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

fortune.com

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

#131

Post by panick21_ »

jalapenos wrote: post #49
dmckeon wrote: post #5

Congress-people have few incentives to restrain or reduce the national debt. There is plenty of talk, but little action. The event horizon may be distant, but the pull is inexorable. What could possibly solve this? Could we give representatives and senators bonuses for spending less and taxing more?

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…

Nonsense. The Gold Standard in no way prevents somebody (anybody) from taking on to much debt and going bust.

> The only thing that makes the current situation tenable is being able to print money.

That is factually wrong. The current situation isn't untenable from a financial standpoint. But over the medium term it would require hard choices.

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

#132

Post by throw0101d »

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…

> We owe a bit more than 1 year's GDP.

And who is this money owed to?

$24T is owed to US domestic entities, while $7T is foreign owned:

* https://usafacts.org/articles/which-countries-own-the-most-u...

Americans are mostly paying money to themselves.

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

#133

Post by strawberryfie »

neilwilson wrote: post #126

He's wrong. The US debt is just the amount of savings in US dollars that the non-government sector has accumulated from government spending that hasn't yet been paid back in taxes. In other words it is a component of the money supply that allows people to save safely for the future. The problem is the idea that this saving has to be rewarded in some way. It doesn't. The saving will happen anyway for status and insura…

Interesting definition of government debt, but those “paying back” the debt in future taxes are very unlikely to have any connection to those who incurred the costs to start with.

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

#134

Post by panick21_ »

specialist wrote: post #99
Stealthisbook wrote: post #53

He doesn't seem to recognize that the government debt is backed by not only the entire productive capacity of the nation, but also the willingness of creditors to tank the world denominated currency. It's possible that some political fights could temporarily sway the market but it would take a broader societal collapse to actually kill the dollar.

Yes and: The US dollar is worth as much as the US military says it is.

That's not how markets work. And the US military does not control the world either. The US military couldn't even the value of currency in Baghdad.

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

#135

Post by KoolKat23 »

neilwilson wrote: post #127
KoolKat23 wrote: post #111

Earlier quoted context omitted.

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.

It works for all currencies. Some currencies have higher savings rates than other currencies. The problem is calling that saving 'debt' and then catastrophising about it.

Most countries are not self-sufficient and do export/import and many countries are not able to issue debt in their own currencies.

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

#136

Post by panick21_ »

pavs wrote: post #92
aryehof wrote: post #82

The USA can continue overspending, lending and making payments, all while taxing minimally - for a limited time only. Eventually, that equation will need to change. The choices are tighten the belt and/or increase taxes, war and the appropriation of resources, and/or renege on debt and start printing money. All choices and consequences (in some cases dire) sadly left to the next and future generations.

You know I have been hearing this and its many incarnation debt related doom scenario for atleast 20+ years, when I first started following it. Probably longer. Every few years, when debt related doomed future story pops, I feel lile no one really knows what is going on, or even worse what they are talking about.

Nobody that is serious about the topic believed in some kind of doom scenarios. Indeed people who are actually in this topic pretty much agree on the general numbers on the topic. The 'doom' talk is from people who don't know shit. However that doesn't mean there is no problem.

There are plenty of people who know whats going on, its not even very complex. What people disagree about is the long term implications.

The reality is this, the US getting to the point where the debt servicing costs as much as the military. And future spending is known to be high simply by the already promised social benefits.

And the debt servicing could go much bigger if interest on debt goes up even slightly. Ever 1% of increase debt might result in a whole US military worth of extra debt serving per year.

So, eventually the US will either have to raise taxes broadly on the whole population, or cut social spending by a large amount. Both are politically untenable and thus have a high potential of not happening or resulting in a serious political crisis.

As long as neither of them happens, the situation is getting worse, and critically getting worse with ever increasing speed. And that simply isn't possible to go on forever.

So its easy to go into an exponential curve of things getting worse and worse. All the other countries that ran into problems also had people say 'wouldn't happen here'.

So this isn't a doom for the next couple years, even decades but even until then, spending large parts of your GDP with debt servicing isn't really great way to spend money either.

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

#137

Post by jalapenos »

panick21_ wrote: post #130
jalapenos wrote: post #112

Earlier quoted context omitted.

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 w…

Non of that has anything to do with government debt. The gold standard, has never limited government spending. During the classical goal standard plenty of government had debt, plenty of governments went bust.

Well I mean this is the internet, where no comment is so absurd as to avoid confidently being made. But I'll bite.

So tell me: if an entity has to be able to repay its debt in gold, which it has limited stocks of, and can't get more without difficulty, how does that not limit their spending compared to if they can print bits of paper to repay their debt?

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

#138

Post by csomar »

neilwilson wrote: post #126

He's wrong. The US debt is just the amount of savings in US dollars that the non-government sector has accumulated from government spending that hasn't yet been paid back in taxes. In other words it is a component of the money supply that allows people to save safely for the future. The problem is the idea that this saving has to be rewarded in some way. It doesn't. The saving will happen anyway for status and insura…

That's using a lot of fancy words to define debt. Debt is debt: money or value to be paid back, in the future.

> In other words it is a component of the money supply that allows people to save safely for the future.

All debts have risk. There is no zero risk instrument, as the currency itself can devalue even if you get your basis back.

> The stabilisation policy for an economy needs to be in the market for labour, not the market for money.

Not sure what this means. Maybe you have an idea that you want to better articulate?

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

#140

Post by csomar »

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…

> MMT says we don't need to think about this the way we think about personal and corporate debt.

I thought the recent inflation surge has debunked MMT (something which I almost bought, myself). Or is that not enough inflation?

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