Ask HN: Are you worried about the US dollar collapse?
Given the enormous US government debt conservatively estimated at $37T and annual revenues of $1.86T, it seems like we are on the precipice of a debt spiral. And yet everywhere I look it seems like business as usual.
It's hard to find credible reading to learn about all of this and how the situation is expected to reconcile.
Are you worried? What do you think it doing to happen? Is there any reading you can recommend? What are you doing to financially protect yourself?
48 comments
[ 4.1 ms ] story [ 105 ms ] threadhttps://fiscaldata.treasury.gov/americas-finance-guide/natio...
https://en.wikipedia.org/wiki/National_debt_of_the_United_St...
for sake of common sense - simplified:
You are indebted $37000 and you annual revenue is $1860, how much money will bank borrow you or your uncle borrow you ?
My planning involves relocating to a family-owned rural property and drastically downsizing and conserving my resources, and plying my diverse skills for cash and prizes.
Unless we want to genuinely enact change then just breathe. Enjoy your life and don’t be afraid of the things you’re aware of. Take strength in the billions of humans that have gone through the same thing, having their lives cut so short. It’ll happen, and then it’ll be over (:
The debt isn't as significant considering there is revenues that could pay it.
Tax rates in the 50s vs tax rates today. The lack of higher income brackets in the tax code, etc.
We've got plenty of money.
1) We don't have the political will to increase revenues (read: taxes)
2) We don't have the political will to cut spending. That is, politicians keep buying votes with new programs, and we keep smiling as we sell our votes to the highest bidder.
In short, you're over-simplifying the base financial system (i.e., The Fed), the broader financial system (i.e., banks and the fractional banking system), as well as the sociopolitical system.
There's more to this than debt in some amount and GDP in some amount, and saying the ratio of those two is all we need to understand and not worry.
btw, for bonus points, read the first three or four chapters from Lyn Alden's "Broken Money".
https://www.lynalden.com/broken-money/
The US has had a wide-range of tax rates and tax policy.
Despite that, FedGov has never collected more than 22% of GDP for longer than two years.
One explanation is that the tax code affects people's behavior wrt taxes.
A huge global financial/commerce system needs a "standard" currency. The lack of a good replacement for the dollar (in that capacity) means there are a load of A List players in the game...who have vested interests in pretending that US govt. debt doesn't matter.
Prioritizing loyalty and ideology over competence will cause problems. We know Trump prizes loyalty over every other quality.
The Federal Reserve plays along and keeps financing that bad behavior.
Together they're compromising the dollar and the associated economy but... we're going to blame a random third-party when the shit hits the fan?
Is this an April Fools' joke?
This party? That party?? That's pointless minutia at this point.
Yes, in the long term, the sun is going to burn out and leave the earth a cold lifeless rock, but I can certainly do things right now to improve the "short term", like voting for a party that doesn't constantly overinflate the debt.
No more or less than any other self-sabotaging economic policy. Brexit, etc.
During his presidency Trump showed that a president CAN have profound effects on the economic system. He ordered changes to trading policy with China that had effects that were obvious and felt (regardless of the merit of the actions).
A lot of times presidents are simply unwilling to risk rocking the boat, preferring stability and the status quo. There is a lot of risk of ruining ones re-election chances and damaging the electability of congresspersons of ones party and thus the party itself losing political power (and thus the sweet teet of special interest lobbying money and such that comes along with wielding enough power to represent those interests).
Trump--and I agree with this sentiment myself--is more willing to do something radical. That doesn't mean anything radical he does will be intrinsically bad or have bad effects, it's possible that he could affect positive radical change too.
So, while it's true our president doesn't normally affect too much, it isn't purely because the office lacks the power to affect the economy.
Then what was the 2007 / 2008 bail out?
And the Covid "bail outs" (on the part of the Fed)?
But yes, a Ponzi Scheme looks perfectly fine... until it doesn't.
Keep in mind, this financial vehicle isn't standing still. Once the wheels come off, there will be plenty of sparks, with plenty of flammable liquid nearby.
I suppose we don’t have control over the outcome, but we do have some control over how we hedge against it or not…
A state with a decent credit rating is going to keep paying interest and that's what investors are interested in.
I don't think we are going to see things get worse from now, maybe they will even stabilize. But generally, we just went through a massive inflationary period that will be felt for a while.
Easy to see you weren't around in 1979. That looked like things could collapse into a runaway inflation.
Look, we still could mess this up and wind up there. But 4% a year for six years isn't evidence that we're there.
I've been hearing that my entire life, and I'm about ready to retire. I'm not going to argue it here, but I'd even say there are plenty of apologetics to say that some national debt is a good thing (and plenty of smarter folk than I have already written those arguments, I seriously recommend a search for them).
