We need a race to the bottom to devalue everything.
How will the US debt situation play out?
31–40 of 51 posts
Re: How will the US debt situation play out?
#32Ray Dalio exactly answers your first question in this video(45m): https://www.youtube.com/watch?v=xguam0TKMw8
The short answer is war, likely with China.
The long answer is civil unrest. Billionaires who feel threatened by people who want to re-distribute wealth (tax the wealthy), use their wealth to put "strongmen" into power to defend their interest. Strongmen destroy innovation which weakens the military, which invites enemies to challenge your strength. If the world feels that the value of your currency is under threat (and if you are at risk of losing a war, it is under threat), you lose reserve currency status, which means all of a sudden you can no longer import the goods your economy needs to function, then your economy and/or currency collapses.
> What should the layperson (US & non-US residents) do to safeguard against it?
The only way out of this is to produce more value than we spend and to tax billionaires (not for the money, but to decrease their ability to buy government influence).
We are pretty doomed until our aristocracy decides to start being responsible instead of greedy, which is unlikely.
You could also move to New Zealand. That's the plan that many of our greedy billionaires have when the consequences of their greed are fully realized... Just like a "senior" engineer writing really complex code might leave to another company when it's time to pay the maintenance cost for that complexity.
Re: How will the US debt situation play out?
#33Slightly above ‘average’ inflation-levels, compounded over time, creating an intrinsic tax on wealth and inflating away the debt-to-gdp ratio so it remains roughly the same or near-same levels. Combine that with an increase in retirement age, a reduction in retirement benefits, and an increase on social-security tax incrementally over the next decade. Gen Z will perhaps be the first with a retirement age of 69 (nice)…
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Re: How will the US debt situation play out?
#34Slightly above ‘average’ inflation-levels, compounded over time, creating an intrinsic tax on wealth and inflating away the debt-to-gdp ratio so it remains roughly the same or near-same levels. Combine that with an increase in retirement age, a reduction in retirement benefits, and an increase on social-security tax incrementally over the next decade. Gen Z will perhaps be the first with a retirement age of 69 (nice)…
Regarding retirement age;
Once upon a time it was irrelevant. Whatever age it was, you died before you hot there.
Then we decided that 60 is a good age. Most people die somewhat-soon after that, so you can store up value along the way, then spend it "after retirement". Back in the day most people entered the work force by 20 (usually a lot earlier) so nominally 40 years of work, and 5 to 10 of retirement.
Of course today lots of people go off to college and won't enter the workforce until well into their 20s. They have better health options, were better nourished in formative years, smoke less and can legitimately expect to live into their 80s.
So there's this arbitrary retirement age, which is based on life factors, but somehow its uncool to adjust the retirement age.
Let me reframe your point. Gen Z will perhaps be the healthiest generation in history. With a life expectancy into the 90s. (nice).
Re: How will the US debt situation play out?
#35US debt is fine as it is, and US will always be able to pay it (it can just print more money).
The issue is how much of the US government budget it takes to pay the interest, which is exploding right now as interest rate is 5%+, leaving a big bill for future generations.
This money comes from the same budget that contributes to medicare, social security, maintenance of roads etc.
The big bill for future generations isn't actually something the Americans will pay, but how its currency will weaken and lose its reserve status, as it will need to print more money.
Currency debasement has a lot of negative consequences, such as... huge inflation. Prices will go up.
Currencies of other countries will become stronger and the US is a country that is heavily reliant on imports, those imports will be more expensive for the average US American resident.
There are plenty of references of high debt in history, and the most recent ones happened in Latin America, check Argentina for example.
It went from being a rich country in the 60/70s to mass poverty Today, 50 years later, making its currency completely useless and now they are trying to kill the peso and just use the dollar, a currency they do not have the printing machine.
The dollar at some point might become a currency nobody would consider parking their money with, this has really negative consequences to the US, as having a stable currency is a pre-requisite for many investments.
For reference, the average PE ratio (price-to-earnings) for US companies are at least 2x of Brazil. Brazil has a somewhat stable currency(higher average inflation), but weaker than the dollar. People are less willing to invest in Brazilian companies because there's a currency risk.
