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

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

#91

Post by thebradbain »

PaulDavisThe1st wrote: post #67
bigstrat2003 wrote: post #40

Earlier quoted context omitted.

> The fact that "we" don't want to right now has more to do with Republican attitudes towards taxation than anything else. No, it has just as much to do with Democrat attitudes towards spending. You're right that the Republicans are partly to blame. But to balance a budget requires cutting spending as much as, if not more than, increasing revenues. The problem is that ~everyone thinks using their preferred approach (…

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…

The active duty military vote is not actually a solid republican voting block, contrary to popular belief: in 2020, they swung +8 for Biden [1]. It’s the veterans who are solidly (2/3) conservative, currently, but even that’s lessening [2].

Unfortunately I don’t think a majority of either party wants to reign in military spending, considering every admin including Obama and Biden has increased it since Carter, even though likely granting such a blank check is financially irresponsible (i.e. trillions unaccounted for in budget audits [3]). Both parties just want to please that bloc of votes, because it also has ripple effects on the rest of the nation’s votes to be seen as “good on military”.

I personally think our military could be just as effective if we tightened the wallet, but I don’t think either party actually wants to.

[1] https://www.economist.com/united-states/2021/10/14/military-... and https://www.nbcnews.com/think/amp/ncna1245542

[2] https://news.gallup.com/poll/118684/military-veterans-ages-t... (2009, but the trend has only gotten deeper)

[3] https://www.reuters.com/world/us/pentagon-fails-audit-sixth-...

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

#92

Post by pavs »

aryehof wrote: post #82

The USA can continue overspending, lending and making payments, all while taxing minimally - for a limited time only. Eventually, that equation will need to change. The choices are tighten the belt and/or increase taxes, war and the appropriation of resources, and/or renege on debt and start printing money. All choices and consequences (in some cases dire) sadly left to the next and future generations.

You know I have been hearing this and its many incarnation debt related doom scenario for atleast 20+ years, when I first started following it. Probably longer. Every few years, when debt related doomed future story pops, I feel lile no one really knows what is going on, or even worse what they are talking about.

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

#93

Post by CygnusX-1 »

Why compare debt against GDP? For a person, debt to income ratio is important, but I think debt to assets is a better indicator of how likely the debt is likely to be paid off (vs being defaulted.) For the US, if you divide debt ($33T) by assets ($270T), that ratio is just 12%. This ratio will grow into a big problem only in a massively deflationary scenario when the value of all assets goes down a lot while debt stays constant. In an inflationary scenario, 12% is not a problem.

I like Taleb's writings and agree with him on most things, but seems to me that the sky is not falling.

(Obtained the debt and asset values from Google Bard)

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

#94

Post by reducesuffering »

matthewaveryusa wrote: post #58
berserk1010 wrote: post #33

Earlier quoted context omitted.

Take a look at Zeihan's video where he shows in a graph how US debt level compares to other major economies. https://youtu.be/mcZPOuI-vcU?t=939 . US is in the middle of the pack. US is going to be ok. Also, watch until 20:38. You will see how screwed up some countries are when it comes to debt.

I started watching and couldn't stop until the end. Now the only question I have is how much should I believe Zeihan? He makes a lot of bold assertions, what's his track record?

Zeihan is informed and generally right, better than 95% of sources. However, there are certain things he will get wrong imo, such as details and a certain siding of the Nagorno-Karabakh conflict, and portraying Navalny as far more militarily hawkish than he is.

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

#95

Post by apexalpha »

I think that's a bit overblown. The US debt-to-GDP isn't that high.

Though, I have to say, running 6,5% deficits in fiscal years with no immediate crisis or direct war seems a bit extravagant. If that becomes the norm it could spiral out of control.

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

#96

Post by greazy »

Stealthisbook wrote: post #54
jalapenos wrote: post #38

Earlier quoted context omitted.

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…

Servicing the debt is an entirely political act. If the US government wants to pay its bills, it does. The alternative is unlikely, but interesting-what if the US just says no? What enforcement mechanism is there? The biggest trade partner, biggest military, and cultural hegemon says "what are you gonna do about it?" and you do what?

This kind of happened under trump with the WHO. https://news.yahoo.com/amid-plans-quit-u-not-214130290.html?...

Very little if anything was affected.

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

#97

Post by raincom »

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 works well, if exporters want to swap their real assets (commodities, food, chips, metals, labor) with US dollars (nominal). No one wants to export their real stuff to Venezuela unless the latter pays in US dollars.

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

#99

Post by specialist »

Stealthisbook wrote: post #53

He doesn't seem to recognize that the government debt is backed by not only the entire productive capacity of the nation, but also the willingness of creditors to tank the world denominated currency. It's possible that some political fights could temporarily sway the market but it would take a broader societal collapse to actually kill the dollar.

Yes and: The US dollar is worth as much as the US military says it is.

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

#100

Post by elashri »

CygnusX-1 wrote: post #93

Why compare debt against GDP? For a person, debt to income ratio is important, but I think debt to assets is a better indicator of how likely the debt is likely to be paid off (vs being defaulted.) For the US, if you divide debt ($33T) by assets ($270T), that ratio is just 12%. This ratio will grow into a big problem only in a massively deflationary scenario when the value of all assets goes down a lot while debt sta…

Doesn't this mean also you need to get an estimate on a more complex number, which is how much of US assets can be liquidated in a way that would help you pay the dept?

I know that this is true in case of companies and individuals but how this will play our with governments? I don't know. It does not own the majority of these assets but we are talking about government dept as liabilities. Yes, they will not default as they can keep printing money (and compete with cosmic inflation rate /s) but it wouldn't help the economy and will make matter worse with time.

But you will need to fight inflation which in part means you raise interest rate which in turn increase dept service and that would make you more dept. I probably wrong but I don't feel like this is a black and white situation.

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