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Will America's debt doom us?

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Re: Will America's debt doom us?

#161

Post by kachurovskiy »

JohnFen wrote: post #82
treis wrote: post #39

Earlier quoted context omitted.

>It tells us how many years of productivity we owe. That's not accurate though. We can pay off the debt tomorrow and skip the years of productivity. It really is an apples to oranges comparison. The debt isn't denominated in productivity. It's denominated in dollars that the government can create for "free". Of course there are knock on effects of creating enough dollars to zero out the debt, but it's not equivalent…

> It's denominated in dollars that the government can create for "free". The government cannot create wealth "for free". It can print more dollars, but in doing so it makes each dollar worth less. No wealth is actually gained. > there are knock on effects of creating enough dollars to zero out the debt Doing that is impossible, though. Reducing the value of a dollar means that you'll need even more dollars to repay t…

Imagine we have a company with 100 shares total. I have 1 share. Now you print 100 more shares and keep them. Sure, company is still the same but the wealth is redistributed, I have 2 times less of it.

Same with US dollars. Half of them might be held by non-US persons. Another quarter by US population. Printing dollars is a wealth redistribution excersice and a very effective one.

Re: Will America's debt doom us?

#162

Post by mikeash »

abecedarius wrote: post #134
JackFr wrote: post #36

Earlier quoted context omitted.

> it misses the obligation to pay the principal But you never really have to do that. You can just keep rolling them. If we could keep the debt at the same absolute level inflation and productivity increases would drive it into insignificance. Of course the idea of keeping it at the same level is a fantasy.

I wonder how people reconcile how it's OK to rely on progress to grow our way out of a debt burden but also incredibly irresponsible to expect progress to cope with our carbon problem. Both seem defensible to me but like they kind of need an adaptor to fit in the same worldview.

Historically, progress has resulted in more environmental damage and CO2 emissions. Relying on progress to fix these things is counting on a fundamental shift to happen. By comparison, progress historically has always increased GDP, so counting on progress to grow away our debt is just expecting the historical trend to continue.

Re: Will America's debt doom us?

#163

Post by tehabe »

_edo wrote: post #11

> Because debt-to-GDP is apples-to-nonsense. No it's not. Debt is measured in dollars. GDP is dollars per year. Debt/GDP is $/($/yr)=yr This ratio converts debt, a number it's hard to have intuition for, to years. It tells us how many years of productivity we owe. For those of us who don't manage $30 billion in assets years of productivity probably carries more meaning than big numbers with 12 zeros.

The problem is, state debt is not like personal or corparate debt. If you cut your spending to pay of a loan, it is usually not a problem. If the state cut its spending to pay back a loan, it means people have to spent more money on another spot to make up for the budget cuts.

We see this currently in Germany, the German government is proud of their budget but at the same time the infrastructure is crumbling, trains are delayed, bridges are in need for repair or even replacement, broadband doesn't reach all places and I don't want to talk about climate change and the structural issue to which it will lead.

There is also one more thing about state debt, many people invest in state debt because it is a secure investment for the retirement and when a country no longer takes debt, this possibility is gone.

The ideology to have little or no state debt is hurting the economy and will do so in the future. And I'm not even talking about a recession or a depression which will come sooner or later.

Re: Will America's debt doom us?

#165

Post by Ambele »

Yes this will doom us if it is not taken care of but I expect the American people will get smart and elect congressional leaders that will care of the growing national debt before we default.

9.8% of all of our government's revenues (tax dollars) are wasted on paying interest on the $22 trillion dollars of national debt(1)(2).

1) https://www.cbo.gov/publication/55342

2) https://www.usdebtclock.org/

Re: Will America's debt doom us?

#166

Post by PeterStuer »

PeterStuer wrote: post #57

What stands between the USD and the Zimbabwean Dollar is the worlds largest military/intelligence power not just prepared but using it's full strength to enforce the petrodollar.

I don't mind the downvotes, but I would rather see rebuttals that would change my mind.

Re: Will America's debt doom us?

#167

Post by samsonradu »

tehabe wrote: post #163
_edo wrote: post #11

> Because debt-to-GDP is apples-to-nonsense. No it's not. Debt is measured in dollars. GDP is dollars per year. Debt/GDP is $/($/yr)=yr This ratio converts debt, a number it's hard to have intuition for, to years. It tells us how many years of productivity we owe. For those of us who don't manage $30 billion in assets years of productivity probably carries more meaning than big numbers with 12 zeros.

The problem is, state debt is not like personal or corparate debt. If you cut your spending to pay of a loan, it is usually not a problem. If the state cut its spending to pay back a loan, it means people have to spent more money on another spot to make up for the budget cuts. We see this currently in Germany, the German government is proud of their budget but at the same time the infrastructure is crumbling, trains…

German infrastructure is top-class, trains work quite well and bridges are not collapsing. May I ask where you got this from?

EDIT

Please don't turn this into a flame war. I am slightly worried about the effects of mainstream media, as I've seen these kind of posts on Reddit also.

People keep hearing about the low/inexistent economic growth of countries like Germany or Japan and start thinking that these countries are a deep mess. The reality is quite far from it.

Re: Will America's debt doom us?

#168

Post by davinic »

MuffinFlavored wrote: post #15
crusso wrote: post #4

Like the housing bubble, our debt hasn't been a problem and it's not going to be a problem right up until it is a problem. It will be a black swan event and afterward everyone will claim that they saw it coming and "the other guy" ignored it.

In the mean time, are us Americans ever going to get a president that focuses on paying down the debt? How much would taxes have to go up (because spending can't go down, right?) for citizens to contribute their fair share of paying down the debt?

The answer can be zero. We also own the printing presses. This could act as a general tax on the economy without a tax rate hike.

Re: Will America's debt doom us?

#169

Post by noobermin »

logfromblammo wrote: post #157
MuffinFlavored wrote: post #15

Earlier quoted context omitted.

In the mean time, are us Americans ever going to get a president that focuses on paying down the debt? How much would taxes have to go up (because spending can't go down, right?) for citizens to contribute their fair share of paying down the debt?

Banish "fair share" from your vocabulary when speaking of taxation. That is a guaranteed way to derail a productive conversation, by shifting it into arguing about what is fair, rather than what would solve the problem. If we are intent on fairness, the generations that incurred the debts should be the ones forced to pay them off. So for the sake of argument, let's divide the populace by birth year, and institute a t…

What you're proposing goes against normal sensible morality, but the context is true.

Re: Will America's debt doom us?

#170

Post by jdhn »

bpt3 wrote: post #101
MuffinFlavored wrote: post #68

Earlier quoted context omitted.

This is a dumb unrelated question on my end but are the returns of Social Security very bad? If you put 6.2% (12.4% total with employer contribution) of your income away into index funds that grew at 7% per year, at $100k/yr gross salary ($12.4k/yr) from ages 25 - 65 (40 years), you would end up with $2.6m (in today's dollars). $2.6m converted into dividend funds with a 3% yield would be $6.6k/mo. I don't know anybod…

Social Security funds aren't allowed to be invested in the stock market, and are held in the form of US Treasuries [0]. There was talk of changing that under Bush 44, but his reform plans never gained any serious traction. [0] https://www.cbpp.org/research/social-security/policy-basics-...

>There was talk of changing that under Bush 44

I wish it had, I'd love to dedicate X% of my SS check to investing in the stock market.

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