Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

No one knows how much the government can borrow

noahpinion.substack.com

Post reply on HN
Print view View original

231–240 of 326 posts

Re: No one knows how much the government can borrow

#231

Post by egypturnash »

Swizec wrote: post #150
TheOtherHobbes wrote: post #145

Earlier quoted context omitted.

You'd be amazed how easy it is to spend $10m a year. Real-estate, private jets, yachts, trophy cars, trophy alimony payments, security, art collections, horse breeding, interior design, fashion, private islands, expensive educations for the kids, bequests, public philanthropy, legal fees covering both public and personal disputes, investment management fees, political sponsorship and activism... I'm not suggesting an…

Oh for sure. But there’s this wide spot in the mid 6-figure range where you can’t afford any of that and have way more than you can spend. Typical middle class trappings aren’t a concern, upper class trappings are inaccessible. So what do you do? Personally I’m dumping it into index funds and business ideas. Maybe thinking about buying a house soonish.

All the art of your fursona you could ever want.

Re: No one knows how much the government can borrow

#232

Post by epistasis »

mr_toad wrote: post #226
rubyn00bie wrote: post #76

I'd really like to point out this: > Hyperinflation is so incredibly destructive that you’d think macroeconomists would spend a lot of time studying the phenomenon, figuring out when and why it happens. Especially because the answer to the question of hyperinflation is also the answer to the question of how much the government can borrow. An understanding of hyperinflation would give us a flashlight to shine down the…

> It's really hard to default when your debt is in your own currency. That’s true, but it misses the point because printing money is debasing your currency, not defaulting on debt. And if it’s true that borrowing $x billion and printing money can be done without consequences ‘almost indefinitely’, then why stop at x? Why not 2x, or 10x, or 1000x?

I think that is the point though, that the very worst that can possibly happen is hyperinflation.

Why not stop at 1000x? That's the entire point of the article, we don't know the situations that set off currency debasement well enough. We all assume that there will at least be some period of normal inflation first, before we get to hyperinflation though.

When we have become the global currency, there is also great risk when we do not have enough dollars and treasury bills out there. Because the world's savings are pretty much equivalent to our "debt." As there is more wealth in the world and as more of that wealth is held in US dollars or in US T-bills, if we do not continue to deficit spend, or somehow get more money supply, there are other risks too.

Re: No one knows how much the government can borrow

#233

Post by Swizec »

tunesmith wrote: post #200
Swizec wrote: post #125

Earlier 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…

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 mut…

> a lot of people are just going to try and save like crazy

Exactly. You save the money you don’t know how to meaningfully use right now.

Re: No one knows how much the government can borrow

#234

Post by epistasis »

onlyrealcuzzo wrote: post #173
analyst74 wrote: post #109

Earlier quoted context omitted.

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.

The other specific thing about mortgages and other debt is that banks are a source of new money when they create loans. Banks do not even have to have a fractional reserve on hand any more, and have far more flexibility to create money as long as they can survive the stress tests. Which means that banks are far more in charge of the money supply than most acknowledge.

Which can cause a huge amount of inflation in housing, if there's not enough of it to go around for extended periods of time.

Re: No one knows how much the government can borrow

#235

Post by alexmingoia »

mr_toad wrote: post #213
alexmingoia wrote: post #190

Earlier quoted context omitted.

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.

They could opt to pay for it out of tax revenues. Or they can issue new bonds to repay old bonds. They can print money, but the optics are bad. The loss of confidence in the value of the dollar is as much a cause of hyperinflation as the actual money supply. Loss of confidence in the value of the dollar can rapidly increase the velocity of money, which means that less money supply is needed. This causes more inflatio…

It’s all printed money. Taxes are paid in USD. USD comes from... the government creating it from nothing.

Tax revenue is old printed money. Bonds are future printed money. All government revenue is money they created.

Re: No one knows how much the government can borrow

#236

Post by epistasis »

chii wrote: post #181
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.

Stocks, no. But houses are generally considered essential. Or at least I home they will be. With the way that my community has accepted mass homelessness without any concern fir allowing new housing to be built, I fear that we may regress from the 20th century position of housing being a human right.

Re: No one knows how much the government can borrow

#237

Post by epistasis »

ironmagma wrote: post #230
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…

The government creating money is the country borrowing money from itself. At some point, a good portion of that money needs to be paid back, in the form of destroying said printed money.

Simply not true, especially if wealth grows and people hold onto money as savings.

The money supply needs to increase to account for how people are using it. When there's not enough money, it's far far worse than inflation.

Re: No one knows how much the government can borrow

#238

Post by mr_toad »

alexmingoia wrote: post #235
mr_toad wrote: post #213

Earlier quoted context omitted.

They could opt to pay for it out of tax revenues. Or they can issue new bonds to repay old bonds. They can print money, but the optics are bad. The loss of confidence in the value of the dollar is as much a cause of hyperinflation as the actual money supply. Loss of confidence in the value of the dollar can rapidly increase the velocity of money, which means that less money supply is needed. This causes more inflatio…

It’s all printed money. Taxes are paid in USD. USD comes from... the government creating it from nothing. Tax revenue is old printed money. Bonds are future printed money. All government revenue is money they created.

What I mean is that they don’t need to necessarily print more money, or at least print 100% of the debt.

Re: No one knows how much the government can borrow

#239

Post by Aperocky »

dcolkitt wrote: post #188
nly wrote: post #174

Earlier quoted context omitted.

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…

The bank of Japan literally to hold half of that.

It's just printing cash with extra steps.

Re: No one knows how much the government can borrow

#240

Post by [deleted] »

throw0101a wrote: post #210
Clewza313 wrote: post #207

Earlier quoted context omitted.

Do you really think a rich country of 100M hasn't done its homework on this? I'm personally partial to Matsutani's Shrinking-Population Economics : https://www.amazon.com/Shrinking-population-Economics-Lesson... From a review: " The parlous state of Japan's pension system is well known, but Matsutani reviews the projections: by 2030, contributions will cover only 44% of expenditure, leaving a projected yearly deficit…

> Do you really think a rich country of 100M hasn't done its homework on this? I'm sure they have. But we're all a bunch of randos on the Internet to each other, which is why I'm asking for citations: I'd like to hear the sources which people's thoughts come from so I can better assess them. Otherwise the person on the other end of the screen is just another crazy from /r/wallstreetbets. :)

[deleted]
Post reply on HN