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Nassim Taleb says the U.S. is in a ‘death spiral’ over government debt

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Re: Nassim Taleb says the U.S. is in a ‘death spiral’ over government debt

#111

Post by KoolKat23 »

raincom wrote: post #97
slowhand09 wrote: post #76

Earlier quoted context omitted.

MMT basically says "its ok, we can just print more money". How did that work for Venuzuela? Lets see... 1.00 US Dollar = 3,615,588.83 Venezuelan Bolívares. The 6 inch thick stack of currency required to buy a roll of toilet paper would be more efficient than the toilet paper. Printing more money just devalues the work product of everyone before that. Republican attitudes about tax? Surely you jest.

MMT works well, if exporters want to swap their real assets (commodities, food, chips, metals, labor) with US dollars (nominal). No one wants to export their real stuff to Venezuela unless the latter pays in US dollars.

Don't know why you're being down voted, it's widely accepted that it only really works for currencies that are reserve currency status. It could also work if you were entirely self-sufficient with no exports/imports. All on the proviso that humans are quick to react to inflation, using perfect information, which we're not and which we don't have.

Re: Nassim Taleb says the U.S. is in a ‘death spiral’ over government debt

#112

Post by jalapenos »

LargeTomato wrote: post #87
jalapenos wrote: post #49

Earlier quoted context omitted.

It's a solved problem - the gold standard. The only thing that makes the current situation tenable is being able to print money. Put simply, the government doesn't actually view it as a problem. If you have an unlimited credit card you never have to repay, that's not a problem for you but for everyone else. Bit of an unfortunate omission from the US constitution really. That's the only way they'd have kept it - other…

Which gold standard? There are many. Is everything backed by gold? So no loans, debt, or bonds? This is deflationary because the total value of stuff grows but the monetary base stays the same. Is there a fiat currency backed by gold? How will you avoid the monetary base growing larger than the total quantity of gold in the world? How is this functionally different from today?

The following one: simply remove the fiat, and let the market take over again.

I.e. the same way commerce was carried out everywhere for approximately forever.

It's presumed a gold standard would return in that scenario, but could be something else.

I assume this is how it'll end up naturally though. No one will end up willing to take the other country's currency in cross border trade, so that's where hard currency will return.

Re: Nassim Taleb says the U.S. is in a ‘death spiral’ over government debt

#113

Post by Gow8876 »

CygnusX-1 wrote: post #93

Why compare debt against GDP? For a person, debt to income ratio is important, but I think debt to assets is a better indicator of how likely the debt is likely to be paid off (vs being defaulted.) For the US, if you divide debt ($33T) by assets ($270T), that ratio is just 12%. This ratio will grow into a big problem only in a massively deflationary scenario when the value of all assets goes down a lot while debt sta…

For USA debts, it is falling. The last 3 years Fed need to buy the left over new bills unsold. In the past, 100% being sold to public and sovereign. But the last 3 years spooked US Treasury as routinely only half sold. Janet even had to fly over to China to "kowtow" to Xi to not sell but buy. It wasn't reported much in the west, but widely in the east and exceedingly humiliating if you able to read the chinese reporting. Essentially now, Fed is directly printing money to American public without going through hoops. Coincidentally the last 3 years inflation exceed way higher than 2% even though interest has been increased from 0% to 4+%.

Re: Nassim Taleb says the U.S. is in a ‘death spiral’ over government debt

#114

Post by RecycledEle »

Ron Paul said this in 1984.

Imagine an alternate reality where the USA elected Dr. Ron Paul president in 1984, passed a constitutional amendment requiring a balanced budget in 1985, paid off its debt by 1992, and never allowed the federal government nor any state to runa deficit again because any cash flow shortfall automatically triggered an increase in all tax rates by double the percentage of the shortfall. So if the government of the State of California spent 10% more than they took in in 2023, they would see all tax rates automatically increase by 20% in 2024, which would provide pressure on their state government to stop spending.

Re: Nassim Taleb says the U.S. is in a ‘death spiral’ over government debt

#115

Post by RecycledEle »

CygnusX-1 wrote: post #93

Why compare debt against GDP? For a person, debt to income ratio is important, but I think debt to assets is a better indicator of how likely the debt is likely to be paid off (vs being defaulted.) For the US, if you divide debt ($33T) by assets ($270T), that ratio is just 12%. This ratio will grow into a big problem only in a massively deflationary scenario when the value of all assets goes down a lot while debt sta…

$27 trillion compares to a GNP of $26 trillion.

If we owe a year's income, we are in trouble.

