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The debt doesn't matter. What matters is being the world's reserve currency. I don't know a metric for that. Loose it and then debt matters a lot.

• avip 8y ago
  What I know for sure does not matter in economics is what people say matters. It's like Palaeontology, a fascinating study of the past with little implications for our future. debt does not matter, until one day it will.
  • platz 8y ago
    , which is an entirely value-free assertion from which no understanding can be derived
    • rjf72 8y ago
      I think what he was saying is that past successes are not necessarily indicative of future successes. I do think this simple observation can be used to derive understanding. I'd like to increase the volume of my balloon as much as possible. I blow it up a little bit. It increases a little bit. I blow into it hard. It substantially increases. I keep blowing and it invariably keeps getting larger and larger. There is an absolutely perfect and undeniable correlation between how much I blow into that balloon and the measured volume. In fact it's not even a correlation, it is a clear causal relationship. This leads to an empirical conclusion that is completely wrong. In our society those that say to keep blowing are going to end up succeeding. Not only do their predictions work out, and quite profitably so, but they're also optimistic and promise untold volumes to come. The understanding would be to consider that in fields where meaningful tests cannot be readily performed, empiricism should never replace logic. And illogical but empirically supported concepts should be treated with extreme skepticism. Logic can be flawed and proven to be wrong. Empiricism can be equally flawed, yet the danger is that it can also be impossible to prove wrong until you're left picking up pieces of rubber.
  • jfoutz 8y ago
    Palaeontology drives a lot of fossil fuel discovery. Perhaps not so important over the next 100 years, but I believe it was pretty significant over the last 100 years. With regard to economics, deflation seems bad. Really bad. I (think) I get your point. I think you’re expecting physics results from economics. Econ usually says weak things in a limited context, like weather. Yes. Debt matters. I would be happier with less of it. But in our current context, for a little while, it’s not that important. It’s a fire 300 miles away. The fire could be a really big personal problem surprisingly quickly, but today the biggest worry is housing and feeding the refugees. It’s a strained analogy. Hopefully it gets the point across.
• nabla9 8y ago
  This meme should die. It's just a thing said aloud without any numbers or estimates backing it up. US economy would do just fine and debt would be managed without the reserve currency status. Japan has significantly more debt than US and it manages without reserve currency just fine. Reserve currency status helps US financial sector but it also hurts US competitiveness and exports. The net benefit is estimated to be between 0.3 to 0.5 percent of US GDP [1]. 1. An exorbitant privilege? Implications of reserve currencies for competitiveness https://www.mckinsey.com/featured-insights/employment-and-growth/an-exorbitant-privilege https://www.mckinsey.com/featured-insights/employment-and-gr... 2. Questioning the U.S. Dollar’s Status as a Reserve Currency https://www.jpmorgan.com/jpmpdf/1158630192140.pdf https://www.jpmorgan.com/jpmpdf/1158630192140.pdf
  • Zecar 8y ago
    > Japan has significantly more debt than US and it manages without reserve currency just fine. Wait wait, hold up. Do you really think Japan's economy is doing well? Is this a joke?
  • platz 8y ago
    It's not a "meme" Just because there are some downsides, doesn't mean all the upsides go away. I don't know if holding up Japan's situation as a beacon of light is particularly enticing here.
    • porphyrogene 8y ago
      https://www.merriam-webster.com/dictionary/meme https://www.merriam-webster.com/dictionary/meme
      • platz 8y ago
        I prefer "spimes", thank you
    • nabla9 8y ago
      The net upside is too small to be used as statement that explains the US economy or debt.
• pmart123 8y ago
  More importantly than being the world’s reserve currency is having the debt denominated in your own currency. For instance, during the housing bubble, Icelanders took mortgages out in GBP, Eastern Europe’s took mortgages out in CHF. In these situations, you can’t just print your way out of the debt.
  • xchaotic 8y ago
    I am an unfortunate victim of that situation (banks would lend in local currency but would lend in CHF). It turns out banks didn't actually go and buy CHF to give you, it's just the way the loan was written as what ended up in developers bank account was local currency anyway. So in that specific situation it was entirely possible for a gov to intervene without resorting to buying foreign currency. In my country they still didn't, in Hungary they did.
  • platz 8y ago
    that does make some sense
• bensonn 8y ago
  In a completely hypothetical scenario- if every morning another zero was added to the national debt would there be any downsides? All other variables remain the same, unemployment, GDP, etc, only the debt increase ten-fold. Does debt not matter because we have experienced relative stability and growth for 70 years? If we had another depression (not the hyped great recession but true depression) or world war, would we be better off with less debt or does it truly not matter?
  • testpostpls 8y ago
    Not sure that’s a valid hypothetical yet. There needs to be a counterparty to this hypothetical debt—how will that work?
    • dajohnson89 8y ago
      assume that the counterparties are the same as they are now, in identical proportion to their current outstanding balances.