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I agree with this statement: "There will always be demand for interest bearing risk free government debt". Now go ask investors how they feel about Greek/Argen

by whb07 8y ago

I agree with this statement: "There will always be demand for interest bearing risk free government debt". Now go ask investors how they feel about Greek/Argentinian/Venezuelan etc bonds. A country is just a large collection of people and can be thought of as a giant person. They aren't magical creatures / objects. If a country has no steady job and loves wasting money no one will lend it money. Same applies to a business and a person. If you hold that to be true, then there can definitely be a limit at which point a person will loan money (buy bonds) from a country. Now the question for the U.S is where is that limit, and if we hit it how painful will it be to get back into "healthy" shape. Just like a 400 lb person being told its time to lose weight or they will die of heart attack/diabetes maybe its better to start eating right and exercising BEFORE you get to that point in life.

cheald 8y ago
One might suggest that Greek/Argentinian/Venezuelan bonds aren't risk-free. :) It's true that the US Govt could print its way out of nominal debt, but there are market constraints on how aggressively it may do so if we want the system to keep working, because stable inflation is a key component in the demand for government bonds. Once inflation stops being stable, your government's ability to issue new bonds is in trouble, because buyers demand higher yields to encapsulate the risk of that uncertainty. I'm of the opinion that reality is somewhere in the middle - US government debt isn't the same as household debt, but it's not meaningless, either, and I think it does everyone a disservice when we discuss it as being characteristic of either extreme.
- JumpCrisscross 8y ago
  > there are market constraints on how aggressively it may do so if we want the system to keep working Part of which involves discussing deficit and debt.

by whb07 8y ago

cheald 8y ago

One might suggest that Greek/Argentinian/Venezuelan bonds aren't risk-free. :) It's true that the US Govt could print its way out of nominal debt, but there are market constraints on how aggressively it may do so if we want the system to keep working, because stable inflation is a key component in the demand for government bonds. Once inflation stops being stable, your government's ability to issue new bonds is in trouble, because buyers demand higher yields to encapsulate the risk of that uncertainty. I'm of the opinion that reality is somewhere in the middle - US government debt isn't the same as household debt, but it's not meaningless, either, and I think it does everyone a disservice when we discuss it as being characteristic of either extreme.

JumpCrisscross 8y ago
> there are market constraints on how aggressively it may do so if we want the system to keep working Part of which involves discussing deficit and debt.