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

Re: No one knows how much the government can borrow

#191

Post by lend000 » Sun, Jan 24, 2021, 2:50 AM UTC

chii wrote: post #183

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.

Because if they just print the money and add "money printed" to the Treasury's balance sheet, they are no longer pretending that the dollar is bound by some rules of legitimate currencies, which would surely send shockwaves through the financial system.

Yes, there is deadweight loss and time wasted this way, but it prolongs the game of trying to appear to be a fiscally legitimate government, and it ensures that everyone gets something, not just the beneficiaries of existing government works.

Re: No one knows how much the government can borrow

#192

Post by throw0101a » Sun, Jan 24, 2021, 2:58 AM UTC

lend000 wrote: post #100

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-…

Everybody in the industry is making predictions (with 0 dollars on the line) constantly, so cherry-picking different credentialed people to support a narrative is pointless. Especially in the field of macroeconomics where a few individuals are making decisions behind closed doors that can radically alter the economy. I do tend to put more weight on the predictions of people who statistically understand markets. By th…

I know who Dalio is. I've read his Principles. He's a smart cookie. I think he's wrong.

The inflationists have been squawking about since QE started under Ben Bernanke way back in 2010:

> We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment.

* https://economics21.org/html/open-letter-ben-bernanke-287.ht...

Krugman has been saying we don't have to worry about it for just as long since we're in the zero-lower bound territory:

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

Krugman has been writing about this since 1998 as Japan enter this territory a couple of decades before the rest of us:

* https://www.brookings.edu/bpea-articles/its-baaack-japans-sl...

Can you point me to the theory(-ies) that Dalio uses in his predictions for inflation? He may end up being right, but unless he can explain why, then he's just throwing darts. Show me the math you base your predictions on: at least with Krugman/Keynes, if they are wrong, models can be examined and improved on (like they were with stagflation in the 1970s).

As for Dalio's All Weather portfolio, Meh:

* https://canadiancouchpotato.com/2015/07/06/raining-on-the-al...

Re: No one knows how much the government can borrow

#193

Post by tomp » Sun, Jan 24, 2021, 3:05 AM UTC

njarboe wrote: post #27

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/#i…

Just because he's been thinking about it doesn't mean he's right.

His funds posted record losses (-20%) in 2020.

https://www.bloomberg.com/news/articles/2020-11-06/bridgewat...

Re: No one knows how much the government can borrow

#194

Post by throw0101a » Sun, Jan 24, 2021, 3:10 AM UTC

kukx wrote: post #166

throw0101a wrote: post #120

Earlier quoted context omitted.

> The consequences are negative and sooner or later we will see them, or it is likely that we are already deeply affected. This was published ten years ago (November 2010): > We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset pu…

There is the CPI, but it does not represent all prices. House prices and stock went up a lot, in many cases to irrational levels. The young people without a house feel the pain. They will inherit the national debt as well. Now the commodity prices steadily increase. Add to it increasing wages and more expensive imports and we will see rising costs of production and in consequence the CPI.

The CPI takes into account housing, specifically the carrying costs (which is 'rent equivalent'). Housing itself, like stocks, is considered an asset and is not part of inflation.

> [Young people] will inherit the national debt as well.

You know who else will inherit the national debt? Their children, and grand children, and great grand children, and great-great grand children. Not too long ago the UK rolled forward debt from the South Sea Bubble (1700s), Napoleonic Wars (early 1800s), Crimean War (late 1800s), and WW1 (1910s):

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

As long as economic growth is higher than the interest rate of the debt, it's generally not a problem. And interest rates have been, with some gyrations, dropping for over 700 years:

* https://www.visualcapitalist.com/700-year-decline-of-interes...

Re: No one knows how much the government can borrow

#195

Post by cs702 » Sun, Jan 24, 2021, 3:20 AM UTC

There's persuasive evidence that high levels of government and private sector borrowing tend to precede Bad Stuff™.

The World Bank published a detailed report about precisely this topic on December 2019, right before the pandemic, at https://www.worldbank.org/en/research/publication/waves-of-d... -- here's the first paragraph of that report, summarizing the findings:

"The global economy has experienced four waves of debt accumulation over the past fifty years. The first three debt waves ended with financial crises in many emerging and developing economies. The latest, since 2010, has already witnessed the largest, fastest and most broad-based increase in debt in these economies. Their total debt has risen by 54 percentage points of GDP to a historic peak of almost 170 percent of GDP in 2018."

That was written right before the pandemic. Since then, governments and businesses have borrowed aggressively. It's safe to say that globally, we are in uncharted territory. As to what happens next, your guess is as good as mine.

Re: No one knows how much the government can borrow

#196

Post by codecamper » Sun, Jan 24, 2021, 3:21 AM UTC

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…

printing money is essentially a wealth tax on everyone that owns the money. It's a flat tax. However, it also can cause prices to rise, and then... what will they do?

Re: No one knows how much the government can borrow

#197

Post by chii » Sun, Jan 24, 2021, 3:24 AM UTC

em500 wrote: post #86

titzer wrote: post #26

Earlier quoted context omitted.

"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…

You probably need another correction: CPI does not count the cost of a mortgage, nor interest payments in any direct way. What the CPI estimates is the price of shelter , by surveying renters how much rent they pay, and house owners how much rent they think their house would rent for. It's a bit frustrating that there are so many misunderstandings around this topic, while the BLS has clear and extensive explanations…

it's more that people have an innate desire to own (their residence). When they see prices of houses grow, they feel disenfranchised. They blame it on inflation - because to them, the house hasn't changed when its price grew.

Re: No one knows how much the government can borrow

#198

Post by mr_toad » Sun, Jan 24, 2021, 3:25 AM UTC

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…

It’s all going into the housing market. Try getting a loan for anything else and you need a pound of flesh as collateral.

Re: No one knows how much the government can borrow

#199

Post by chii » Sun, Jan 24, 2021, 3:27 AM UTC

lr4444lr wrote: post #144

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…

Not to mention the inelastic necessities of healthcare, education, and housing, which don't make it into the CPI basket.

> the inelastic necessities of healthcare, education, and housing, which don't make it into the CPI basket.

they are all covered: https://www.bls.gov/cpi/questions-and-answers.htm#Question_1...

see :

https://www.bls.gov/cpi/factsheets/medical-care.htm

https://www.bls.gov/cpi/factsheets/college-tuition.htm

Re: No one knows how much the government can borrow

#200

Post by tunesmith » Sun, Jan 24, 2021, 3:29 AM UTC

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…

Boy, I don't understand this scenario at all. At 150-200k/year, a lot of people are just going to try and save like crazy. CAPE is high, financial planners are saying that "safe withdrawal rates" are no longer 4% or even 3.25%, but below even 2.5% - even if you're not in the very HCOL areas, you're looking at needing to save more than three million dollars to retire, which can take a very long time when expecting muted market returns in the future.