US debt levels : worrying or not

rl27's picture
Rank: Baboon | 101

Can someone enlighten me why people don't discuss the US debt levels more? At the moment it's around $23.6 trillion with nearly 109% debt to GDP ratio and the pandemic will likely make this worse. Is it just a case of too big to fail or is this something the world economy should worry about going forward?

Comments (64)

Mar 27, 2020

Personally, I believe they're worrying. No country in the world is immune to debt. With that being said, neither party seems to care - I recommend you vote for local leaders who will commit to common sense budget and spending practices. Also, really the only way to balance the budget is to scale down our military spending, but the only other country willing to take up our mantle in that respect is a communist, one party, authoritarian state. I shudder to think the world under Chinese military rule.

Mar 27, 2020

Agree it is worrisome.

Cutting military spending isn't the only way to reduce it. There are a lot of ways. Military, social programs, earmarks...

A good start would have been excluding the $25M for the JFK Center of the Performing Arts in the stimulus package.

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Mar 28, 2020

MS?! Hard to believe that is required in an emergency package.

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Mar 30, 2020

And the $65mm for the ADL, SPLC, and friends...

"Work ethic, work ethic" - Vince Vaughn
Mar 27, 2020

We definitely need to cut our military budget but if we cut 100% of the military budget we would still run a huge annual deficit. The reality is, our spending has spiraled out of control in all areas. We need tax increases across the board (that is, on everyone, not just the wealthy) and spending cuts on everything.

Mar 28, 2020

Agreed. One thing I've noticed, since some people have such a hard-on for Scandinavian countries, is that they tax the everliving shit out of their middle class. Informed consent I suppose.

It would be nice to get Americans to understand that is how you get all the shit you want, but we have one party that thinks tax cuts cut deficits and another that hardly seems to notice deficits.

Controversial
Mar 28, 2020
Dr. SBWM:

Personally, I believe they're worrying. No country in the world is immune to debt. With that being said, neither party seems to care - I recommend you vote for local leaders who will commit to common sense budget and spending practices. Also, really the only way to balance the budget is to scale down our military spending, but the only other country willing to take up our mantle in that respect is a communist, one party, authoritarian state. I shudder to think the world under Chinese military rule.

In a perfect world, we'd be able to make drastic cuts to our spending and reduce the size and scope of the Federal government to the essential. Unfortunately the military budget is the way it is because all those tanks we keep buying (but don't have enough people to man) is to keep folks in Bumfuck, USA employed because their shitty little town has one employer that everyone depends on.

In addition the US Military is the employer of first and last resort because so long as you have a pulse you can probably gain employment. Also the Federal government is forced to keep that fatass 400 Lbs potato chip eating fuckface alive so there goes funding for food stamps, Medicaid, etc. Also what about all those asshole parents who fuck like rabbits and bust out an army of kids who then need to be on free school breakfast, lunch, and even dinner programs.

Fact is the ever increasing overbalance of the Federal government and Balkan-like attitude is the reason why our deficit is the way it is. Just look at all the pork barrel funding former Congressman Byrd received for the shitty excuse of a state, West Virginia!

Mar 28, 2020

RedRage you are speaking my language man

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Mar 27, 2020

The debt is crazy high but as long as there is demand for the dollar, the fed has ammunition to keep interest rates low without worrying about inflation, and so the debt is less of an issue. People gotta put their money somewhere so in a sense it's all relative. If other countries/regionds are more f-ed up than the US, the US debt can keep climbing. And as is, the US is still the best place to park large amounts of money safely.

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Mar 27, 2020

What if Treasuries get downgraded again? Would Treasuries be the safest place to park money?

Mar 28, 2020

Considering the possible devaluation of the dollar after unlimited Fed ammo, I doubt there's going to be the same value for the USD as a safe haven currency as it is today. People will find new ways to put their money: maybe crypto (not a huge fan of), or real estate, or JPY/CHF, whatever. The USD currently derives most of its value as a flexible currency for international use, but if it comes at risk of devaluation (like Trump wants to, and JPow's policy will lead to), then I can see many people, including myself, moving to another proxy currency such as the CHF.

I doubt the US is going to last as hegemon though. China (excluding the number of deaths) has rebounded with production back online, although lower. It has already begun catering to manufacturing stuff required by the infected countries, and considering no one has yet configured changes to their supply chains, I don't think anyone is going to move away from their Chinese supply chains in future either. Of course, assumptions here and there.

