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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

#261

Post by mcosta »

tomp wrote: post #193
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...

Nobody was right about 2020.

Re: No one knows how much the government can borrow

#262

Post by georgeplusplus »

the US dollar has been losing value relative to other currencies though since covid happened on the order of about 20% so far.

I believe the inflation that the 2008 crisis was supposed to bring was curtailed by the promise that the Feds QE would be temporary. However 12 years later, it has turned out to be untrue. Also, China was a big buyer of treasuries in 2008 as opposed to now..

Today, The fed essentially is buying its own debt through Blackrock (which I didn’t see the article mention)

Bottom line is the idea of how much a gov can borrow is hand wavy and arcane because ultimately the currency is backed by pure faith. the US Dollar will cease to have value when people stop taking it.

Maybe it’s not studied more because It’s better to stop the things that will lead to that devastating point before it happens and things like buying up your own debt and handing out checks that don’t cause any economic production cause that faith to be pushed further and further to that limit.

Re: No one knows how much the government can borrow

#263

Post by neilwilson »

Of course we do. We can borrow as much as people want to save in the currency of issue.

Because the two are identical by accounting identity

And there is no need at all to pay people to do that. They will do it naturally for lots of reasons, insurance, status or just good old fashioned mercantilism.

States borrow in the same way your bank borrows when you pay money into your checking account. It's a function of the way the accounting works, not a statement of moral virtue.

Re: No one knows how much the government can borrow

#264

Post by kukx »

throw0101a wrote: post #194
kukx wrote: post #166

Earlier quoted context omitted.

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…

> Housing itself, like stocks, is considered an asset and is not part of inflation.

The CPI is an arbitrary indicator set and counted by the government in secrecy, the same entity that has the incentive to keep its value low. Even if someone trusts the government, it does not mean they should trust it completely.

* https://www.forbes.com/sites/perianneboring/2014/02/03/if-yo...

* https://www.forbes.com/sites/greatspeculations/2020/08/31/is...

As I mentioned before printing money not backed by the creation of value diminishes the value of money. Otherwise why bother working. The government could print money for all of us and we could party all the time. The printing press was invented quite a while ago, I wonder why no one come up with this solution earlier!

The debt is a burden and increasing it, increases the burden. You can argue of utility of increasing the debt in bad times, but then it should be decreased in good times. If it is not happening then there is something fundamentally wrong.

Re: No one knows how much the government can borrow

#265

Post by tomp »

mcosta wrote: post #261
tomp wrote: post #193

Earlier quoted context omitted.

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...

Nobody was right about 2020.

Don’t be so sure about that.

Rokos is up 44% - they are much smaller in terms of capital but probably trade similar strategies (global macro).

https://www.bloomberg.com/news/articles/2021-01-11/chris-rok...

Re: No one knows how much the government can borrow

#266

Post by hardwaresofton »

throw0101a wrote: post #189
headmelted wrote: post #104

Earlier quoted context omitted.

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 supp…

Really good video explanation of the difference (and the importance therein) between the monetary supply and the velocity of money:

https://www.youtube.com/watch?v=l0mh7cCjwDU

Re: No one knows how much the government can borrow

#267

Post by pseudopro »

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…

Wrong. You don't have any clue what you're talking about. Fractional reserve banking exists to create money regardless of how much money is being printed. Inflation is the measure if price increases overtime. Velocity does not equal inflation, it indicates greater consumer demand for goods and thus can signal rising prices.

The government does borrow money. It borrows it from a central bank by selling it bonds. Bonds for which the public owes the future payments. Thus the government borrows from the public.

Put down the Marx and new monetary theory bullshit. Money has value, money has meaning, money is real. Your understanding is flawed.

Re: No one knows how much the government can borrow

#268

Post by dctoedt »

Railsify wrote: post #203
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-…

Krugman recently came out and said almost all of his advice about globalism was wrong. The man can't be trusted.

Citation, please? Krugman has been laudably willing to confess error; I wasn't aware he'd done so on this point.

Re: No one knows how much the government can borrow

#269

Post by dctoedt »

dnautics wrote: post #180
anticristi wrote: post #69

I 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 pa…

> 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 ....

"Objection, your honor — assumes facts not in evidence."

Re: No one knows how much the government can borrow

#270

Post by disgruntledphd2 »

eloff wrote: post #159
flatline wrote: post #138

Earlier quoted context omitted.

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 recomm…

The trouble with this approach (although rational for an individual) is that if everyone who can does this, we end up with even more of a global savings glut than we already have, and interest rates go even more negative.

As an aside, it's very odd to me that we have so much money sloshing around, and yet we're not spending it on infrastructure that would help us get off the fossil fuel treadmill and towards a more sustainable system.

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