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In your description a debt created in return for consumption today and honored in the future is like a wormhole in space-time. Unlike iron or steel, personal l

by nugget 11y ago

In your description a debt created in return for consumption today and honored in the future is like a wormhole in space-time. Unlike iron or steel, personal labor is a real resource capable of time travel. A psychiatrist can work 40 hours or 80 hours this week. Presumably society is better off if he works 80, so we promise him more money (future demand) in return for his services now (supply pulled forward, especially if he retires earlier than he otherwise would). In theory, as you imply, future generations are better off since you have "accelerated" economic development which is usually net positive. In reality, taken to the extreme, you wake up one day and find that you have been born into a world of neonatal debt slavery to retired psychiatrists who you never met and (especially without population growth) the entire system collapses and reboots. This describes Japan: a country with 300% debt to GDP and flat to declining population, where babies are born into a headwind of sovereign debt.

RobertoG 11y ago
You complicate the issue too much. What would you prefer, to live in a Somalia with 0% public debt or in a Japan with 300% public debt? And why? Because in one there is real infrastructure and knowledge and the other not so much. Or if we want to go all science fiction. In what future do you prefer to live? One with economic fusion, artificial intelligence, and robots that do the entire job but a 300% debt or a future of 0% debt and less technology or infrastructure that today. Debt is a political arrangement and organizational issue. Real wealth comes, surprise, from real wealth.
- nugget 11y ago
  You aren't wrong. I believe in economic acceleration but there is a limit to how far you can take it, which we are now testing with ZIRP. In this case the central banks kept their feet on the gas pedals too long out of political fears of a global depression. Global depressions suck but they are also very useful in that they create healthy periods of intense asset reallocation to prevent malinvestment. Did (largely successful) Japanese attempts to prop up their economy in the 90s and 00s prevent more acute pain but also kill an entire generation of Japanese entrepreneurs who would have cut their teeth with blood in the streets? Instead of healthy reallocation, we have far less targeted broad asset inflation in an attempt to keep economic acceleration going when we are already near the point where GDP growth equals debt service requirements and I don't think it ends well. It's also interesting that ZIRP screams ''maximize your human capital'' at the same time that automation threatens opportunities for the bottom rungs of the work force, and it's not clear how that dilemma will be resolved.

by nugget 11y ago

RobertoG 11y ago

You complicate the issue too much. What would you prefer, to live in a Somalia with 0% public debt or in a Japan with 300% public debt? And why? Because in one there is real infrastructure and knowledge and the other not so much. Or if we want to go all science fiction. In what future do you prefer to live? One with economic fusion, artificial intelligence, and robots that do the entire job but a 300% debt or a future of 0% debt and less technology or infrastructure that today. Debt is a political arrangement and organizational issue. Real wealth comes, surprise, from real wealth.

nugget 11y ago
You aren't wrong. I believe in economic acceleration but there is a limit to how far you can take it, which we are now testing with ZIRP. In this case the central banks kept their feet on the gas pedals too long out of political fears of a global depression. Global depressions suck but they are also very useful in that they create healthy periods of intense asset reallocation to prevent malinvestment. Did (largely successful) Japanese attempts to prop up their economy in the 90s and 00s prevent more acute pain but also kill an entire generation of Japanese entrepreneurs who would have cut their teeth with blood in the streets? Instead of healthy reallocation, we have far less targeted broad asset inflation in an attempt to keep economic acceleration going when we are already near the point where GDP growth equals debt service requirements and I don't think it ends well. It's also interesting that ZIRP screams ''maximize your human capital'' at the same time that automation threatens opportunities for the bottom rungs of the work force, and it's not clear how that dilemma will be resolved.