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I'm sure internal political divisions will probably hasten this process. It's mildly comforting to know that we're not the only empire to self-destruct, but onl

I'm sure internal political divisions will probably hasten this process. It's mildly comforting to know that we're not the only empire to self-destruct, but only mildly. The only potential salvation here is China's debt. There is a possibility that China is sitting on a massive load of unmaintainable debt in their municipalities, with authoritarian regimes more capable of cooking the books on debt & growth than a democracy. They might flame out in the next decade, which would let the US retain its leadership.

Hydraulix989 8y ago
I'm not sure how much worse intra-China debt is than American debt to China. If I had to guess, the former is actually a better situation for China than the latter is for the US.
- cthalupa 8y ago
  As of October, US debt to China is 1.13 trillion. Total US debt is 21 trillion - most of that held by the US government itself or US citizens. (Foreign debt holders only total 3.9 trillion of that 21 trillion total) The municipal debt being referred to is estimated to be ~6 trillion. Neither are particularly meaningful at current. The fear with the Chinese municipal debt is that it's being used to subsidize growth in a way that will flame out and cause their economy to slow. And both countries have more to lose trying to strong arm each other over the US debt than they stand to gain from using it as political leverage.
ProAm 8y ago
> China is sitting on a massive load of unmaintainable debt in their municipalities Isn't the US sitting the same level? We raise the ceiling of what we feel is allowable debt every year or so to kick the can down the road?
- village-idiot 8y ago
  Yes and no. Yes, the US has a ton of debt, and we definitely need to reduce our accumulation of it soon. No in that the US debt is out in the open, as is our growth numbers. The important thing with debt is the growth rate in interest payments. Those can go up by changing rates, and by changing levels of debt. As long as your GDP out-grows your interest payments, there is no reason to stop. It's once your interest payments start outgrowing your economy (and thus your ability to tax & cover the payments) then you end up in a world of hurt. With China, there are two distinct possibilities: 1. They're lying about their GDP growth. 2. They're lying about their debt. They're been accused of 1 for a long time. There are some researchers using light emission to estimate GDP, who claim that China's GDP might be 25% lower than they claim [0]. Meanwhile they might have up to $5.8 trillion in debt tied up in their local government. This doubles the "official" debt level of the Chinese government, a massive level of fraud if true. Combined, the Chinese debt to GDP ratio might be as high as 150%. This is alarmingly high, much much higher than the US has ever reached. Keep in mind that China currently is paying a higher interest rate on its federal debt too compared to the US. [0] https://www.investors.com/politics/editorials/new-study-shines-light-literally-on-chinas-and-russias-fake-gdp-data/ https://www.investors.com/politics/editorials/new-study-shin... [1] https://www.reuters.com/article/us-china-economy-debt/china-local-governments-hidden-debt-could-total-58-trillion-sp-idUSKCN1MQ0JH https://www.reuters.com/article/us-china-economy-debt/china-...

Hydraulix989 8y ago

I'm not sure how much worse intra-China debt is than American debt to China. If I had to guess, the former is actually a better situation for China than the latter is for the US.

cthalupa 8y ago
As of October, US debt to China is 1.13 trillion. Total US debt is 21 trillion - most of that held by the US government itself or US citizens. (Foreign debt holders only total 3.9 trillion of that 21 trillion total) The municipal debt being referred to is estimated to be ~6 trillion. Neither are particularly meaningful at current. The fear with the Chinese municipal debt is that it's being used to subsidize growth in a way that will flame out and cause their economy to slow. And both countries have more to lose trying to strong arm each other over the US debt than they stand to gain from using it as political leverage.

ProAm 8y ago

> China is sitting on a massive load of unmaintainable debt in their municipalities Isn't the US sitting the same level? We raise the ceiling of what we feel is allowable debt every year or so to kick the can down the road?

village-idiot 8y ago
Yes and no. Yes, the US has a ton of debt, and we definitely need to reduce our accumulation of it soon. No in that the US debt is out in the open, as is our growth numbers. The important thing with debt is the growth rate in interest payments. Those can go up by changing rates, and by changing levels of debt. As long as your GDP out-grows your interest payments, there is no reason to stop. It's once your interest payments start outgrowing your economy (and thus your ability to tax & cover the payments) then you end up in a world of hurt. With China, there are two distinct possibilities: 1. They're lying about their GDP growth. 2. They're lying about their debt. They're been accused of 1 for a long time. There are some researchers using light emission to estimate GDP, who claim that China's GDP might be 25% lower than they claim [0]. Meanwhile they might have up to $5.8 trillion in debt tied up in their local government. This doubles the "official" debt level of the Chinese government, a massive level of fraud if true. Combined, the Chinese debt to GDP ratio might be as high as 150%. This is alarmingly high, much much higher than the US has ever reached. Keep in mind that China currently is paying a higher interest rate on its federal debt too compared to the US. [0] https://www.investors.com/politics/editorials/new-study-shines-light-literally-on-chinas-and-russias-fake-gdp-data/ https://www.investors.com/politics/editorials/new-study-shin... [1] https://www.reuters.com/article/us-china-economy-debt/china-local-governments-hidden-debt-could-total-58-trillion-sp-idUSKCN1MQ0JH https://www.reuters.com/article/us-china-economy-debt/china-...