5 ms·

> 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

by 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).

by zeveb 11y ago

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).