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This presupposes that American debt is unsustainable. The American debt-to-GDP is pretty average for a developed country. What matters is not the total amount

This presupposes that American debt is unsustainable. The American debt-to-GDP is pretty average for a developed country. What matters is not the total amount of debt, but rather the cost of maintaining it. And US Treasury bonds carry negative real interest rates. The US has many crises, but debt isn't on of them.

zeveb 11y ago
> This presupposes that American debt is unsustainable. The American debt-to-GDP is pretty average for a developed country. That's equivalent to 'but everyone else is doing it!' Our debt either is, or is not, sustainable.
- jgeada 11y ago
  Our debt is in dollars. You know, those things that can be arbitrarily printed by the government anytime, and created out of thin air by financial institutions (aka leverage). We can never run out of dollars.
  - chimeracoder 11y ago
    > Our debt is in dollars. You know, those things that can be arbitrarily printed by the government anytime, and created out of thin air by financial institutions (aka leverage). We can never run out of dollars. Money can always be printed, but not without consequences. (Just ask Germany or Zimbabwe). So yes it is literally impossible for the US to default on that debt unless it actively chooses to, but that doesn't mean that we can just rack up arbitrary amounts of debt without any negative ramifications.
    - jgeada 11y ago
      Agreed 100%. I don't mean to imply that we should just arbitrarily add to the debt; my intent was just to point out the fallacy of the "sky is falling" type of argument around our debt. Historically, however, inflating ones way out of debt has been common. Additionally, the USA is unusual in that it is possibly the only economic powerhouse that is largely self-sufficient in most regards (raw materials, people, etc). We import most goods because they are more convenient, slightly cheaper or more tax advantageous to source elsewhere, not because we have to. One of the reasons the USA has tended to an isolationist attitude is because it could do so without much consequence. The world has much more to lose than we do should we should to inflate our way out of debt.
      - chimeracoder 11y ago
        > The USA is unusual in that it is possibly the only economic powerhouse that is largely self-sufficient in most regards Hardly - the US could not maintain its current economy and standard-of-living as an autarky. The US is only able to maintain its current standard-of-living because of the massive amounts of work being down outside the country. Manufacturing in China is an easy example, but not the only one. > The world has much more to lose than we do should we should to inflate our way out of debt. Not really. Through a number of effects (both direct and indirect), if we were to try and inflate our way out of debt of this magnitude, we would tank our economy in the short- and medium-term, just the same way Germany, Zimbabwe, and Thailand did[0]. Those economies did recover in the longer run, but not without serious repercussions in between, and it can literally take multiple generations just to get back to the starting point, to say nothing of recovering the same global standing. There is no way the US would want to regress to the sort of economy that this would involve. It would be a total economic disaster. [0] This would be true even before we took into account the effect of no longer being the de facto global reserve currency (which would no longer be the case if we started printing hyperinflation-levels of money).
    - deleted 11y ago
      [deleted]
    - calibraxis 11y ago
      The poster is correct: money is a social phenomenon which the US can create all it wants. (In fact, most of it is just numbers in databases. Points in a game. Those who control the game's rules have everyone wasting endless time life chasing these points.) More important than creating money is having by far the biggest guns. What does it mean to be owed a "debt" by the person who controls the currency and most of the guns? Yes, there are "consequences" to creating more money. Every act has consequences. If someone advises you to drink a lot of water, should I respond with counterexamples where someone drank from a firehose?
      - Gibbon1 11y ago
        As far as consequences are concerned, traditional economics as opposed the the crap that currently in vogue teaches us the exact technique to deal with excess debt; wage and price inflation. That's how the US successfully retired it's WWII debt.
  - Gibbon1 11y ago
    This is exactly correct in that a country whose debt is denominated in it's own currency cannot suffer currency crisis ALA Argentina circa 2000 or Greece currently.
- dummy7953 11y ago
  Well, let's put it this way, a lot of other countries are going to have a debt crisis long before the US does. So while in some theoretical universe all nations of the world (including the US) might have unsustainable debt, it will be a long, slow-moving problem by the time it becomes a problem for the US.
- redthrowaway 11y ago
  Debt is unsustainable when the market says it is. When the market is paying you to lend you money, it's not unsustainable.
  - ZoeZoeBee 11y ago
    Negative interest rates are indicative of a very unhealthy economy incapable of growing, the same market "paying you to lend money" is actively taking away money from the savers by providing interest rates much lower than the actual rate of inflation. Without real growth the debt will continue to grow, until more of the budget is devoted towards paying interest instead of the places its needed.