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."

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Mar 28, 2020

There is no alternative to the USD as a reserve currency. The industrialized world is drowning in debt and China is an autocratic police state with no rule of law. Just because the US is in a fiscal mess doesn't mean there are demonstrably better situations. CHF? LMAO. Without looking it up, there has to be like 100 times more US currency than Swiss currency. You can't have a reserve currency without supply.

Mar 28, 2020

Granted, I was referring to CHF as a safe haven currency from an Asian perspective (which it is). It doesn't matter if China is an autocratic state or not, as soon as the USD begins devaluing and in tandem with a weaker US economy, a stronger China renegs deals with ME countries and Russia to buy oil in CNY (which is feasible considering very strong bilateral ties buildup in recent years), the USD's value as an international currency will lose face. Not to mention, USA was only narrowly beating the EU as China's trade partner in 2017, prior to the trade war BS.

I've been in touch with some folks I worked with now at ME sovereign wealth funds and talks of yen-denominated oil sales aren't far away. Nor are the recent moves by the Fed to inspiring confidence at keeping crude at a reasonable USD price for these exporters. China literally just needs to reneg these deals and pay a premium in CNY for these countries to shift track. After all, China is their largest import partner.

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."

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Most Helpful
Mar 28, 2020
My Name is Jeff:

Granted, I was referring to CHF as a safe haven currency from an Asian perspective (which it is). It doesn't matter if China is an autocratic state or not, as soon as the USD begins devaluing and in tandem with a weaker US economy, a stronger China renegs deals with ME countries and Russia to buy oil in CNY (which is feasible considering very strong bilateral ties buildup in recent years), the USD's value as an international currency will lose face. Not to mention, USA was only narrowly beating the EU as China's trade partner in 2017, prior to the trade war BS.

I've been in touch with some folks I worked with now at ME sovereign wealth funds and talks of yen-denominated oil sales aren't far away. Nor are the recent moves by the Fed to inspiring confidence at keeping crude at a reasonable USD price for these exporters. China literally just needs to reneg these deals and pay a premium in CNY for these countries to shift track. After all, China is their largest import partner.

You grossly misunderstand why the USD is the world's reserve currency. There wasn't some overnight shift from one sovereign currency to the USD. In fact, it's been rare in human civilization to have a reserve currency outside of gold. The USD is the reserve currency because U.S. debt is dollar denominated, and the U.S. has not defaulted on its debts since it launched the American revolution in 1775; the U.S. military is so powerful that no nation could threaten to tople the American government; the U.S. inherited English common law and has, arguably, the best track record in history of fair and equal enforcement of contracts and of the law (particularly business law). Also, there are a whole helluva lot of dollars in circulation, making it a highly liquid asset (it's why comparing "stronger" currencies, e.g. the Euro, GBP, is not apples to apples because there are so many more dollars). If reserve currency status was just about oil and commodities and a few third world countries being held hostag, the Middle East and Russia/USSR would have ensured the demise of the USD in the 1970s.

China's lack of rule of law is a huge barrier to it ever retaining the reserve currency. If you're Chinese, you don't even have freedom of the movement of your own capital. The banking system is outsourced to Hong Kong, and Hong Kong's status as a financial capital may not be long for this world. Nobody will put their faith in the Chinese gov't during global catastrophe. Nobody

Mar 29, 2020
My Name is Jeff:

I've been in touch with some folks I worked with now at ME sovereign wealth funds and talks of yen-denominated oil sales aren't far away.

That's good because all those military spending are justified now. Mighty USA in the Middle East again. Only question is will it be WMD again this time.

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Mar 27, 2020

Yes, it's very worrying. We will eventually get to the point where our entire budget is snuffed out by debt payments and we will have to cut spending and raise taxes, slowing economic growth even further (3% seems to be the very high end of what can be achieved with 2% kind of the standard right now, so slow growth relative to 2%).

The U.S. federal government has something like $130 trillion in assets. My plan would include selling enough assets to bring debt down to 50% of GDP, cut spending 1% across the board every year until we balance our budget, radically attack waste, fraud, and abuse (which around $400B across domestic and military spending), implement a VAT tax, increase the retirement age, and remove the income limit on the payroll tax. To offset slow economic growth policies of tax increases and spending cuts, I'd unilaterally eliminate all trade barriers, liberalize banking, and gut regulation.

