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Not to go all MMT here, but so what? We print our own money, have the biggest economy in the world, and despite all the pearl clutching we're one of the most st

Not to go all MMT here, but so what? We print our own money, have the biggest economy in the world, and despite all the pearl clutching we're one of the most stable economies / governments in the world with a lot of highly skilled workers and a reputation for innovation. If you're betting on governments you can do worse than the US. The absolute number of debt is scary, but do you doubt we'll be able to pay back our dues?

Someone1234 8y ago
If the global market enters another downturn and the USD falls, the US could actually get downgraded. That would increasing the cost of this debt, and make it more painful to continue with a budget deficit. Essentially the US is riding on its reputation, but as good as that reputation is, as debt continues to raise relative to GDP international banks may grow wary of loaning, or simply want to diversify if they have a lot tied into US bound debt.
yourbandsucks 8y ago
Interest payments get bigger and there's less money to pay for other stuff.
tabtab 8y ago
Printing money to fix big debt creates a lot of side-effects and risk, including that of run-away inflation. If you want the US Dollar to mean something consistent, it has to stay relatively consistent. That being said, inflation has been relatively mild of late such that a little extra "printing" may not hurt much this time. I just don't like printing as a general fix.
lsiq 8y ago
It's simple accounting, as interest payments on the debt become an increasingly higher part of the budget, the end result becomes insolvency. Of course, an actual default for a country like the U.S. is a very unlikely outcome for a variety of reasons. What is more likely, is that inflation is allowed to rise and 'eat' up the debt. The "hope" is that a mild rate of inflation is sufficient to do so. I doubt it though, there have always been periods of high inflation, and there is no reason to think they will not return.
- redblacktree 8y ago
  US central bankers have had the opposite problem in recent decades. Inflation rates are below target.

Someone1234 8y ago

If the global market enters another downturn and the USD falls, the US could actually get downgraded. That would increasing the cost of this debt, and make it more painful to continue with a budget deficit. Essentially the US is riding on its reputation, but as good as that reputation is, as debt continues to raise relative to GDP international banks may grow wary of loaning, or simply want to diversify if they have a lot tied into US bound debt.

yourbandsucks 8y ago

Interest payments get bigger and there's less money to pay for other stuff.

tabtab 8y ago

Printing money to fix big debt creates a lot of side-effects and risk, including that of run-away inflation. If you want the US Dollar to mean something consistent, it has to stay relatively consistent. That being said, inflation has been relatively mild of late such that a little extra "printing" may not hurt much this time. I just don't like printing as a general fix.

lsiq 8y ago

It's simple accounting, as interest payments on the debt become an increasingly higher part of the budget, the end result becomes insolvency. Of course, an actual default for a country like the U.S. is a very unlikely outcome for a variety of reasons. What is more likely, is that inflation is allowed to rise and 'eat' up the debt. The "hope" is that a mild rate of inflation is sufficient to do so. I doubt it though, there have always been periods of high inflation, and there is no reason to think they will not return.

redblacktree 8y ago
US central bankers have had the opposite problem in recent decades. Inflation rates are below target.