    - redthrowaway 11y ago
      It's more a symptom of an extremely chaotic and uncertain global economy than a weak American one. Investors are willing to pay the USG to lend it money because American treasuries are seen as one of the few safe places left to stash your cash. American growth is mediocre, but far less so than that of other developed nations. Europe is still scrambling to find ever-larger guns with which to blow its own feet off, Canada and Australia are realizing that building an economy on Chinese demand for resources is bound to end in tears, and the BRICS are suddenly looking much less lucrative. The US is still the driver of the global economy, and is doing kind of okay while everyone else is a basket case.
      - ZoeZoeBee 11y ago
        For the time being, the problem is things aren't getting better and after numerous false starts, the problems of the world which have merely been masked over the last 8 years will have to be dealt with. Never mind the coming Demographic crisis, in Japan, China, almost all of the EU, Canada Australia and the US eventually as well, you're right we are better than most of those but all of those are hitting a brick wall
- ethbro 11y ago
  No, a clear, objective measure on whether our debt is or isn't sustainable would require a benchmark debt to weigh against. In other words, if someone chooses not to invest in American debt, then will instead invest in other debt. The relative risk and attractiveness is where the cost and therefore sustainability comes from. IOW, you can not buy American debt. But you would instead buy Chinese, or EU, or Indian, or Russian. There is no "pure debt" to buy as an alternative (gold isn't the same).
7Figures2Commas 11y ago
> What matters is not the total amount of debt, but rather the cost of maintaining it. Classic.
ZoeZoeBee 11y ago
Near zero percent interest rates are the only reason debt is not a "crisis" at the moment. If interest rates are to normalize the payments on interest skyrocket. As it stands right now the US pays $430 billion a year on interest, which is less than we paid in 2008, despite adding over $9 Trillion to the National Debt in six and a half years. https://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm https://www.treasurydirect.gov/govt/reports/ir/ir_expense.ht...
Lazare 11y ago
> The American debt-to-GDP is pretty average for a developed country. As of 2013, the national debt was $16.4 trillion; GDP was around $16.2 trillion, for a ratio of 102%. Developed countries with a higher ratio would be uh... Ireland, Italy, Greece, and Japan. Countries like Germany, Austria, Finland, New Zealand, Australia, Canada all have much lower ratios. > What matters is not the total amount of debt, but rather the cost of maintaining it. And US Treasury bonds carry negative real interest rates. Are you suggesting this is going to continue indefinitely?
- Cacti 11y ago
  Are you suggesting that Ireland, Italy, Greece, Japan, Germany, Austria, Finland, New Zealand, Australia, and Canada are really that comparable to a country that is the sole super power, has the strongest military in history, provides the majority of its energy consumption, and denominates it's debt in its own currency?! I mean, come on. No, it will not continue indefinitely, but that is not the point. The rate of change and the feedback loops matter far more here than the sheer amount of "debt."
  - Lazare 11y ago
    I was replying to someone who claimed that the American debt-to-GDP ratio was average among developed nations. This is factually inaccurate. You are making a very, very different argument. Albeit one which is also pretty silly. The US is reliant on other countries providing it with very cheap finance, China most of all. The American military is strong, but it's not strong enough to force China to provide 0% loans. And that assumes that China even has the funds to do so; if China's economy has a major hiccup, then what? And you can't print your way out of a primary deficit, even if your debt is denominated in your own currency. This is very basic economics. > The rate of change and the feedback loops matter far more here than the sheer amount of "debt." Exactly. Hence the concern. Because if the US starts paying anything approaching its historical cost of debt for future borrowing, the feedback loop vicious. The only way for those feedback loops not to be activated is to argue that the US will continue to be offered ~0% loans indefinitely, which as you admit, they will not. I'm open to the argument that the US's position is economically strong enough to weather the coming storm; I might even agree. But suggesting that there is no storm to weather (or that their debt-to-GDP ratio is not a source of weakness) is simply silly.
xlm1717 11y ago
It doesn't presuppose. It asks the question: what is a sustainable public debt? Then, it goes on to answer that question. The paper referenced reaches the conclusion that three different models used to analyze debt sustainability raise serious questions as to whether today's public debt is sustainable. They go on to suggest that, in the US at least, taxes on labor can go a long way towards making the debt sustainable, while in Europe, neither taxes on labor nor taxes on capital will do much to make the public debt sustainable (since both are already high in Europe). Additionally, taxes on consumption can help in the US just as much as taxes on labor.

