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I think one of the bigger problems is people conflate government debt with personal debt. If you loan money to build a house, you eat the interest costs. But if

by jorvi 8y ago

I think one of the bigger problems is people conflate government debt with personal debt. If you loan money to build a house, you eat the interest costs. But if the government loans money to build a bridge, that money flows into the economy creating jobs. As long as the growth that loaned money creates outpaces interest, the government would he stupid not to loan. Not to mention the absolute safest governments to 'stash' your money (The Netherlands and Germany come to mind) actually pay negative interest rates on some of their bonds.

dmurray 8y ago
It's not really all that different from borrowing to improve your personal money flow. Borrow for a house to decrease the amount you spend on rent, borrow for a car to commute to your job and earn more money, take a student loan to get a higher paying job in the future. Of course, both governments and individuals can make bad decisions or get unlucky, and the government has more negotiating power if it has trouble repaying the loan. But on some level you can be "stupid" not to borrow money if the return to your personal finances outpaces the interest.
- jorvi 8y ago
  Sure, though part of my point was that if you loan money to build a house the money flows from your pocket into the pocket of the timber salesman and electrician. But if the government loans money via bonds and then builds a bridge, that money mostly stays inside the country, where it is both taxable and will contribute to the GDP.
- crdoconnor 8y ago
  >It's not really all that different from borrowing to improve your personal money flow. Borrow for a house to decrease the amount you spend on rent, borrow for a car to commute to your job and earn more money, take a student loan to get a higher paying job in the future. Of course, both governments and individuals can make bad decisions or get unlucky, and the government has more negotiating power if it has trouble repaying the loan. How exactly would a government that prints USD have trouble repaying a loan denominated in USD? It's not only impossible for a government to not be able to pay back a loan in its currency - it has pretty much full control over the interest rate (it can be pushed down with QE at will). If the government wants to borrow at 0.1% it can - and the US government apparently does. The only countries that have defaulted or come close to defaulting on their loans are countries that borrowed in a currency they didn't print (Zimbabwe->USD, Greece->Euro) or countries that unilaterally decided "fuck it, most of our debt is owned by foreigners, let's just not pay them" (Russia).
  - dmurray 8y ago
    > How exactly would a government that prints USD have trouble repaying a loan denominated in USD? If you print too much money you might end up with hyperinflation and bad effects for your citizens. That's just as big "trouble" as a personal bankruptcy. That's not a real risk for the US at the moment, but it's a backstop that answers the question of "why can't we solve all our economic problems by borrowing or printing more money?"
    - crdoconnor 8y ago
      >If you print too much money you might end up with hyperinflation That's about the rate of spending exceeding the economy's ability to produce, not the overall level of debt. It can even happen in surplus. Every country that has suffered hyperinflation had it come about because of a critical reliance upon imports and/or a debt denominated in a foreign currency. Zimbabwe didn't face hyperinflation because the deficit was a bit too high. It faced hyperinflation because they took on foreign debts which they tried to pay back and destroyed their farms. >That's just as big "trouble" as a personal bankruptcy. And a totally different economic problem. >That's not a real risk for the US at the moment And it likely never will be and still has nothing to do with aggregate debt to GDP.
Scarblac 8y ago
They could always just print the money to pay back the debt, and if that leads to too much inflation then remove money from the pool some other way (e.g. raise the reserve percentage that banks have to keep). Didn't France use to have a system where they just printed all money that government spent, and all money they received from taxation ceased to exist?
savanaly 8y ago
It's the same for personal debt, right? I would never take out a loan unless I expected the present value of the thing I'm buying with that money to be greater than the discounted cost of the loan. It might be awfully hard to quantify (what's the return on paying my hospital bill compared to not paying it, or in fixing my car compared to not fixing it?), but there is a return and you only took out the loan because you figured it was higher than the interest you're paying on the loan. Same exact argument as for government debt.

by jorvi 8y ago

dmurray 8y ago

It's not really all that different from borrowing to improve your personal money flow. Borrow for a house to decrease the amount you spend on rent, borrow for a car to commute to your job and earn more money, take a student loan to get a higher paying job in the future. Of course, both governments and individuals can make bad decisions or get unlucky, and the government has more negotiating power if it has trouble repaying the loan. But on some level you can be "stupid" not to borrow money if the return to your personal finances outpaces the interest.

jorvi 8y ago
Sure, though part of my point was that if you loan money to build a house the money flows from your pocket into the pocket of the timber salesman and electrician. But if the government loans money via bonds and then builds a bridge, that money mostly stays inside the country, where it is both taxable and will contribute to the GDP.
crdoconnor 8y ago
>It's not really all that different from borrowing to improve your personal money flow. Borrow for a house to decrease the amount you spend on rent, borrow for a car to commute to your job and earn more money, take a student loan to get a higher paying job in the future. Of course, both governments and individuals can make bad decisions or get unlucky, and the government has more negotiating power if it has trouble repaying the loan. How exactly would a government that prints USD have trouble repaying a loan denominated in USD? It's not only impossible for a government to not be able to pay back a loan in its currency - it has pretty much full control over the interest rate (it can be pushed down with QE at will). If the government wants to borrow at 0.1% it can - and the US government apparently does. The only countries that have defaulted or come close to defaulting on their loans are countries that borrowed in a currency they didn't print (Zimbabwe->USD, Greece->Euro) or countries that unilaterally decided "fuck it, most of our debt is owned by foreigners, let's just not pay them" (Russia).
- dmurray 8y ago
  > How exactly would a government that prints USD have trouble repaying a loan denominated in USD? If you print too much money you might end up with hyperinflation and bad effects for your citizens. That's just as big "trouble" as a personal bankruptcy. That's not a real risk for the US at the moment, but it's a backstop that answers the question of "why can't we solve all our economic problems by borrowing or printing more money?"
  - crdoconnor 8y ago
    >If you print too much money you might end up with hyperinflation That's about the rate of spending exceeding the economy's ability to produce, not the overall level of debt. It can even happen in surplus. Every country that has suffered hyperinflation had it come about because of a critical reliance upon imports and/or a debt denominated in a foreign currency. Zimbabwe didn't face hyperinflation because the deficit was a bit too high. It faced hyperinflation because they took on foreign debts which they tried to pay back and destroyed their farms. >That's just as big "trouble" as a personal bankruptcy. And a totally different economic problem. >That's not a real risk for the US at the moment And it likely never will be and still has nothing to do with aggregate debt to GDP.

Scarblac 8y ago

They could always just print the money to pay back the debt, and if that leads to too much inflation then remove money from the pool some other way (e.g. raise the reserve percentage that banks have to keep). Didn't France use to have a system where they just printed all money that government spent, and all money they received from taxation ceased to exist?

savanaly 8y ago

It's the same for personal debt, right? I would never take out a loan unless I expected the present value of the thing I'm buying with that money to be greater than the discounted cost of the loan. It might be awfully hard to quantify (what's the return on paying my hospital bill compared to not paying it, or in fixing my car compared to not fixing it?), but there is a return and you only took out the loan because you figured it was higher than the interest you're paying on the loan. Same exact argument as for government debt.