, clothes are good, 1 or 2 vacations per year, go out to eat wheneve…
My ex...liked to spend money. We made 300k combined in 2019 in a MCOL area, and I still have no idea where it all went. Mortgage, nice cars, eating out, a couple vacations - all gone! I’ve heard of people making 7 figures and can barely afford their lifestyle. Rule of thumb, people spend what they make. Some spend on saving/investing. I think that’s what sets apart the top percentage with a few exceptions, they make…
Most people just ramp up their lifestyle when they make more money.
I've been petty conservative about doing that and living below my means since the start of my career. In the beginning I was saving 80% of my income. That dropped over time as I got married and had to accept ramping up my expenses, but I've saved enough over the years to be about halfway to financial independence by my mid thirties. I strongly recommend intensely saving as the only fiscally responsible way to live. I don't think it's affected my happiness negatively at all. I couldn't buy everything I wanted, but having that safety net was well worth it in exchange.
Re: No one knows how much the government can borrow
#160Earlier quoted context omitted.
Turkeys think they have a great life right up until Thanksgiving. While I’ll readily concede that Japan has surprised everyone, at some point in time the sheer magnitude will overcome the lenders’ belief. Their ability to repay, and then it all goes downhill very fast. That’s the thing - hyperinflation happens fast. You usually don’t see inflation, high inflation, higher inflation, and then hyperinflation. Instead yo…
As Noah says in the article. The question he's addressing is how to know when we are approaching the cliff. We all agree it is out there but we can have a much better society if we know how far. If we fall off the cliff of course that is bad. Conversely if we cripple our opportunities because we are afraid, but the cliff is really many many trillions of dollars further away, that is also bad.
That seems akin to predicting the stock mocket... If you, as a lender, could predict before everyone else when the cliff was approaching, then you would stop lending sooner.
If everyone does that, then the cliff moves closer, and your algorithm loses all predictive power.