My plan would get me thrown out of office in about 2 seconds, if I was ever elected at all. In other words, I think the collapse of the U.S. in the coming 50-100 years is inevitable. The Roman Empire collapsed, in part, because Rome spent itself into poverty, couldn't maintain a sizable army, and, as a result, was assaulted by countless outside attacks. For the U.S., our debts will eventually ground our economy to a standstill and snuff out domestic expenditures (education, infrastructure), causing dissension and eventually dissolution of the republic as states break away. Before that, our inability to maintain a sizable military will salt away our influence in the world, slowly but surely over time.

Mar 27, 2020

I think making recreational drugs legal and tax them would help. Think of all the time and money we spend on enforcing it and the money we could get via taxation and licensing.

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Mar 28, 2020

I can see Europe effectively implementing this, considering the crowd. The US? Haha, you have one side that's in rabid opposition to drug legalization, a class that should have been snuffed out is comprised of the boomer generation. If common sense could pass through their tiny brains......but muh Jesus, muh faith, muh Christian valooze.

And somehow the young still let these relics govern them.

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."

Mar 29, 2020

consumers already spend money on other things. Huge tax revenues for state governments like Colorado only work bc people from other states go there to buy marijuana. If marijuana was legalized across the country, you wouldn't see a huge increase in tax revenue because people would just shift their spending away from similar products like beer and wine.

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Mar 30, 2020

We will simply inflate away our debts.

Mar 28, 2020

Zero problems until FED can do brrr

Mar 28, 2020

Consumers, corporations, and the government are all jacked to the tits with completely unsustainable levels of debt, and now we're in a recession in the middle of a global fucking pandemic. What could go wrong?

  • Intern in IB-M&A
Mar 28, 2020

Henry Kravis should LBO the government

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Mar 28, 2020

One sentence without any capitalization? Colour me surprised Mr. @Lloyd Blankfein. I think you're losing your touch.

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."

Funniest
Mar 28, 2020

Should have been "JACKED to the TITS"

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Mar 28, 2020

For me, the most significant issue with tripling our deficit is how we are going to finance it. We should take the money from existing outlays such as the military and possibly increasing the age of eligibility for collecting social security. It would be a big mistake to fund it by issuing more debt. Assuming higher debt levels, might lead to the ratings agencies downgrading US Treasuries, which would would make the situation worse.

Mar 28, 2020

I would call it highly problematic but one step short of alarming.

Our debt is 1.1x GDP. From a world ranking perspective, that's bad. It puts us in the same class as the more profligate and value-destroying European countries like France, Italy, Portugal.

On the other hand, its only half Japan's level. We see what Japan has done the last few decades . . its been bad, they had the lost decade, but not quite the ruin of a nation either.

Furthermore, some adjustment needs to be made for the fact that will be continuing high demand for dollars as so much international debt is denominated in USD. That deflationary force gives us more room to inflate away our own debt while still ending up at net neutral inflation.

Another small adjustment that should probably be made is national wealth. In addition to our cash flow (GDP) we have a base of citizens that has higher than average wealth. This is not a huge consideration because the measurement of their wealth is somewhat co-dependent on all the money printing we've already done. But its a small consideration.

Lastly, our ability to grow GDP may be better than other countries if we can remain the top spot for the world's biggest tech companies and innovation generally. Yes we are losing a ton of ground to China and others, but if our GDP growth will remain above our fellow 1x Debt/GDP colleagues (France Italy etc) then that's another reason we're not quite like them.

Ultimately, I do believe some reduction in standard of living is needed. If we can be smart and do it now, it can be smaller. Push up retirement ages, take a harder look at the defense budget, do more efficient social programs, stop making college the investment of a lifetime, etc. Very solvable problem if any politician is wise enough to confront it.

Problem is, most politicians only want to tell people what they want to hear, and nobody wants to be the guy who said some cutbacks are needed. Need someone in charge who is incentivized by the opportunity to save the country but only get credit for it 30 years later.

