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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

#171

Post by hcmacro »

lamontcg wrote: post #161
sheepscreek wrote: post #143

Earlier quoted context omitted.

If not interest rates, what would you advise the Fed to use for controlling inflation? Please don’t say there’s no need to control inflation. That will wipe out any savings anyone has. Your money will be worth We’ve seen its ill effects time and again. Argentina has 211% inflation right now. It is a vibrant economy, crippled by inflation. People cannot save. Either spend all you have (it will be worth 1/4th in a year…

We need more inflation than 2% though. The fact that 211% is too high doesn't mean that 2% isn't too low. And the low inflation expectations leads to low interest rates which reduces the cost of money which is creating our financial sector inflation/bubble.

You should look up Wynne Godley and Sectoral Balances.

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

#172

Post by no_wizard »

csomar wrote: post #164
no_wizard wrote: post #154

Earlier quoted context omitted.

The Soviet Union lacked a domestic economy that could keep up with the needs of its population, and there by fell apart internally. I'd argue the US can do the same, but our domestic economy - at least on paper - is more functional the Soviet Unions ever was and can provide for its citizenry and is an important market for nations all over the world. That's a major difference than with the Soviet Union, and a key one.

I do not disagree with that; and that is also what my comment is about (the military is not the economy, it’s the other way around).

I agree, in so far as its the other way around.

The key difference in opinion that may be surfacing here, is that other nations are willing to co-operate and push interests that also further US interests because they get tangible benefits from the US being the dominate superpower (IE, the western worlds military, de facto).

This is a strong incentive for countries to look the other way in times of crisis. Arguably, because congress is inept at proper budgeting and such, we should already have trouble selling in the debt markets, but treasures still sell just fine and at an ultra low cost to the government, despite some notion of "downgrade" by one of the bond rating agencies (I think Moodys?).

If I was looking at the US right now, and all the political in-fighting problems we are having, I wouldn't have nearly as much faith in the US government and buying its debt. This should have made debt more expensive to sell, and it hasn't.

I posit, one reason is, keep the US propped up to a certain extent (IE, not raising the cost of the US government bonds by refusing to buy at current value) would be that we are the worlds de facto military, and western nations are increasingly leaning on us with the turmoil that has bubbled up recently, and they have every incentive to keep the machine going right now because of it.

US consumers are also a great market, currently, and I doubt anyone wants to see that crumble, and that plays a big role here too.

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

#173

Post by cvalka »

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?

A balanced budget amendment.

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

#174

Post by imtringued »

slowhand09 wrote: post #76
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 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 is more about the fact that money isn't some alien artifact but is created by a government that needs to credibly demonstrate that the money it issued is needed for tax payments.

If that credibility is lost, for example, by creating more money than it intends to tax, then you will see inflation.

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

#175

Post by smolder »

panick21_ wrote: post #129
PaulDavisThe1st wrote: post #67

Earlier quoted context omitted.

A lot of Democrats (not all, for sure) would be very happy to massively cut defense expenditure, which is a vast slice of federal expenditure. Alas, that has two problems: (1) US military spending is our own national version of socialism, in which we prop up communities by providing massive state subsidies, along with housing, healthcare, education and more to a large group of people (2) because of (1), it is hard to…

Cutting military alone wouldn't fix anything. Everybody has their own pet issues they want to cut. The reality is only broad taxes on the middle class or massive social spending can really change the long term situation. Not that cutting military spending wouldn't be smart.

There are a lot of Ron Swansons out there, who simultaneously decry big government and make their living directly from government spending.

> The reality is only broad taxes on the middle class or massive social spending can really change the long term situation.

Why the middle class, which has mostly been taxed into not existing? How about the upper class? As Warren Buffett says, they've won the class war, and gone a bit far with it. The lower classes are being depleted of their productivity through a kind of tragedy of the commons as they're relentlessly squeezed from above.

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

#176

Post by lucas_membrane »

jalapenos wrote: post #38
happytiger wrote: post #13

Let’s answer this man with his own damn quote : > History is useful for the thrill of knowing the past, and for the narrative (indeed), provided it remains a harmless narrative. One should learn under severe caution. History is certainly not a place to theorize or derive general knowledge, nor is it meant to help in the future, without some caution. We can get negative confirmation from history, which is invaluable,…

Isn't he just saying it's inevitable from what's observable? E.g. approaching the point where servicing the debt itself becomes untenable? There's nothing historical or predictive involved that I can see. If a group of people are telling you again and again, for decades, that "we're just not ever going to even slow down the pace we're wracking up unrepayable debt, no matter what", isn't it just a case of take them at…

Keynes was aware of the argument. It was he who said that, "The long run is a misleading guide to current affairs. In the long run, we are all dead."

> Extrapolate the obvious

OK. The list of things that are going to get worse before they get better is going to get longer before it gets shorter. There is a lot that has to change if we want to keep doing what we are doing. We are all in this alone, but we are chained to each other, and we can move only forward. Get used to it.

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

#177

Post by neilwilson »

KoolKat23 wrote: post #135
neilwilson wrote: post #127

Earlier quoted context omitted.

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.

So what? You can only import what you can export. In a floating system that swaps the currencies around just fine.

Draw it out and do the balance sheets. Local importers end up paying the local currency costs of exporters.

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

#178

Post by neilwilson »

strawberryfie wrote: post #133
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.

But they will have inherited the asset side of the debt from grandad won’t they.

That’s the connection. Debt is really saving and when people spend those savings it eliminates the debt.

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

#179

Post by neilwilson »

tfehring wrote: post #166
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…

Long-term interest rates aren’t set by the Fed, they’re market rates based on the Treasury’s demand for borrowing and investors’ demand for purchasing US government debt. If there were enough demand for zero-interest US government debt to support the Treasury’s borrowing needs, then the interest rate on that debt would already be zero. I’m curious, how would you advocate for using the labor market directly as a stabi…

Look up Japan. Then tell me long term government debt rates are set by the market

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

#180

Post by neilwilson »

c7THEC2DDFVV2V wrote: post #128
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…

Can you expand on this, I'm not 100% familiar with the way this is communicated and it just seems like mental gymnastics to avoid calling debt what it is.

If you hold a government Treasury are you in debt or do you have a saving asset?
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