It seems pretty clear that this debt will never be repaid, and will just keep growing - how big can it grow before it just doesn't get to grow any more?
Judging by Japan's example, a lot more. Though you never really know. It's like trying to predict just how much snow will cause an avalanche. All you can really do is look at it and say 'that looks dangerous.'
First: that debt will be repaid. The people who own those T-bonds will redeem them and get their money. This is an important distinction; you buy T-bonds because you know they’ll be paid back.
The total value of the debt is an almost meaningless number. As long as people keep buying US debt, we’ll have the money to pay the debt off. (Strictly the US could just print the money it needs to pay the debt right now - the question is whether the resulting inflation would be worth it).
The rest cost of the debt is interest payments. As long as those stay at a manageable fraction of GDP the US is just fine. If GDP increase 10% but debt servicing only increases 5% then the servicing payments are effectively 4.5% smaller.
In the next decade our problem is less likely to be total quantity of debt than increasing interest rates (which are very low right now).
That is an amazing amount of public and private debt. It's an interesting thought that I have had $0 of private debt for at least 10 years, which means someone else is picking up a lot of slack for me. Reminds me of an old Square One TV episode that talked about the average number of donuts eaten by Americans -- and I concluded that someone (or multiple someones) must have seriously been picking up my slack there as well :p.
Why is the headline saying the debt-to-GDP ratio is low like it's a bad thing? I'd expect it to be fine if the debt is high, as long as GDP is significantly higher.
Fun game: try to find a number for how many trillion euros the EU is in debt and be amazed at how much censorship was involved in hiding the statistic.
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[ 3.5 ms ] story [ 51.4 ms ] threadThe U.S. spent $450 billion in interest payment to its debt, on tax revenue of about $2.5 trillion That's 18% of revenue.
Can it go to 30%? Sure, but there will be cuts made to services.
Japan gets panned for overspending, but they're in line with what the U.S. spends in debt servicing cost in relation to revenue.
https://data.worldbank.org/indicator/GC.XPN.INTP.RV.ZS?locat...
The total value of the debt is an almost meaningless number. As long as people keep buying US debt, we’ll have the money to pay the debt off. (Strictly the US could just print the money it needs to pay the debt right now - the question is whether the resulting inflation would be worth it).
The rest cost of the debt is interest payments. As long as those stay at a manageable fraction of GDP the US is just fine. If GDP increase 10% but debt servicing only increases 5% then the servicing payments are effectively 4.5% smaller.
In the next decade our problem is less likely to be total quantity of debt than increasing interest rates (which are very low right now).
What happens then?
If you don’t control your currency (think of Greece in the Euro) then it’s another matter. The same if you borrow in a foreign currency.
This is nothing more than a form of taxation.