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Mar 28, 2020

Japan is having a deficit after pursuing socialized healthcare, subsidized education, a relatively bare minimum level of comfortable living standards for all its people, and a demilitarized population. Not to mention a large population of oldies. The US has none of the first three 100% locked down, rather barely even tackled, has a larger youth population and more guns in the world per capital save for Yemen. Not to mention cultural differences - Japan will bow down and persevere under the benevolent figurehead leadership of the Emperor. Meanwhile, compliance isn't something I've found to be of second nature in Americans.

America has two choices - tax the shit out like Europe, or expand the deficit radically.

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."

Mar 28, 2020

Good points.

Japan has all those things you just mentioned, but also has twice the debt/GDP we have. So its not clear to me that we couldn't just continue down this road and end up like them. Which is a much better place than Europe is in right now.

Re: older population. I've spoken to a few pension investment friends in the last few weeks. Don't doubt for a second that there are some dark jokes being told about the "silver lining" behind the coronavirus.

Mar 28, 2020

I hope you guys are ok (and your kids) paying 40-50% taxes in the future. That's the only way and it's inevitable.

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Mar 28, 2020

I already pay close to 40%. It sucks but I can afford it. I'm definitely not happy with the amount nor how it's being spent but that's a different issue. Now if I was right out of college paying that much, I'd be in a bad spot.

Mar 28, 2020

Debt levels certainly a long term problem and will force very hard choices and likely will create internecine warfare between gen-x and millennials, as well as haves and have nots, in the next 20-30 years. As it stands currently the US on a relative basis is in much better shape than Europe and Japan with their aging populations and huge social welfare spending, regulatory burdens etc.

However, outside of finance you have generations completely brainwashed by progressive propaganda that would make Lenin envious, believing the Nordic countries are some kind of secret economic miracle and they do not have the mental faculties to recognize the flaws in using them as an analogy (as well as the fact that those countries are trying to reduce their social welfare spending). These countries were able to do this because a confluence of rare factors. Social, cultural, language and religious homogeneity which that factors such as waste, fraud and abuse in their safety nets, something the US and the rest of Western Euorpe lack. Even now, despite, how you may feel morally or politically about immigration, the social fabric of the Nordic countries is tearing, and the shared cultural values that held the system together are severely strained. Also, low birth rates, aging populations, increasing high health care costs, along with generous social welfare policies that are now being exploited on a scale not previously seen they are looking towards market/capitalist solutions (they have marginal tax rates so high they cannot use the magic tax the rich that US liberals hold up as gospel). The low levels of entrepreneurship and capital formation as the result of high tax rates and regulatory burdens, make it hard to generate the needed growth for these countries. The US's economic dynamism gives it a distinct advantage to potentially grow it way out of its problems in conjunction with entitlement reform.

Steps for the US to take would be to increase the age for social security and means test it. Freeze non discretionary (entitlement) spending at a certain level of GDP. Immediately make it illegal for drug companies to sell their drugs to foreign countries for less than in the US (adjusted for purchasing power parity) US consumers subsidize national health care in the UK, Europe, Nordic countries etc (drug reimportation schemes reveal the sheer ignorance of static progressive thinking) . Drug prices would rise there and fall here. Finally we must either charge Europe a tax for use of US military assets in NATO that fully reflects our cost. They have no meaningful air or sea lift capacity or rear echelon support infrastructure such as in flight refueling, logistical transport etc. We need to stop wasting our hard earned blood and treasure on Europe and endless wars in the middle east that can never be won.

But make no mistake, you wont get us out of debt by cutting the military like every ignorant liberal believes. You need to address entitlements which is politically impossible as we have a country of whiny babies who want their bottle and want it now and would never sacrifice for real. They buy a Tesla an virtue signal their climate righteousness, with factoring in the mining of cobalt (child slave labor in congo with no environmental protections) lithium mining which is hugely destructive to the environment, and requires 500,000 gallons of water to produce just one ton of lithium. The met coal required for steel, and the oil/gas products required for light weight, high strength carbon components or plastics/resins used in seats, dashboards etc. If we installed electric batteries in every care and industrial/solar wind farms what is the environmental damage. Again the so called educated progressive is incapable of processing these factors and just like religious orthodoxy is unwilling to abandon the feeling of moral superiority they get from being climate zealots.

I can tell you this, you cannot have the climate righteousness the progressives are seeking and a solvent and dynamic economy. The costs of their climate righteousness will only increase the burden on the poor and create more economic stagnation and wealth inequality. But what is that in comparison to the great feeling of moral superiority one gets from using their brain and making difficult choices regarding allocating scarce resources.

