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US National Debt Surpasses GDP

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Re: US National Debt Surpasses GDP

#31

Post by adjejmxbdjdn »

JohnnyLarue wrote: post #29

In debt to... themselves. Oh no!

Not exactly.

The U.S. government is not the same entity as private U.S. entities.

The U.S. government is in debt to private U.S. institutions and persons.

While any issues that the U.S. government faces due to its debt won’t be because everyone will ask to collect on their debt at the same time, it’s a useful exercise to think about what would happen if they did do so, to test your implied claim that this is effectively the right hand borrowing from the left.

If everyone did collect at the same time, the following could happen: - The US government doesn’t pay. And a whole bunch of private entities would be dramatically poorer, but also, pretty much every bank and other financial entity’s balance sheet and reserves would break. There would be all sorts of terrible downstream effects. - The US government does pay, in which case it would have to cut massive number of services and increase taxes dramatically.

This situation isn’t gonna happen, but it does show that just the fact that the lenders are American doesn’t mean rhat there are no concerns. Especially since those lenders can very well choose not to buy American debt going forward if other options open up, such as the Chinese loosening monetary policy and boosting their consumer economy, or Japan growing its economy and exports since Japan already has mature and trusted sovereign debt instruments, but doesn’t have the economy to support the market size of U.S. debt, or Europe continues to issue significantly more debt, especially to build their defense industries.

Or, much more likely, a combination of all of these, along with other efforts such as, for example, countries like India, Nigeria, Brazil, starting to issue more debt to build a domestic renewable energy generation and transmission ecosystem in response to the Iran war.

The U.S. economy isn’t collapsing anytime soon. It’s too large, varied and strong for that.

But it’s been weakening nearly every pillar that it stands on for the last few years, and the fiscal debt risk is a major one of those.

Re: US National Debt Surpasses GDP

#32

Post by adjejmxbdjdn »

prepend wrote: post #18
OsrsNeedsf2P wrote: post #2

Are folks really optimistic about the US in the long term? Like obviously right now it's one of the best places to be for career growth and income, but do people really imagine staying here for the next 20, 30 years, or do they just not think about it?

One thing my economics professor taught me is that it’s about relative position across alternatives. The reason the US continues to grow and thrive despite insane debt is that other countries are worse. Try investing $100B in other markets stably. Now do that 100 times and the chaos of the US is preferred due to the massive debt of other countries, corruption, etc

The problem for the U.S. is that it’s becoming very much like those other countries.

We’ve lost all fiscal policy stability.

Central bank independence is being severely threatened.

Tax rates are all over the place.

Tariffs are all over the place.

Any industry/company can either be bailed out or completely destroyed based on the whims of the President (Spirit Airlines bailed out for no good reason, and offshore wind energy destroyed for good reason just as an example).

Some may like to think that this is a temporary problem, given the US’s historical fiscal and regulatory stability, but the problem with such actions is that once the floodgates are opened they’re very difficult to close back.

It will be hard for the next President, irrespective of which party they’re in, to resist engaging in similar actions. Heck, even if they’re the most upright individual, they would have to engage in arbitrary executive actions simply to undo some of the actions we have already seen, never mind what we will see for another couple of years.

There are people from scores of countries across the world that will tell us that once corruption slips in at the top, it’s very hard to stop it growing like a cancer.

Re: US National Debt Surpasses GDP

#34

Post by kilroy123 »

dlivingston wrote: post #16
kilroy123 wrote: post #14

Earlier quoted context omitted.

I left the US over 10 years ago. Not for any political reasons, but because I just wanted to live abroad all my life. This has given me an interesting perspective. I think the World is in a major transitional period. The next 5 years will be very rough for most regular Americans. Kind of like in 1939-40. It's going to be bad for a little while and then get better once a new world order is established.

Can you say more about the transitional period (the why and how)? I agree completely we are going through one.

Humanity lives in endless cycles. I believe we're experiencing a collision between a few shorter cycles and longer cycles. All at the same time.

1. a sort of 80 year forth turning kind of cycle (WWII was the end of one of these): https://en.wikipedia.org/wiki/The_Fourth_Turning

2. a larger super cycle of anacyclosis in the West:

https://anacyclosis.info/ https://en.wikipedia.org/wiki/Anacyclosis

3. a ~250 year cycle of empires rising and falling (US):

https://www.goodreads.com/en/book/show/6177860-the-fate-of-e... https://www.goodreads.com/book/show/52962238-principles-for-...

Now I don't think any of these theories perfectly map to the world. It's not black and white; there are shades of gray. The real world just isn't like that. But it's clear to me there are these shorter and longer cycles and we're about to wrap up several of these and a perfect storm is forming.

Re: US National Debt Surpasses GDP

#35

Post by kilroy123 »

BobbyTables2 wrote: post #28
kilroy123 wrote: post #14

Earlier quoted context omitted.

I left the US over 10 years ago. Not for any political reasons, but because I just wanted to live abroad all my life. This has given me an interesting perspective. I think the World is in a major transitional period. The next 5 years will be very rough for most regular Americans. Kind of like in 1939-40. It's going to be bad for a little while and then get better once a new world order is established.

What areas have you lived in? What did you find? I’ve come to appreciate how few English speaking countries there actually are in the world. Western Europe seems cute and glamorous but it feels like a lot of people not much above poverty are just trying to survive. (Hence small buildings and their characteristic way of life). Prices are high, taxes high, incomes low. (Sure, they might say they’re less capitalistic an…

[dead]

Re: US National Debt Surpasses GDP

#36

Post by bluefirebrand »

gucci-on-fleek wrote: post #30
bluefirebrand wrote: post #23

Earlier quoted context omitted.

Calgary's housing has gone kind of out of control too. It's slowed down now, but for a while it was crazy. I own my house in Calgary and my property value went up by ~250k since I bought in 2018. Lucky for me but kind of insane growth

I'm in Calgary too, and housing has definitely jumped a lot since Covid, but we're still not quite at the Vancouver/Toronto insanity of $1MM for a 1-bedroom apartment (and hopefully it stays that way!).

Yeah, I agree. As much as I like seeing the value of my property grow, I don't think it's overall very good for the city or society if no one can afford homes

Re: US National Debt Surpasses GDP

#37

Post by prepend »

adjejmxbdjdn wrote: post #32
prepend wrote: post #18

Earlier quoted context omitted.

One thing my economics professor taught me is that it’s about relative position across alternatives. The reason the US continues to grow and thrive despite insane debt is that other countries are worse. Try investing $100B in other markets stably. Now do that 100 times and the chaos of the US is preferred due to the massive debt of other countries, corruption, etc

The problem for the U.S. is that it’s becoming very much like those other countries. We’ve lost all fiscal policy stability. Central bank independence is being severely threatened. Tax rates are all over the place. Tariffs are all over the place. Any industry/company can either be bailed out or completely destroyed based on the whims of the President (Spirit Airlines bailed out for no good reason, and offshore wind e…

But the other countries are also becoming more like the other countries, more quickly.

Thus the US gets worse but less worse than alternatives. So US returns continue to grow.

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