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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

#181

Post by chii »

jennyyang wrote: post #97

The only time people care is when they care. And you can't predict when that will happen. It's like a flock of birds flying in the air, you can't figure out which individual bird caused the first change in direction, but it quickly spreads across the entire flock. The other fallacy is that inflation is here, it's just not being measured by the Federal Reserve properly. There is crazy inflation in things like house pr…

> There is crazy inflation in things like house prices and assets like stocks.

but these items are not required for somebody to live - so they are not used in the inflation calculation.

Re: No one knows how much the government can borrow

#182

Post by throw0101a »

erichocean wrote: post #142
throw0101a wrote: post #82

Earlier quoted context omitted.

The technical explanation why, when rates are zero, and you 'print money', inflation does not (or at least in all our current experiences has not) appear(ed): * https://en.wikipedia.org/wiki/Liquidity_trap It's what Keynesians (like Krugman) generally follow, and they've been right to date. Krugman for one has been writing about this since (at least) 1998 when Japan entered this situation: * https://www.brookings.edu…

Krugman said that Trump, if elected, would bring global a recession. [0] Oops. Point being, he tends to let politics cloud his judgement—especially in the last 10 years or so. [0] https://www.politico.com/story/2016/11/krugman-trump-global-...

And he quickly (2-3 days) retracted that call once he recovered from the initial despair of the 2016 election results:

> But will the extent of the disaster become apparent right away? It’s natural and, one must admit, tempting to predict a quick comeuppance — and I myself gave in to that temptation, briefly, on that horrible election night, suggesting that a global recession was imminent. But I quickly retracted that call. Trumpism will have dire effects, but they will take time to become manifest.

> In fact, don’t be surprised if economic growth actually accelerates for a couple of years.

* https://www.nytimes.com/2016/11/14/opinion/trump-slump-comin...

* http://krugman.blogs.nytimes.com/2016/11/11/the-long-haul/

We all make mistakes: the important things is to own up to them and learn from them.

Have any of the people who said Bernanke's QE would cause (hyper)inflation and currency debasement publicly recanted?

Re: No one knows how much the government can borrow

#183

Post by chii »

lend000 wrote: post #139

This really is one of the most interesting and consequential economic questions of our time. And I do imagine we will get an answer, because there is no political will to cut spending anymore. The reason that all this stimulus hasn't affected measured inflation all that much is because the mechanism of monetary policy tends to be top-heavy, creating low interest rates which obviously benefits the rich more than the p…

> print a universal stimulus check, tax it, and spend the tax

why go thru the trouble of printing money to give to people, only to tax it back by a bit? The money is created out of thin air in this case - the size of the pie hasn't changed yet, so it is a cause for inflation if it isn't met by a corresponding increase in productivity.

Re: No one knows how much the government can borrow

#184

Post by throw0101a »

MR4D wrote: post #133
throw0101a wrote: post #57

Earlier quoted context omitted.

> 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

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…

UK debt-GDP has hit 250% during the Napoleonic Wars and 240% after WW2:

* https://en.wikipedia.org/wiki/File:UK_GDP.png

* https://en.wikipedia.org/wiki/United_Kingdom_national_debt#H...

The UK is still rolling forward that debt:

* https://www.theguardian.com/business/2014/oct/31/uk-first-wo...

Japan peaked at 180%.

The US can always revert the Trump tax cuts (for the rich), as they didn't seem to do anything useful and get some extra revenue. That should help.

Re: No one knows how much the government can borrow

#185

Post by gonehome »

Swizec wrote: post #125
flatline wrote: post #119

Earlier quoted context omitted.

20% is 1 of 5, hardly easy to miss. A lot of that money goes toward expenses in HCOL areas, where more people live, and the salaries are higher. A lot goes into consumer goods. People buy stuff, a lot of it. A lot of the rest is in the stock market in retirement accounts because nobody has pensions anymore. Americans don’t save a lot of money, and are not particularly fiscally responsible, that money is not hiding in…

> 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…

A Bay Area house that isn’t total trash is easily 3M on the peninsula.

Elsewhere, yeah - you’d be fine if you don’t spend stupidly.

Re: No one knows how much the government can borrow

#186

Post by chii »

Clewza313 wrote: post #131
XorNot wrote: post #107

Earlier 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.

Inflation only happens if the production cannot keep up with demand. I believe that the US's productive capacity is very high, and have a huge slack (due to heavy mechanisation and automation). If demand grows, production can keep up - and thus, no inflation.

Countries that import most of their supply (like in venezuela) cannot have slack in their production, and thus you see high inflation in times of high demand and low supply.

Re: No one knows how much the government can borrow

#187

Post by chii »

sdenton4 wrote: post #134
AnimalMuppet wrote: post #93

Earlier 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…

> you create money to pay for things

only your own citizens would accept this money, and if the citizenry cannot "create things" (for example, the country does not have the capital investment to have created machinary/automation or infrastructure), this printing of money is meaningless. MMT is crackpot theory that is lacking imho.

Re: No one knows how much the government can borrow

#188

Post by dcolkitt »

nly wrote: post #174
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…

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

The counterpoint is Japan, which has 280% debt-to-GDP ratios (about double the US), and is still selling government bonds at 0% interest rates.

I'm not saying demand is infinite, but it very well could be significantly higher than the current supply. In particular older demographics tend to heavily favor low interest rates and high money supplies. Old people tend to have high savings, and are risk-averse enough that they'll park it in liquid sovereign bonds even at negative real yields. And the continuing aging of American and world demographics isn't changing for the next century.

Re: No one knows how much the government can borrow

#189

Post by throw0101a »

headmelted wrote: post #104
throw0101a wrote: post #68

Earlier 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-…

We’re basing the prediction of inflation on the notion that there’s more money “sloshing around out there”. I’m not convinced that more of it is sloshing. Wage growth has been largely absent for many people in the 12 years since the crisis, and as a result those people haven’t had more money to spend. The money clearly exists of course given that it’s been printed, but there’s a good chance it just isn’t finding it’s…

> I’m not convinced that more of it is sloshing.

A lot of the 'inflationistas' only look at the quantity/supply of money (M1/2), and don't bother examining what it is doing. The velocity of money is an important component:

> This view can also be represented by the so-called “quantity theory of money,” which relates the general price level, the total goods and services produced in a given period, the total money supply and the speed (velocity) at which money circulates in the economy in facilitating transactions in the following equation:

* https://www.stlouisfed.org/on-the-economy/2014/september/wha...

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

As you said, if it's just sitting around, it's not going to effect CPI:

* https://en.wikipedia.org/wiki/Money_supply#Link_with_inflati...

Re: No one knows how much the government can borrow

#190

Post by alexmingoia »

chii wrote: post #178
alexmingoia wrote: post #176

It’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.

Treasury bonds are bought with USD. Where does USD come? The government prints it. Borrowing doesn’t fund the government, the printing press does.

At the bottom of the tower of USD is printing money. ~80% of treasuries are held domestically, and the foreign buyers purchase it with USD that came from the treasury.

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