zeveb 11y ago

> This presupposes that American debt is unsustainable. The American debt-to-GDP is pretty average for a developed country. That's equivalent to 'but everyone else is doing it!' Our debt either is, or is not, sustainable.

jgeada 11y ago
Our debt is in dollars. You know, those things that can be arbitrarily printed by the government anytime, and created out of thin air by financial institutions (aka leverage). We can never run out of dollars.
- chimeracoder 11y ago
  > Our debt is in dollars. You know, those things that can be arbitrarily printed by the government anytime, and created out of thin air by financial institutions (aka leverage). We can never run out of dollars. Money can always be printed, but not without consequences. (Just ask Germany or Zimbabwe). So yes it is literally impossible for the US to default on that debt unless it actively chooses to, but that doesn't mean that we can just rack up arbitrary amounts of debt without any negative ramifications.
  - jgeada 11y ago
    Agreed 100%. I don't mean to imply that we should just arbitrarily add to the debt; my intent was just to point out the fallacy of the "sky is falling" type of argument around our debt. Historically, however, inflating ones way out of debt has been common. Additionally, the USA is unusual in that it is possibly the only economic powerhouse that is largely self-sufficient in most regards (raw materials, people, etc). We import most goods because they are more convenient, slightly cheaper or more tax advantageous to source elsewhere, not because we have to. One of the reasons the USA has tended to an isolationist attitude is because it could do so without much consequence. The world has much more to lose than we do should we should to inflate our way out of debt.
    - chimeracoder 11y ago
      > The USA is unusual in that it is possibly the only economic powerhouse that is largely self-sufficient in most regards Hardly - the US could not maintain its current economy and standard-of-living as an autarky. The US is only able to maintain its current standard-of-living because of the massive amounts of work being down outside the country. Manufacturing in China is an easy example, but not the only one. > The world has much more to lose than we do should we should to inflate our way out of debt. Not really. Through a number of effects (both direct and indirect), if we were to try and inflate our way out of debt of this magnitude, we would tank our economy in the short- and medium-term, just the same way Germany, Zimbabwe, and Thailand did[0]. Those economies did recover in the longer run, but not without serious repercussions in between, and it can literally take multiple generations just to get back to the starting point, to say nothing of recovering the same global standing. There is no way the US would want to regress to the sort of economy that this would involve. It would be a total economic disaster. [0] This would be true even before we took into account the effect of no longer being the de facto global reserve currency (which would no longer be the case if we started printing hyperinflation-levels of money).
  - deleted 11y ago
    [deleted]
  - calibraxis 11y ago
    The poster is correct: money is a social phenomenon which the US can create all it wants. (In fact, most of it is just numbers in databases. Points in a game. Those who control the game's rules have everyone wasting endless time life chasing these points.) More important than creating money is having by far the biggest guns. What does it mean to be owed a "debt" by the person who controls the currency and most of the guns? Yes, there are "consequences" to creating more money. Every act has consequences. If someone advises you to drink a lot of water, should I respond with counterexamples where someone drank from a firehose?
    - Gibbon1 11y ago
      As far as consequences are concerned, traditional economics as opposed the the crap that currently in vogue teaches us the exact technique to deal with excess debt; wage and price inflation. That's how the US successfully retired it's WWII debt.
- Gibbon1 11y ago
  This is exactly correct in that a country whose debt is denominated in it's own currency cannot suffer currency crisis ALA Argentina circa 2000 or Greece currently.
dummy7953 11y ago
Well, let's put it this way, a lot of other countries are going to have a debt crisis long before the US does. So while in some theoretical universe all nations of the world (including the US) might have unsustainable debt, it will be a long, slow-moving problem by the time it becomes a problem for the US.
redthrowaway 11y ago
Debt is unsustainable when the market says it is. When the market is paying you to lend you money, it's not unsustainable.
- ZoeZoeBee 11y ago
  Negative interest rates are indicative of a very unhealthy economy incapable of growing, the same market "paying you to lend money" is actively taking away money from the savers by providing interest rates much lower than the actual rate of inflation. Without real growth the debt will continue to grow, until more of the budget is devoted towards paying interest instead of the places its needed.
  - redthrowaway 11y ago
    It's more a symptom of an extremely chaotic and uncertain global economy than a weak American one. Investors are willing to pay the USG to lend it money because American treasuries are seen as one of the few safe places left to stash your cash. American growth is mediocre, but far less so than that of other developed nations. Europe is still scrambling to find ever-larger guns with which to blow its own feet off, Canada and Australia are realizing that building an economy on Chinese demand for resources is bound to end in tears, and the BRICS are suddenly looking much less lucrative. The US is still the driver of the global economy, and is doing kind of okay while everyone else is a basket case.
    - ZoeZoeBee 11y ago
      For the time being, the problem is things aren't getting better and after numerous false starts, the problems of the world which have merely been masked over the last 8 years will have to be dealt with. Never mind the coming Demographic crisis, in Japan, China, almost all of the EU, Canada Australia and the US eventually as well, you're right we are better than most of those but all of those are hitting a brick wall
ethbro 11y ago
No, a clear, objective measure on whether our debt is or isn't sustainable would require a benchmark debt to weigh against. In other words, if someone chooses not to invest in American debt, then will instead invest in other debt. The relative risk and attractiveness is where the cost and therefore sustainability comes from. IOW, you can not buy American debt. But you would instead buy Chinese, or EU, or Indian, or Russian. There is no "pure debt" to buy as an alternative (gold isn't the same).