Re: Nassim Taleb says the U.S. is in a ‘death spiral’ over government debt

#116

Post by Our_Benefactors »

Gow8876 wrote: post #113
CygnusX-1 wrote: post #93

Why compare debt against GDP? For a person, debt to income ratio is important, but I think debt to assets is a better indicator of how likely the debt is likely to be paid off (vs being defaulted.) For the US, if you divide debt ($33T) by assets ($270T), that ratio is just 12%. This ratio will grow into a big problem only in a massively deflationary scenario when the value of all assets goes down a lot while debt sta…

For USA debts, it is falling. The last 3 years Fed need to buy the left over new bills unsold. In the past, 100% being sold to public and sovereign. But the last 3 years spooked US Treasury as routinely only half sold. Janet even had to fly over to China to "kowtow" to Xi to not sell but buy. It wasn't reported much in the west, but widely in the east and exceedingly humiliating if you able to read the chinese report…

> exceedingly humiliating if you able to read the chinese reporting

Given that what passes for “exceedingly humiliating” is extremely different between the two cultures, this seems more like packaging the transaction to be more palatable for a domestic Chinese audience that dislikes the idea of their leadership doing business with America.

Re: Nassim Taleb says the U.S. is in a ‘death spiral’ over government debt

#117

Post by coldtea »

nickff wrote: post #24
PaulDavisThe1st wrote: post #16

We owe a bit more than 1 year's GDP. Most families that own a house owe substantially more than 1 year's income. Last time we reduced the annual deficit to zero, the usual debt hawks all reversed their position and said "this is terrible". We've demonstrated in my lifetime that we can do this. The fact that "we" don't want to right now has more to do with Republican attitudes towards taxation than anything else. MMT…

Comparing a government's debt to its GDP is like comparing a couple's debt to their employers' total revenues. The country's government doesn't own all its residents' property, and is usually unable take their income streams. MMT says a lot of things, but people only seem to follow it when convenient.

>Comparing a government's debt to its GDP is like comparing a couple's debt to their employers' total revenues. The country's government doesn't own all its residents' property, and is usually unable take their income streams.

Doesn't matter, since it's a relative comparison, not an absolute one.

And as a proxy of the severity of the issue it's good. The government might not take "all its residents' property, and is usually unable take their income streams", but getting part of those is exactly where it gets the money to pay the debt (plus printing money, with its own side-effects).

Re: Nassim Taleb says the U.S. is in a ‘death spiral’ over government debt

#118

Post by coldtea »

dkjaudyeqooe wrote: post #72
PaulDavisThe1st wrote: post #65

Earlier quoted context omitted.

The debt is owed by us, the American people. Thus we compare to the total (economic) resources available to us, the American people.

That's not true, it's not like if the US defaults you become personally liable. We're more like shareholders, and they are never debtors.

>That's not true, it's not like if the US defaults you become personally liable.

Citizens might not become "personally liable" in a legal sense, but they get similar consequences, reduction in wealth, poverty increase, etc, that somebody "personally liable" for their personal debt would get.

A country wide failure of economy can be even more devastating to individuals than some personal debt they default on.

Re: Nassim Taleb says the U.S. is in a ‘death spiral’ over government debt

#119

Post by bdjsiqoocwk »

KoolKat23 wrote: post #109
CygnusX-1 wrote: post #93

Why compare debt against GDP? For a person, debt to income ratio is important, but I think debt to assets is a better indicator of how likely the debt is likely to be paid off (vs being defaulted.) For the US, if you divide debt ($33T) by assets ($270T), that ratio is just 12%. This ratio will grow into a big problem only in a massively deflationary scenario when the value of all assets goes down a lot while debt sta…

Your asset base is in truth meaningless (and often very inflated). The true measure is your ability to pay this debt and in order to pay this debt you need to generate revenue, at a country scale this revenue is GDP. A bank's first think to look at is affordability, are you able to actually pay the installments on this. Recoverability of initial capital is secondary and only matters in a liquidation event, you don't…

> Your asset base is in truth meaningless

If you believe this, do you also believe that debt is meaningless, because you can print money to pay it?

Re: Nassim Taleb says the U.S. is in a ‘death spiral’ over government debt

#120

Post by WhereIsTheTruth »

fragmede wrote: post #55

The fentanyl drug addiction crisis and the TikTok digital addiction crisis are more of a problem than government debt, from where I'm standing. there's also the housing crisis to consider, as well as the job market. government debt death spiral isn't a thing. fentanyl is.

TikTok is the least of your problems

https://www.theguardian.com/global-development/2024/jan/31/m...

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