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Mar 28, 2020

Fun fact: the average EV needs to be driven 300,000 miles to offset the additional carbon footprint created (over an ICE vehicle) by battery manufacturing.

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Mar 29, 2020

make it illegal for drug companies to sell their drugs to foreign countries for less than in the US (adjusted for purchasing power parity) US consumers subsidize national health care in the UK, Europe, Nordic countries etc (drug reimportation schemes reveal the sheer ignorance of static progressive thinking) . Drug prices would rise there and fall here. Finally we must either charge Europe a tax for use of US military assets in NATO that fully reflects our cost.

And then the EU drug companies (Roche, Novo Nordisk, Novartis, AstraZeneca, Sanofi, Bayer, etc) can charge USA a premium on their drugs in retaliation. USA can then rely on India and China to produce the generics that they need.

As for NATO, Europe will then just consider Russia and China an equal partner than now, as they slowly are. Europe, India and China already work with Iran and Russia on buying their oil, against US sanctions. As for European security issues, Europe has only one enemy right now, and that's Russia. And there's always China that Europe can count on as an unwilling ally, since at the end of the day, China can get to do business in Europe, one of their biggest trade partners, after the end of the hypothetical unsuccessful Russian invasion. Also, Europe could just drive through straight through Belarus and end up in Moscow or St Petersburg, a fact which Moscow knows pretty well. Funfact: China always has plans drawn out for an invasion of Siberia and Kamchatka. So yeah, Russia has its hands tied and Putin is not stupid.

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."

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Mar 30, 2020

It would be a beautiful day when the US gets out of Europe. It will also be the end of the US as we know it. The NATO argument, and the EU can just pay for it is a joke. NATO is a way for the US to keep control over the EU.

Germany is dying to trade with Russia and so is the rest of Europe. There is only the US' poodle in Europe that is against full openness to Russia, fortunately they voted out recently so their voice and concern will be forever diminished. Where as for Poland who has just sucked off the tits of the EU for too long and then decided to start sucking off the US for more money in defiance of the rest of the EU they can go to hell with their hatred of Russia.

Just look at Italy - Russian and Chinese doctors as well as supplies are flying in. It's starting.

So yea stop contributing to NATO - stop being involved in the ME. It's already happening as you cannot maintain those expenditures any longer. China's silk road is in full blown motion, as de-dollarisation happens we are looking at the slow loss of influence of the US over the coming decades. Eurasia is coming and there is no real place for the US in it.

I might have exaggerated a bit - but given the shit show going on with the middle class in the US and the growth of influence of China and regain of influence of the EU - the US is in trouble

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Mar 28, 2020

Debt levels are concerning but when we look at interest payments as % of GDP, its not as horrible due to chronically low interest rates for the last decade and even beyond that (due to demographic trends). So (i) interest payments are as troublesome and as long as interest rates stay low (which they will), economists won't be too worried. (ii) high debt is a worry for countries that do not print their own currency because it is possible for them to default on their debt. The US will not default on its debt as it can always print more. This brings me to (iii) printing cash to service the debt will cause inflation to increase which is the main worry of rising debt levels. With the persistently low inflation we have now, that's less of a worry. For economists and policy makers alike, they would rather deal with slightly higher inflation than slower growth and higher unemployment. The virus has demonstrated just that. Policy makers will throw money at the fire to help people stay afloat. Will inflation increase a bit? Maybe. Are they willing to take that risk? 100% yes

Mar 28, 2020

We're able to print this much without spiking inflation because the amount we are printing is a certain % of GDP, with that % small enough to keep the effect in check. The problem is, more and more is needed each time and eventually the size the print becomes such a large % of GDP but that its effect is too big.

In the ~3 years following the financial crisis, we printed about 10% of GDP.

From 2013-2018, we did another 12%.

Now these last two weeks, Fed + Treasury impact is $6T, or 30% of GDP.

At some point, the size of the print becomes bigger than anything else going on in the economy and significant inflation is then inevitable. With that, higher interest rates must naturally follow.

For that reason, I'm not comforted by measurements of GDP/interest or low inflation. I think those are fleeting. What's more stable to me is total debt load vs. GDP.

I won't even get into the real debt, which includes our $200T unfunded mandates. Enough fear for one day.

