Recently, President Trump seemed to cosplay as Jesus. In that case, could he also die carrying America’s economic original sin and thereby cancel the U.S. national debt?
We don’t have any serious leaders on this issue. We don’t have scholarship divorced from politics about this issue. Maybe we never will. The Austrian school basically thinks this is the end of the world. The MMT folks think this is business as usual. The Keynesians are somewhere in the middle, but being in the middle of the road politically is not the same as an apolitical view on this.
As a lay person who hasn’t studied economics enough to understand if this is an actual issue or a theoretical issue, I really need some politics-free scholarship on this.
It doesn’t help that our political leaders say it’s an issue, unless it’s their party that wants that spending, then it’s fine. The right says it’s fine as long as it goes to endless wars, and the left says it’s fine when we spend the money on social programs. Both say it’s bad when the other side spends it, but not when their own spends it.
This is exhausting and demonstrably not helping us resolve the fundamental issue of how do you manage a large society without it imploding.
Everything will be great until the default happens. After that, everything will still be great, we will just have less reputable friends. That's how spirals work.
All the great Western hegemonic powers have used public debt to finance the requirements and ambitions of the state. This was true of Spain in the sixteenth century, Holland in the seventeenth century, England at the height of its power during the eighteenth and nineteenth centuries, and the USA since World War II [1]. Public debt finance is a force multiplier that enables the government to undertake far greater civilian and military projects than it could otherwise achieve. Everyone knows this, including the people who are running the U.S. Treasury and the Federal Reserve.
As a percentage of GDP, government debt is high by historical standards, and it is rising at a fairly rapid pace. That could be a problem if it continues unabated. But there are two solutions: reduce spending and/or raise taxes. Most U.S. federal expenditure goes toward either defense, entitlements or interest on the debt, so it seems unlikely that spending will fall very much. That means higher taxes. At some point, the country will need to find a political reformer who can sell tax increases to the electorate. Until then, the crisis just continues to quietly grow.
[1] Giovanni Arrighi (1994) The Long Twentieth Century: Money, Power and the Origins of Our Times
That framing makes it sound like high defense and welfare spending are laws of physics, impassable mountains you just have to navigate around. They aren't, they're very specific political choices that can be changed quickly and easily once the will is there. If you're going to pin your hope on a "political reformer" who can "sell" to the electorate, you'd do better to hope for one that can sell lower entitlements and defense spending.
Third solution is "taxation through inflation" in which the official inflation is 4%, the unofficial one is 10%, interest rates kept low, and over a few decades the debt gets nominally trimmed down against a nominally rising GDP. Real GDP growth will even accelerate this. Owners of assets that are not real-inflation protected (such as the debt owners) see their asset value go down ; people who have no net equity see their salary go up, but only in nominal value ; people who hold real-inflation protected assets that also distribute dividends are the winners in this.
>As a percentage of GDP, government debt is high by historical standards
I think this means: GDP === Debt not seen since WWII?
I mean true, that is high by historical standards, but also seems slightly not like the other times in past years when people said it's a bit high by historical standards.
I thought the US crossed that mark long ago. According to FED [1] it was in 2013. Could someone explain what the WSJ means given the article is behind a paywall.
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[ 0.22 ms ] story [ 22.6 ms ] threadRecently, President Trump seemed to cosplay as Jesus. In that case, could he also die carrying America’s economic original sin and thereby cancel the U.S. national debt?
Debt is in dollars, GDP is in dollars per year.
We don’t have any serious leaders on this issue. We don’t have scholarship divorced from politics about this issue. Maybe we never will. The Austrian school basically thinks this is the end of the world. The MMT folks think this is business as usual. The Keynesians are somewhere in the middle, but being in the middle of the road politically is not the same as an apolitical view on this.
As a lay person who hasn’t studied economics enough to understand if this is an actual issue or a theoretical issue, I really need some politics-free scholarship on this.
It doesn’t help that our political leaders say it’s an issue, unless it’s their party that wants that spending, then it’s fine. The right says it’s fine as long as it goes to endless wars, and the left says it’s fine when we spend the money on social programs. Both say it’s bad when the other side spends it, but not when their own spends it.
This is exhausting and demonstrably not helping us resolve the fundamental issue of how do you manage a large society without it imploding.
Now if USD loses reserve status, that could be very problematic, since the US basically spreads its borrowing costs to the entire world.
And there will be no consequences since we're the reserved currency for the world backed by the most powerful military in human history.
What will they do if it was repaid
Why do people keep lending money to the US government if they think it's a problem
Does not matter as long as they control the printing press for the reserve currency of the world.
https://en.wikipedia.org/wiki/Triffin_dilemma
As a percentage of GDP, government debt is high by historical standards, and it is rising at a fairly rapid pace. That could be a problem if it continues unabated. But there are two solutions: reduce spending and/or raise taxes. Most U.S. federal expenditure goes toward either defense, entitlements or interest on the debt, so it seems unlikely that spending will fall very much. That means higher taxes. At some point, the country will need to find a political reformer who can sell tax increases to the electorate. Until then, the crisis just continues to quietly grow.
[1] Giovanni Arrighi (1994) The Long Twentieth Century: Money, Power and the Origins of Our Times
https://www.amazon.com/Long-Twentieth-Century-Money-Origins/...
I think this means: GDP === Debt not seen since WWII?
I mean true, that is high by historical standards, but also seems slightly not like the other times in past years when people said it's a bit high by historical standards.
[1] https://fred.stlouisfed.org/series/GFDEGDQ188S