Re: How will the US debt situation play out?
#36Earlier quoted context omitted.
What makes Swedish pensions a better system?
They have three tiers of pensions- the government pension, the employer/union pension, and the private pension. The government (“public”) pension is the primary one that everyone gets, whereas the US counterpart (SS) is more “break glass in case of emergency” (by design, anyway). ChatGPT estimates if this system were in the U.S., I’d be getting around $7,000/month as a retiree, from the public and employer pensions.…
I'm not sure I'd trust the ChatGPT number unless it shows its work. Is that inflation adjusted for your retirment age, adjusted for COL, including only the public pension or other parts, and what ages is it using?
An easy point of comparison is what the maximum benefit equates to in percentage of average gross income for the individual and what the taxes are for it. We see about 12% SS tax in the US and about 18% mandatory pension tax in Sweden (not counting the semi-mandatory). Benefit-wise we see earners at the ceiling getting about 30% in the US and about 20% from the mandatory portion in Sweden. Retirment ages are similar but about a couple years later for the US. Both systems have minimum retirement ages, survivor benefits, ceilings, and non-progressive fixed rates. I wasn't able to find any mention of the 15 year calculation. Also, the 59 1/2 retirment age you mentioned is not an option under SS nor Sweden's mandatory systems.
So yeah, it seems like the mandatory portion pays out less than SS, but might require fewer years of pay.
I'm not sure what criteria that we are using to determine if it's better as they seem very similar. If you want to work fewer years and get a smaller payout, that's possible under SS as well. If we want to include employer contributions as well, we would have to look at things like union employees, public sector employees, and employer contributions to DC plans in the US.
"I like that one’s retirement is funded by both the government and the employer, and optionally by the individual."
This isn't true. Participation by the individual is mandatory in either system. The only thing the government is covering under Sweden is in the event of childcare.
Re: How will the US debt situation play out?
#37> I don't know much about finance and global economics.
Neither do most people on HN. In fact, "global economics" is actually filled to the brim with wild speculation. Most people have very little idea how the future will work out, or overemphasize a "model" view that abstracts the reality of global politics and economics into something like a simple y = mx + b equation and then insist on the inevitability of their model.
You need to think more about power. Where does the US's power come from? Is that likely to change? How will the political situation change in America and what effect will that have on the global reality of US power and, crucially, the perception of US power abroad? Will the USD remain the defacto standard global currency and reserve? The further you get into the future the less certain we can be about any of these questions beyond simple speculation.
Re: How will the US debt situation play out?
#38Whaddabout the Singapore debt situation, how will that play out?
Re: How will the US debt situation play out?
#39Earlier quoted context omitted.
I can find YouTube videos and podcasts all day long talking about the “imminent” housing crash, and while I think these discussions are important and interesting to have, they’re little more than hypotheticals or thought experiments. I’m not saying “Brent Johnson” is a quack, but I would trust Warren Buffett over him.
You'd have to actually watch it to find that it isn't saying the things you've projected into it.
I'm not insinuating that the video at the link is discussing the housing market, that's just a very typical example of the "fearmongering" clickbait videos I see on YouTube.
Re: How will the US debt situation play out?
#40Earlier quoted context omitted.
It’s easy to make such a convincing video. Convincing to those with no expertise in the subject. But in 5 years when it hasn’t come to fruition will you remember how wrong he (and by extension you) are? Another conman will take his place and come up with a nice sounding theory that also boils down to: gold!
I think I follow what your intended point was, but from where I stand you appear to be tilting at an imagined opponent. Maybe you can clarify by elaborating on what you imagined the 5 year prediction to be? The "Dollar Milkshake" theory is simply something I found to be a plausible response to the inflation doom predictions of the 2008 cycle. I did look for a concise text summary before posting the video. They didn't…
In 5 years you’ll likely forget about this theory and this person because nothing will come of whatever predictions this person is making. For 50 years these sorts of people have been making the same sort of predictions and they have all been wrong. Empires all come to an end so eventually one of these charlatans will be right but not because of possessing insight. It’ll be a coincidence.