Mar 28, 2020

Interest rates have not shown any sign of increasing any time in the near future. Total debt vs. GDP does not indicate how much off that debt we actually have the service each year. And the debt servicing costs are what actually drive (partially) how much we print. It becomes a sort of balancing act. You can say that high interest rates must follow when at some point artificial demand supplied by gov. props up inflation. Ok but on the other hand, if we slow government spending and begin reigning in the debt, growth and obviously aggregate investment will slow. This means incomes decline , unemployment increases, tax revenue decreases, and the gov. is even less able to balance the budget. We have to somehow spark growth through investment in key areas of the economy, while at the same time not letting debt run away even more than it is now. If we go by standard economic models, its a growth in technology that will let this happen. In any case, its a difficult issue and a bit over my pay grade at the moment but I appreciate your insights.

Mar 28, 2020

All of the people with the most influence over fiscal spending will not be around to pay it off because they're so old. Debt being racked up now by baby boomer politicians who are spending like crazy will really impact our generation. It's like being at a restaurant, and old people eating like everything is free because they'll be dead by the time the waiter brings the bill out.

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Mar 28, 2020

Sums up the biggest problem about as well as I've seen anyone do it.

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Mar 28, 2020

I really think congressional and presidential salaries should be used to pay for spending instead of paid to our politicians unless the budget is balanced.

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Mar 29, 2020

The absolute level of debt doesn't really matter, interest coverage is what matters. With rates where they are now and I think they will be low for a long ass time after this pandemic is over (would you voluntarily raise your borrowing costs? Would anyone?), the debt can probably be sustained at a much higher level than where it is right now.

I think that this approach to monetary policy is long-term very destructive for the average citizen in that pensions no longer exist (when IG debt paid 6,7,8% everybody and their mom had a pension plan) and people are forced into riskier assets if they want any semblance of a return, meanwhile almost everybody from the average Joe to large institutions are in much riskier asset allocations than they realistically should be because it's either that or they have no shot at hitting their return targets, and then some black swan event (like a pandemic) happens, everybody is maximally fucked in terms of their savings and retirement plans. The as-low-as-possible approach to interest rates of course drives the price of real estate sky high, insurance is more expensive since they are a big part of the institutions who need to make money from safe investments, and beyond a certain level ceases to have any beneficial effect on the real economy even without taking into account the above issues.

So the economy slows, people need to work more, their dollars buy less as increased real estate prices and associated taxes etc. are passed onto consumers, the NPV of saved and invested money is jack shit, and tax bracket thresholds do not increase to reflect the amount of price increases that require wage increases to induce people to work to make enough money to buy the price-inflated real estate and other products that the Fed created in the first place. So then the economy is slow, so lower interest rates again. Rinse and repeat until capitalism is dead.

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Mar 29, 2020

In all seriousness in these conversations can someone tell the difference between -
0% government debt
0% Cash

Government debt starts to look a lot like just cash when rates are low. And to a great extent the rise in government debt is just a desire by society to hold more cash.

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Mar 30, 2020

Two things are neglected here. Firstly, net US debt is lower than gross debt because a large number of US Govt bonds are held by the Fed. Govt holding claims on Govt means the positions can be netted.
Secondly, as long as average nominal GDP growth exceeds average nominal interest rate on debt any level of debt is sustainable. Easily shown via calculations. And because US has the right to seignorage I doubt a speculative attack is likely. Debt dynamics simply are different when an entity can print it's own money. Sure there are some constraints but there are more degrees of freedom for certain. So applying corporate logic to a macro situation is not necessarily the right thinking.

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Mar 30, 2020

Yup. Good point about debt held by the Fed being netted, that's a big part of the equation.

Mar 30, 2020

I remember reading in Financial Times a few years back that the UK had finally retired the last of England's debt that was accrued during the Anglo-Spanish War (1585-1604).

^Why does this matter? Because it shows governments can finance debts over hundreds of years. While I do believe the US should be wary of going too deep with deficit spending, the notion that the US federal government is going to go bankrupt or can't afford to finance its debt is laughable. Too many people view government finances through the lens of a household, while in reality they're not even close in comparison.

Mar 30, 2020

I'm not sure we want to look to the UK as an example of sound fiscal policy - after all, their empire is just a memory now, and that's largely because WWII bankrupted their country.

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Mar 30, 2020
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