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U.S. on Track to Add $19T in New Debt over 10 Years

nytimes.com

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Re: U.S. on Track to Add $19T in New Debt over 10 Years

#61

Post by arrosenberg »

Rury wrote: post #59
arrosenberg wrote: post #49

Earlier quoted context omitted.

It doesn't reduce the value of the currency, it increases the supply of available money. This can drive additional demand and drive inflation that way. That's different than (e.g.) Roman-era debasement where they were using less valuable metals to mint coins and the value of the coin was based on the perceived metal content of the coin, rather than being fiat currency that follows supply and demand trends. If the cur…

> If the currency was debased, inflation would have occurred fairly evenly across the economy Nothing makes this necessarily true. As an example, if the government printed everyone in the world 100 trillion dollars, and everyone used it to buy as much house they could, and nothing else, then houses would skyrocket in price as this money spurred demand for houses causing a shortage of housing stock (as prices are a ma…

Wrong. If you debase your currency, by definition the cost goes up on goods even where demand is static. That's what it literally means - coins are now worth half because they have half the silver they used to.

We saw some inflation on food and gas prices in 2022 (for reason not directly related to monetary policy), but not in 2020 or 2021 when the cash was added to the economy - we saw inflation in assets because the Fed handed out cash to investors who deployed it on a limited pool of assets.

Re: U.S. on Track to Add $19T in New Debt over 10 Years

#62

Post by Rury »

arrosenberg wrote: post #61
Rury wrote: post #59

Earlier quoted context omitted.

> If the currency was debased, inflation would have occurred fairly evenly across the economy Nothing makes this necessarily true. As an example, if the government printed everyone in the world 100 trillion dollars, and everyone used it to buy as much house they could, and nothing else, then houses would skyrocket in price as this money spurred demand for houses causing a shortage of housing stock (as prices are a ma…

Wrong. If you debase your currency, by definition the cost goes up on goods even where demand is static. That's what it literally means - coins are now worth half because they have half the silver they used to. We saw some inflation on food and gas prices in 2022 (for reason not directly related to monetary policy), but not in 2020 or 2021 when the cash was added to the economy - we saw inflation in assets because th…

I'm not wrong at all. You can make coins with 1/4 the silver they use to, but if people don't demand more coins to make up for the debasement, there is no inflation seen in traded goods. There's nothing necessarily stopping anyone from accepting the 1/4 silver coin as equivalent as the 100% silver coin for the same good. However if someone is wiser about the debasement, and now demands 4 coins instead of 1 to make up for it = there's your inflation. Like I said, inflation only happens where demand happens. Demand can be broad based, but nothing necessitates it being evenly distributed.

Re: U.S. on Track to Add $19T in New Debt over 10 Years

#63

Post by ashwagary »

gitfan86 wrote: post #29
legitster wrote: post #16

I encourage people interested in this topic to read up on the Fiscal Theory of the Price Level. I flippantly refer to it as "MMT without the magic". But it really did a good job of explaining our current situation. When you have a long-term fixed rate mortgage, only some of the value is paid off by principal payments. The rest is being paid off naturally by inflation. Imagine paying off a mortgage made in 2003 dollar…

This is what the bitcoin people got right. The dollar is going down A LOT. This is also what the bitcoin people got wrong. You don't want to to denominate your asset in dollars. Yes BTC will hit 100k some day. But 100k will only buy a crappy used car at that point.

>This is also what the bitcoin people got wrong. You don't want to to denominate your asset in dollars.

Bitcoin people dont get that wrong, the "1 bitcoin = 1 bitcoin" meme is popular for that reason.

Having said that, fiat has no bottom, so bitcoin has no top. It will continue to increase in fiat value for the rest of its existence as long as the network technicals stay sound.

Re: U.S. on Track to Add $19T in New Debt over 10 Years

#64

Post by ashwagary »

MuffinFlavored wrote: post #35
SilverBirch wrote: post #33

Earlier quoted context omitted.

There's a lot of scary numbers, but here's a graph of the US budget deficit as a percentage of GDP[1] according to the CBO. Yes, the US has a deficit most years, and yes both the financial crisis and COVID lead to very large dficits. But between 1992 and 2000 a deficit of 4.5% became a surplus of 2.3%. So it's well within the possible to decrease the deficit by 7% of GDP over a relatively short period of time. If we…

> If we started that process today But we're not, right? Not only are we not doing that, we're nowhere close to that? We're still on tracking to collect roughly the same in taxation (leaving loopholes open for corporations on purpose) and spending more than ever (growing every year).

Even worse, $19T added to the debt is an extreme lowball by some expectations. Many estimates put the US national debt closer to $90T by the end of the decade.

The country is right on the edge of walking into one of the most expensive wars in its history as well as a few delayed economic disasters that would kick the money printer into much higher gear.

