I've seen extremely smart/well-educated people (not in politics or any skin in the game) argue the debt isn't really a problem. "It's not like your household debt" and all. This one probably isn't just about education.
That's because the US national debt is indeed not like household debt. As a household, I can't choose to print more GlibMonkeyDeathBucks and hand them out to service my debts. I also don't have my own standing army to defend from creditors who might try to seize my hard assets.
That is the Fed educated position. The Keynsian view of economics sees the good economic times as normal and bad economic times as the aberration. Thus, from that view you go into debt to hold the economy over until the good times return.
I've always seen that as an excuse to spend more that you have. Its a trap that is difficult to get out. It is the same as taking more personal debt that you can service. But in the case of the government the bank never says no.
In small amounts, say <3 trillion dollars, the smart people are right.
If the government needs to run a deficit to fight a war, or get the population through a pandemic, it is not a problem.
Party with power spends money. Party not in power complains too much money is being spent. Broken system. Those high interest rates ought to teach them pretty soon.
A lot of deficit spending accelerated with Reagan, when mortgage interest rates were 18%. Yeah, high interest rates will learn ‘em real good this time.
Well, Clinton took over when the Soviet Union had just dissolved. Of all US Presidents, he had the least to worry about on the defense front. Reagan's spending was a reason why the Soviet Union collapsed when it did. So it's not that black-and-white.
Way too reductive. Look at the deficit growth numbers under democrats vs republicans. This comment is just another variant of lazy "both-siderism" that I have really come to loath
"I'm not bald, there's nothing special about 300 hairs, which I currently have, compared to 300,000, which I used to have making me suddenly bald"
Just because there's no magical boundary number doesn't mean a metric can't become increasingly more shitty, and suddenly turn into a bad outcome. Not every response is linear.
then that the debt has been accelerating with either party in power - means this is a problem that won't be solved politically by the current actors i.e both parties.
The funny-stupid bit is that Republicans discovered that this is a viable strategy and _therefore_ raise the debt as much as possible _so that_ when democrats try to do anything of long term value, they can scream about "the debt is too high!"
this is not funny or stupid, this is explicitly the strategy. Look at USPS, Medicare, Social Security. The point is to make elements of the social safety net and services unsustainable, so that they can be targets for cutting. The debt is the most effective tool in doing this, and Social Security is absolutely their target. They will do cuts long before they remove the tax cap.
US government bond yields are regarded as the rate of return on a risk-free asset.
So, for someone to decide to lend you money or invest in your business, you need to offer them a higher rate of return. This is the risk premium.
So when interest rates are close to 0 per cent, mortgages are cheap and everyone is prepared to risk their money on a slide deck promising significant losses over the next three years. Because they have plenty of money that is losing value due to inflation, the risk premium is therefore very low.
If US bonds are at 5 per cent, your banker will add their margin on top and your bank loan will be at least 7 per cent – or higher if they fear a rise in interest rates and inflation. Investors will be much more discerning and demand higher risk premiums. As there are far fewer sectors capable of offering this, investment will concentrate on a very small number of sectors and companies (does AI ring a bell?).
It is therefore the bond yield that affects us directly, rather than the volume of debt. The volume of debt does have an effect, however, as the bulk of the interest is paid by issuing new bonds. If the government repays with cheaper bonds, it isn’t too serious; but if rates rise, the impact is exponential.
The thing is, the more debt and interest there is to pay, the more bonds need to be sold. The more there are, the harder it is, so interest rates have to be raised to attract buyers.
The other half of the equation is what the government is spending the borrowed money on. The effect on the real economy is significant and pertinent to market performance of sectors.
I recall back in 2016 when the debt was $19 trillion dollars.
Here we are 10 years later at double that.
“we must not let our rulers load us with perpetual debt… place economy among the first and most important republican virtues”
-Thomas Jefferson
I read a newspaper article about this. Apparently according to Dutch economists the US only has to raise taxes by a few percent and the deficit is fixed.
I think this is a great solution. Raise some revenue. Tax the rich more. (not being sarcastic, we need more tax money coming in) I didn't say 'eat them', just reach into their pocket and extract more (double? sure...)
At the same time, pull back on the spending. Or maybe even pull back on the growth in spending. No need to go to a full Doge; rather just pull it back a bit.
Because Americans have been conditioned to view taxation as theft and Communism and they'll defend the right of the wealthy to keep every penny they have.
Interest rates are still within "normal" range, so the market is signalling that's it isn't that big of a deal.
Countries have a debt crisis when their debt is huge and their interest rate is off the wall. Pretty much the market deciding that they are cooked.
Wake me up when GDP is stagnant and interest rates are climbing over 15%. The US is still the global leader on multiple fronts with a well diversified economy.