So to answer your question: no, I'm not worried, for several reasons. First, see the paragraph above. Second, there's not a damned thing I can do to keep it from all tumbling down, and if it does, I can't do anything about that, either. I could go all prepper, but that won't save you, either (not arguing that here, either).
And finally, at the risk of starting pointless arguments, the Republican party tends to start banging the "national debt" drum during election years, whereas any other year they don't give a shit (as evidenced by Congressional budget proposals). So to some extent I would argue that you're being sold a party line to make you worry enough to start posting such questions online, and hopefully vote the way "they" want you to.
Yes, and over the course of your lifetime the value of your savings and your buying power has been systematically devalued. You might not be worried, but clearly the sociopolitical system is feeling the strain.
Perhaps there's not much we can do about it now, but being in denial about how we got here doesn't make any sense either.
Been waiting 50 years for that…
I use the analogy that the US drives its economy at the redline, leveraging a lot of debt to produce growth. It works great when times are good, as you reap a multiplication factor on return. But hurts when the car hits a speed bump (economic shock) or burns out.
Either the country will have a "come-to-senses" moment and correct course, or will slowly degrade to reduced global relevance/influence as servicing that debt eats an ever larger portion of the budget (putting a handicap on what else it can get done), dollars become less valuable, and other economies (like China) with more disciplined long-term planning overtake. The speed it happens will be affected by how much of that annual deficit goes back into productive activity vs. lining pockets / luxuries for those holding it. There's a ton of momentum so it's not surprising to see a lot of lag (decades) before the effects become obvious.
Keep in mind not long ago the US was a country of pioneers and entrepreneurs. It still is, but over time the mix naturally changes (some older people argue second or third generation citizens don't have the same work ethic, but that's a broader stroke than I feel fair to paint). As the demographics mature and change, you get more social programs, more entitlements, etc. From another perspective that can be viewed as societal progress. As long as it's sustainable (which I don't think it presently is).
Britain is a great example to look at for lessons from the past (before the pound Stirling lost its status as global reserve currency).
Here in Canada I keep saying it would be nice to see some politicians with conservative ideas on spending, but liberal policies on other fronts.
All of this is just my own uninformed opinion, take it with a big grain of salt and feel free to disagree!
Then came the war of the Austrian Succession; and the debt rose to eighty millions. Pamphleteers, historians and orators pronounced that now, at all events, our case was desperate. Yet the signs of increasing prosperity, signs which could neither be counterfeited nor concealed, ought to have satisfied observant and reflecting men that a debt of eighty millions was less to the England which was governed by Pelham than a debt of fifty millions had been to the England which was governed by Oxford.
Soon war again broke forth; and, under the energetic and prodigal administration of the first William Pitt, the debt rapidly swelled to a hundred and forty millions. As soon as the first intoxication of victory was over, men of theory and men of business almost unanimously pronounced that the fatal day had now really arrived. [...] Not less gloomy was the view which George Grenville, a minister eminently diligent and practical, took of our financial situation. The nation must, he conceived, sink under a debt of a hundred and forty millions, unless a portion of the load were borne by the American colonies.
The attempt to lay a portion of the load on the American colonies produced another war. That war left us with an additional hundred millions of debt, and without the colonies whose help had been represented as indispensable. Again England was given over; and again the strange patient persisted in becoming stronger and more blooming in spite of all the diagnostics and prognostics of State physicians. As she had been visibly more prosperous with a debt of a hundred and forty millions than with a debt of fifty millions, so she, as visibly more prosperous with a debt of two hundred and forty millions than with a debt of a hundred and forty millions.
Soon however the wars which sprang from the French Revolution, and which far exceeded in cost any that the world had ever seen, tasked the powers of public credit to the utmost. When the world was again at rest the funded debt of England amounted to eight hundred millions. [...] It was in truth a gigantic, a fabulous debt; and we can hardly wonder that the cry of despair should have been louder than ever. But again that cry was found to have been as unreasonable as ever. After a few years of exhaustion, England recovered herself. [...] Meanwhile taxation was almost constantly becoming lighter and lighter; yet still the Exchequer was full. It may be now affirmed without fear of contradiction that we find it as easy to pay the interest of eight hundred millions as our ancestors found it, a century ago, to pay the interest of eighty millions. [...]
A long experience justifies us in believing that England may, in the twentieth century, be better able to bear a debt of sixteen hundred millions than she is at the present time to bear her present load. But be this as it may, those who so confidently predicted that she must sink, first under a debt of fifty millions, then under a debt of eighty millions then under a debt of a hundred and forty millions, then under a debt of two hundred and forty millions, and lastly under a debt of eight hundred millions, were beyond all doubt under a twofold mistake. They greatly overrated the pressure of the burden; they greatly underrated the strength by which the burden was to be borne."
Macaulay,...