Democrats massively deficit spend to save the economy because Republican policy tends to lead to economic peril, but Republicans oppose it, except when they are in power, during which they massively deficit spend not as a necessary evil but to cut taxes for the wealthy. It’s head spinning.
No one knows how much the government can borrow
171–180 of 326 posts
Re: No one knows how much the government can borrow
#172Ray 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
#173Earlier quoted context omitted.
Are house prices inflation or appreciation? It may be unfounded but is an increase in value always inflation? (Serious question, not disagreeing with your statement.)
Modern days, the word "inflation" tend to refer to how government measures price increases based on a basket of core consumer goods. And in that case, appreciation and inflation are completely different things. But when talking about housing/asset prices in aggregate, a 10% appreciation means you need 10% more money to buy the same asset, thus losing 10% purchasing power. Whether you call that appreciation or inflati…
Housing is a debt market. Houses don't cost 10% more just because prices have increased 10%. Manipulatedd interest rates have made debt service 15% cheaper. It's not that simple. Sure, you need 10% more for the down payment - I'll give you that.
Re: No one knows how much the government can borrow
#174As 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…
Printing dollars to buy treasuries won't work forever. China has already started tilting away from treasuries and holds almost a trillion dollars less than they did a few years ago.
Now there is talk of the Fed issuing notes with durations longer than 30 years...
There will be consequences eventually
Re: No one knows how much the government can borrow
#175Earlier quoted context omitted.
The term hyperinflation needs to fall out of the lexicon. In every casual economic discussion it's the favorite apocalypse goto word for people, and every one seems to think it's right around the corner. It's not going to happen.
Why not? Is there something that makes the US immune? Also, people fixate on the "hyper" part and assume the US is going to go full Zimbabwe/Venezuela where an egg costs a trillion dollars, but even sustained non-hyper inflation of 10% or 20%/year would wreak havoc on most people's retirement funds or mortgages.
The highest rate of inflation the US ever hit was in the 1980 (https://www.usinflationcalculator.com/inflation/historical-i...) at 13%.
The world did not end, and the rate was not sustained. This time period corresponds to high interest rates because it has to, but the value of loans was depreciating rapidly.
Since then the Federal reserve has had a target inflation rate of 2% over time and if you look at the data they've hit it.
So yes, the US has substantial protections against uncontrolled changes in the inflation rate - that's the Federal Reserves mission statement.
Re: No one knows how much the government can borrow
#176It’s quite simple: Anyone can borrow as much as someone is willing to lend.
That said, the government doesn’t borrow money. They create it.
Re: No one knows how much the government can borrow
#177Earlier quoted context omitted.
> He has had the resources and status to access any scholar on the topic he would like. So did Bill Gross of PIMCO, one of the largest fixed-income (bond) management firms in the world (AUM: $1.9T): * https://en.wikipedia.org/wiki/PIMCO He bet that interest rates would rise in 2011 after QE(2). Keynesian macroeconomists like Krugman said they wouldn't. Krugam was right: * https://www.businessinsider.com/this-was-the-…
Economists as a whole don't have a great track record of predictions here, either. You know the saying, right? Economists have successfully predicted 9 of the last 6 recessions.
> You know the saying, right? Economists have successfully predicted 9 of the last 6 recessions.
You know that the person who said/wrote that was Paul Samuelson, one of the most important economists in the 20th Century, right?
> To prove that Wall Street is an early omen of movements still to come in GNP, commentators quote economic studies alleging that market downturns predicted four out of the last five recessions. That is an understatement. Wall Street indexes predicted nine out of the last five recessions! And its mistakes were beauties.[20]
* https://en.wikipedia.org/wiki/Paul_Samuelson#Aphorisms_and_q...
He literally wrote the (text)book on economics:
Re: No one knows how much the government can borrow
#178It’s quite simple: Anyone can borrow as much as someone is willing to lend. That said, the government doesn’t borrow money. They create it.
They _can_ create it. But they mostly borrow (via bonds like treasury bonds), rather than create. Only those countries' gov't who can't borrow at a low enough rate would create - such as venezuela.
Re: No one knows how much the government can borrow
#179Earlier quoted context omitted.
The term hyperinflation needs to fall out of the lexicon. In every casual economic discussion it's the favorite apocalypse goto word for people, and every one seems to think it's right around the corner. It's not going to happen.
Why not? Is there something that makes the US immune? Also, people fixate on the "hyper" part and assume the US is going to go full Zimbabwe/Venezuela where an egg costs a trillion dollars, but even sustained non-hyper inflation of 10% or 20%/year would wreak havoc on most people's retirement funds or mortgages.
Wouldn't it be "good" for people's mortgages, especially if they've got a long term fixed rate?
Re: No one knows how much the government can borrow
#180I 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…
> If a government can demonstrate that it borrows money to invest in the economy and increase future taxes -- e.g., by building infrastructure, educating the population, researching top-notch tech -- by all means, borrow more!
That's remarkably shortsighted. You're missing whole swaths of knock-on effects of borrowing. What if I told you that the government only borrows money on the backs of the working class, who pay for it in increased prices that the economist class doesn't measure because they have lost touch (compare the increase in price of a quarter pounder vs cpi)... Then would it be worth it unlimitedly borrow?