7Figures2Commas 11y ago

> What matters is not the total amount of debt, but rather the cost of maintaining it. Classic.

ZoeZoeBee 11y ago

Near zero percent interest rates are the only reason debt is not a "crisis" at the moment. If interest rates are to normalize the payments on interest skyrocket. As it stands right now the US pays $430 billion a year on interest, which is less than we paid in 2008, despite adding over $9 Trillion to the National Debt in six and a half years. https://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm https://www.treasurydirect.gov/govt/reports/ir/ir_expense.ht...

Lazare 11y ago

> The American debt-to-GDP is pretty average for a developed country. As of 2013, the national debt was $16.4 trillion; GDP was around $16.2 trillion, for a ratio of 102%. Developed countries with a higher ratio would be uh... Ireland, Italy, Greece, and Japan. Countries like Germany, Austria, Finland, New Zealand, Australia, Canada all have much lower ratios. > What matters is not the total amount of debt, but rather the cost of maintaining it. And US Treasury bonds carry negative real interest rates. Are you suggesting this is going to continue indefinitely?

Cacti 11y ago
Are you suggesting that Ireland, Italy, Greece, Japan, Germany, Austria, Finland, New Zealand, Australia, and Canada are really that comparable to a country that is the sole super power, has the strongest military in history, provides the majority of its energy consumption, and denominates it's debt in its own currency?! I mean, come on. No, it will not continue indefinitely, but that is not the point. The rate of change and the feedback loops matter far more here than the sheer amount of "debt."
- Lazare 11y ago
  I was replying to someone who claimed that the American debt-to-GDP ratio was average among developed nations. This is factually inaccurate. You are making a very, very different argument. Albeit one which is also pretty silly. The US is reliant on other countries providing it with very cheap finance, China most of all. The American military is strong, but it's not strong enough to force China to provide 0% loans. And that assumes that China even has the funds to do so; if China's economy has a major hiccup, then what? And you can't print your way out of a primary deficit, even if your debt is denominated in your own currency. This is very basic economics. > The rate of change and the feedback loops matter far more here than the sheer amount of "debt." Exactly. Hence the concern. Because if the US starts paying anything approaching its historical cost of debt for future borrowing, the feedback loop vicious. The only way for those feedback loops not to be activated is to argue that the US will continue to be offered ~0% loans indefinitely, which as you admit, they will not. I'm open to the argument that the US's position is economically strong enough to weather the coming storm; I might even agree. But suggesting that there is no storm to weather (or that their debt-to-GDP ratio is not a source of weakness) is simply silly.

xlm1717 11y ago

It doesn't presuppose. It asks the question: what is a sustainable public debt? Then, it goes on to answer that question. The paper referenced reaches the conclusion that three different models used to analyze debt sustainability raise serious questions as to whether today's public debt is sustainable. They go on to suggest that, in the US at least, taxes on labor can go a long way towards making the debt sustainable, while in Europe, neither taxes on labor nor taxes on capital will do much to make the public debt sustainable (since both are already high in Europe). Additionally, taxes on consumption can help in the US just as much as taxes on labor.