Trump adding $10T+ in a relatovely uneventful 4 years even before the massive inflation spike hit should give you an idea how quickly diminishing returns on QE can escalate spending.

Re: U.S. on Track to Add $19T in New Debt over 10 Years

#65

Post by Ekaros »

lotsofpulp wrote: post #17
2OEH8eoCRo0 wrote: post #14

Earlier quoted context omitted.

As long as they can continue making interest payments on the debt then what's the problem? It's all relative.

Which the feds can always do since they can issue money. The relevant question is can the US continue producing goods and services that are desirable on a global scale, one of which is a trustworthy society where you can mostly depend on the judicial system keeping things in order, for better or for worse.

And more importantly will others keep accepting USD. Or will they expect to be settled in something else be it other currency or some commodity. If others start to want something else than USD things can go sideways.

Re: U.S. on Track to Add $19T in New Debt over 10 Years

#66

Post by gitfan86 »

ashwagary wrote: post #63
gitfan86 wrote: post #29

Earlier quoted context omitted.

This is what the bitcoin people got right. The dollar is going down A LOT. This is also what the bitcoin people got wrong. You don't want to to denominate your asset in dollars. Yes BTC will hit 100k some day. But 100k will only buy a crappy used car at that point.

>This is also what the bitcoin people got wrong. You don't want to to denominate your asset in dollars. Bitcoin people dont get that wrong, the "1 bitcoin = 1 bitcoin" meme is popular for that reason. Having said that, fiat has no bottom, so bitcoin has no top. It will continue to increase in fiat value for the rest of its existence as long as the network technicals stay sound.

Bitcoin isn't unique in that though. Picasso paintings also have no top as long as their physical fundamentals stay strong.

Re: U.S. on Track to Add $19T in New Debt over 10 Years

#67

Post by arrosenberg »

Rury wrote: post #62
arrosenberg wrote: post #61

Earlier quoted context omitted.

Wrong. If you debase your currency, by definition the cost goes up on goods even where demand is static. That's what it literally means - coins are now worth half because they have half the silver they used to. We saw some inflation on food and gas prices in 2022 (for reason not directly related to monetary policy), but not in 2020 or 2021 when the cash was added to the economy - we saw inflation in assets because th…

I'm not wrong at all. You can make coins with 1/4 the silver they use to, but if people don't demand more coins to make up for the debasement, there is no inflation seen in traded goods. There's nothing necessarily stopping anyone from accepting the 1/4 silver coin as equivalent as the 100% silver coin for the same good. However if someone is wiser about the debasement, and now demands 4 coins instead of 1 to make up…

That assumes people are unaware suckers and would still only be true for a short time under metallist economies (until word gets out). My entire point was that it doesn’t work that way with fiat currency. Demand is driving inflated prices, but the money isn't being debased, the supply is increasing. Congress could remove the extra cash with taxes, which you cant do with debased coins, they have to be reminted entirely.

Re: U.S. on Track to Add $19T in New Debt over 10 Years

#68

Post by comte7092 »

SideQuark wrote: post #55
dragonwriter wrote: post #53

Earlier quoted context omitted.

> The US budget deficit doesn’t come from overspending in any particular area You are right, but even more, the US budget deficit doesn’t come from overspending at all . The deficit is about 2% of GDP. The US taxes at about 8.5% of GDP less than the OECD average. The US deficit is from undertaxing.

Bingo. And (as much as this crowd hates to admit it) the US undertaxes the middle class and poor to an incredible amount compared to other first world countries. OECD tax vs GDP [1] OECD rates US most progressive [2] (the rich pay more of the tax base, even when relative to their share of income). [1] https://www.oecd.org/coronavirus/en/data-insights/tax-to-gdp... [2] https://taxfoundation.org/news-obama-oecd-says-un…

Your second citation is pretty out of date, and it is pretty lacking in methodology.

For instance, does it include payroll taxes? Because that would skew the data pretty significantly.

Re: U.S. on Track to Add $19T in New Debt over 10 Years

#70

Post by SideQuark »

comte7092 wrote: post #68
SideQuark wrote: post #55

Earlier quoted context omitted.

Bingo. And (as much as this crowd hates to admit it) the US undertaxes the middle class and poor to an incredible amount compared to other first world countries. OECD tax vs GDP [1] OECD rates US most progressive [2] (the rich pay more of the tax base, even when relative to their share of income). [1] https://www.oecd.org/coronavirus/en/data-insights/tax-to-gdp... [2] https://taxfoundation.org/news-obama-oecd-says-un…

Your second citation is pretty out of date, and it is pretty lacking in methodology. For instance, does it include payroll taxes? Because that would skew the data pretty significantly.

OECD data includes payroll taxes (and all relevant taxes in each country). You can dig around on their site to find their tax data and methodology.

If you don't like the date, also dig around on their site to find anything up to date you like. The point I made is correct - and it's well backed by the OECD databases.

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