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Gorging on cheap credit works great until it doesn't, then you're screwed. Even debt on a 30 year timeline has to be repaid eventually. Pushing the limits of h

by magila 10y ago

Gorging on cheap credit works great until it doesn't, then you're screwed. Even debt on a 30 year timeline has to be repaid eventually. Pushing the limits of how much credit is available leaves a country with no margin left to weather an economic slowdown. See: Argentina at the turn of the millennium. In the USA's case it already took on a huge amount of debt during the last financial crisis. Another round of deficit spending that big would put the US at its highest debt/GDP level ever and firmly into unknown territory as far as just how much credit the world is willing to extend it. Edit: For the US this is an especially dangerous game to play because unlike most other nations, it is too large to be rescued by the IMF.

Spooky23 10y ago
The IMF for all intents and purposes is the US. The current international financial system is the white collar version of mutually assured destruction. The dollar is what gold was -- every nation on earth has pallets of $100 bills to conduct trade, buy oil, etc. The US gets to effectively tax the world, and the alternatives are grim. Gold is too scarce. Alternate currencies like the Euro have their own problems, etc. So the smart money is to keep buying those bonds. The end game will be refinancing or inflating it away, but it's in everyone's interest to keep things going.
- emp_zealoth 10y ago
  My beef with the whole reasoning shown above is: It doesn't even try to argue that the whole nonsense is in any way good, it just goes "WE CANT STOP NOW" Look at the real dollar value of US debt. Then look at exponential graph. Then tell me with a straight face that there is any other way than eventual, utter meltdown of ALL the currencies. Sure, one can fake the GDP with financial shenanigans (so debt-to-GDP doesn't look as bad), packaging and repackaging same shit over and over again, circlejerking it around back and forth until the financial sector baloons the GDP, but the reality will eventually kick in... (You know, Feynmann quote) Meanwhile actual industries are priced at pocket money, companies that make everything that surrounds me right now. How much is gorenje worth? How much are companies that make plumbing worth?

by magila 10y ago

Spooky23 10y ago

The IMF for all intents and purposes is the US. The current international financial system is the white collar version of mutually assured destruction. The dollar is what gold was -- every nation on earth has pallets of $100 bills to conduct trade, buy oil, etc. The US gets to effectively tax the world, and the alternatives are grim. Gold is too scarce. Alternate currencies like the Euro have their own problems, etc. So the smart money is to keep buying those bonds. The end game will be refinancing or inflating it away, but it's in everyone's interest to keep things going.

emp_zealoth 10y ago
My beef with the whole reasoning shown above is: It doesn't even try to argue that the whole nonsense is in any way good, it just goes "WE CANT STOP NOW" Look at the real dollar value of US debt. Then look at exponential graph. Then tell me with a straight face that there is any other way than eventual, utter meltdown of ALL the currencies. Sure, one can fake the GDP with financial shenanigans (so debt-to-GDP doesn't look as bad), packaging and repackaging same shit over and over again, circlejerking it around back and forth until the financial sector baloons the GDP, but the reality will eventually kick in... (You know, Feynmann quote) Meanwhile actual industries are priced at pocket money, companies that make everything that surrounds me right now. How much is gorenje worth? How much are companies that make plumbing worth?