I look forward to hearing how we have to let more children starve so Trump can build more ugly monuments and we can drop more bombs on school girls in foreign lands.
Yes demographic shift and bubble economics, this much is true. But Japan is hampered by constitutional restraint of their armed forces, the United States economy (infamously) enjoys much broader support from intelligence and military. Japan also historically rejects mass immigration, which the United States has adopted as a means to replenish low skill workforce and 2nd generation child->skilled worker pipeline. If political power can successfully be wrested from the boomers, the USA can abandon their entitlements and rebound quickly. If boomers hang on to political power: a period of sticky inflation and slow growth.
Boomers? Sigh. Please articulate better. You can't refer to an entire generation as 'at fault'.
It's dumb, greedy, selfish politicians, and they come from all generations, including yours and mine, and in the future they'll come from generations not yet old enough to run.
Boomers is a stupid term used by people who only understand easy answers.
2) Politicians are behest to the same biophysical limitations we all are. An aging cohort that is done producing but not done consuming is a recipe for sticky inflation. Your reply does not address the point...
3) Maybe boomers is a stupid term, but it is clear and succinct. Your pet sensitivities reveal more about you than they do about me.
So you’re pinning your hopes on immigration, which you have been cracking down on hard, on the US military-industrial complex to start (and win) another war to fix your economical woes AND on boomers to stop being greedy and encroaching the places of power?
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[ 2.1 ms ] story [ 137 ms ] threadYes, printing money is inflationary.
I've always seen that as an excuse to spend more that you have. Its a trap that is difficult to get out. It is the same as taking more personal debt that you can service. But in the case of the government the bank never says no.
The problem is it is forever, and it is growing.
Fantasy that you can do this for 50 years.
He also claims the number is temporary because of tariff refunds, and that they will reduce the debt with more tariffs.
Just because there's no magical boundary number doesn't mean a metric can't become increasingly more shitty, and suddenly turn into a bad outcome. Not every response is linear.
then that the debt has been accelerating with either party in power - means this is a problem that won't be solved politically by the current actors i.e both parties.
Bessent is especially moronic financially, if he actually had what it takes to perform adequately in his position, Trump would not stand for it.
https://news.ycombinator.com/item?id=49366743
https://news.ycombinator.com/item?id=49378560
stop immediately_______deal
So, for someone to decide to lend you money or invest in your business, you need to offer them a higher rate of return. This is the risk premium. So when interest rates are close to 0 per cent, mortgages are cheap and everyone is prepared to risk their money on a slide deck promising significant losses over the next three years. Because they have plenty of money that is losing value due to inflation, the risk premium is therefore very low.
If US bonds are at 5 per cent, your banker will add their margin on top and your bank loan will be at least 7 per cent – or higher if they fear a rise in interest rates and inflation. Investors will be much more discerning and demand higher risk premiums. As there are far fewer sectors capable of offering this, investment will concentrate on a very small number of sectors and companies (does AI ring a bell?).
It is therefore the bond yield that affects us directly, rather than the volume of debt. The volume of debt does have an effect, however, as the bulk of the interest is paid by issuing new bonds. If the government repays with cheaper bonds, it isn’t too serious; but if rates rise, the impact is exponential.
The thing is, the more debt and interest there is to pay, the more bonds need to be sold. The more there are, the harder it is, so interest rates have to be raised to attract buyers.
* https://ips-dc.org/report-state-of-insecurity-cost-militariz...
that level of military spending is never going down and will only increase by design
something the average consumer has absolutely no control over and no ability to solve
we just wanted healthcare and homes, instead we got endless wars and bombing civilians with tomahawks
What's more interesting is the long, overarching news stories that span decades, e.g. BRICS, and the demise of the petro-dollar
Not that they'll ever do that ofcourse.
At the same time, pull back on the spending. Or maybe even pull back on the growth in spending. No need to go to a full Doge; rather just pull it back a bit.
Why we can't do this, I am flummoxed.
Countries have a debt crisis when their debt is huge and their interest rate is off the wall. Pretty much the market deciding that they are cooked.
Wake me up when GDP is stagnant and interest rates are climbing over 15%. The US is still the global leader on multiple fronts with a well diversified economy.
It's dumb, greedy, selfish politicians, and they come from all generations, including yours and mine, and in the future they'll come from generations not yet old enough to run.
Boomers is a stupid term used by people who only understand easy answers.
2) Politicians are behest to the same biophysical limitations we all are. An aging cohort that is done producing but not done consuming is a recipe for sticky inflation. Your reply does not address the point...
3) Maybe boomers is a stupid term, but it is clear and succinct. Your pet sensitivities reveal more about you than they do about me.
You guys are cooked.