4 ms·

anytime you grow at an unsustainable rate, a slowdown is inevitable. It's not a question of if, its a question of when.

by pascalxus 8y ago

Ma8ee 8y ago
The question is what is a sustainable rate.
- r_smart 8y ago
  The one where interest rates aren't being artificially lowered.
  - muro 8y ago
    "artificially" - is that a thing? Isn't it just "lowered"? What is artificial about it?
    - r_smart 8y ago
      It's artificially lowered because the Federal Reserve is manipulating interest rates, rather than allowing them to fluctuate based on the conditions in the market. Interest is basically the adjustment made to value having money now vs having money in the future (how much would I have to pay you next year in order for you to not ask me to pay you now). An interest rate of 0% means $100 now vs some arbitrary point in the future are of equal use to you, which is irrational. Obviously getting $100 now is better than getting $100 in 5 years. In fairness, interest rates aren't that low. I'm not sure if interest rates equal to inflation would be the same thing as interest of 0% in a 0 inflation world. I'm not an economist.
- moorhosj 8y ago
  If the deficit is 3.8% of GDP [1] and growth is only 2.9% [2] during a supposed economic "boom", something is wrong. [1] https://www.usgovernmentdebt.us/federal_deficit_percent_gdp https://www.usgovernmentdebt.us/federal_deficit_percent_gdp [2] https://www.reuters.com/article/us-usa-economy/u-s-economic-growth-in-2018-misses-trumps-3-percent-target-idUSKCN1QH0HO https://www.reuters.com/article/us-usa-economy/u-s-economic-...
  - opportune 8y ago
    I think our current deficit spending is dumb, but I don't actually see a problem mathematically with this. Assuming we only pay 2% interest on that debt, that's 0.076% of GDP to service the debt from this year. If the new GDP growth is taxed at just 10%, then we have 0.29% of GDP in new taxes. So that's a 4x ROI correct? (of course, the assumption here is that there is no better way to spend that money and that the deficit spending is fully responsible for the GDP growth to begin with...) So theoretically it's not going to break the bank even though many people like me think it's unnecessary
    - moorhosj 8y ago
      ==Assuming we only pay 2% interest on that debt== Where does this come from? the 10-year bond rate was closer to 3% for most of 2018 [1]. ==So that's a 4x ROI correct== You can't calculate ROI with an I. In this case, that is the 3.9% of GDP mentioned. Going forward, we may gain more tax revenue than we would pay in debt servicing each year, but that ignores the initial investment we made. In reality, you would need to show that the present value of your annual tax revenues (0.29% of GDP - 0.076% of GDP) is larger than the 3.9% of GDP invested initially. [1] https://www.thebalance.com/interest-on-the-national-debt-4119024 https://www.thebalance.com/interest-on-the-national-debt-411...
      - opportune 8y ago
        It doesn't matter, 2% or 3% is just splitting hairs. I also apparently underestimated the percent of US GDP going to federal taxes; it's around 19%, not 10%. So there is still more a lot more new tax money coming in than is necessary to service the new debt. "3.9% of GDP invested initially" How is this investing 3.9% of GDP? It costs 0$ in investment for the government to issue new bonds. The only way federal debt costs the country is in the interest spent on servicing it. As long as the tax base increases faster than the interest spent on servicing debt (and also accounting for population growth) there is no economic problem with increasing the federal debt. And again, I am not arguing that the things we are spending the government money on are rational. I think we could do a lot better by cutting military spending and increasing funding for non-military research and infrastructure without deficit spending (which is certainly possible). But technically the current deficit spending is not unsustainable
- indigochill 8y ago
  One where expenses <= income. Yes, you can move forward with debt, but that debt accumulates over time and if you stay in that state indefinitely eventually you'll go bankrupt. Ergo, an average of break even is the minimum to be sustainable.
- vkou 8y ago
  Any exponential growth will eventually become unsustainable.

anytime you grow at an unsustainable rate, a slowdown is inevitable. It's not a question of if, its a question of when.

Ma8ee 8y ago

The question is what is a sustainable rate.

r_smart 8y ago
The one where interest rates aren't being artificially lowered.
- muro 8y ago
  "artificially" - is that a thing? Isn't it just "lowered"? What is artificial about it?
  - r_smart 8y ago
    It's artificially lowered because the Federal Reserve is manipulating interest rates, rather than allowing them to fluctuate based on the conditions in the market. Interest is basically the adjustment made to value having money now vs having money in the future (how much would I have to pay you next year in order for you to not ask me to pay you now). An interest rate of 0% means $100 now vs some arbitrary point in the future are of equal use to you, which is irrational. Obviously getting $100 now is better than getting $100 in 5 years. In fairness, interest rates aren't that low. I'm not sure if interest rates equal to inflation would be the same thing as interest of 0% in a 0 inflation world. I'm not an economist.
moorhosj 8y ago
If the deficit is 3.8% of GDP [1] and growth is only 2.9% [2] during a supposed economic "boom", something is wrong. [1] https://www.usgovernmentdebt.us/federal_deficit_percent_gdp https://www.usgovernmentdebt.us/federal_deficit_percent_gdp [2] https://www.reuters.com/article/us-usa-economy/u-s-economic-growth-in-2018-misses-trumps-3-percent-target-idUSKCN1QH0HO https://www.reuters.com/article/us-usa-economy/u-s-economic-...
- opportune 8y ago
  I think our current deficit spending is dumb, but I don't actually see a problem mathematically with this. Assuming we only pay 2% interest on that debt, that's 0.076% of GDP to service the debt from this year. If the new GDP growth is taxed at just 10%, then we have 0.29% of GDP in new taxes. So that's a 4x ROI correct? (of course, the assumption here is that there is no better way to spend that money and that the deficit spending is fully responsible for the GDP growth to begin with...) So theoretically it's not going to break the bank even though many people like me think it's unnecessary
  - moorhosj 8y ago
    ==Assuming we only pay 2% interest on that debt== Where does this come from? the 10-year bond rate was closer to 3% for most of 2018 [1]. ==So that's a 4x ROI correct== You can't calculate ROI with an I. In this case, that is the 3.9% of GDP mentioned. Going forward, we may gain more tax revenue than we would pay in debt servicing each year, but that ignores the initial investment we made. In reality, you would need to show that the present value of your annual tax revenues (0.29% of GDP - 0.076% of GDP) is larger than the 3.9% of GDP invested initially. [1] https://www.thebalance.com/interest-on-the-national-debt-4119024 https://www.thebalance.com/interest-on-the-national-debt-411...
    - opportune 8y ago
      It doesn't matter, 2% or 3% is just splitting hairs. I also apparently underestimated the percent of US GDP going to federal taxes; it's around 19%, not 10%. So there is still more a lot more new tax money coming in than is necessary to service the new debt. "3.9% of GDP invested initially" How is this investing 3.9% of GDP? It costs 0$ in investment for the government to issue new bonds. The only way federal debt costs the country is in the interest spent on servicing it. As long as the tax base increases faster than the interest spent on servicing debt (and also accounting for population growth) there is no economic problem with increasing the federal debt. And again, I am not arguing that the things we are spending the government money on are rational. I think we could do a lot better by cutting military spending and increasing funding for non-military research and infrastructure without deficit spending (which is certainly possible). But technically the current deficit spending is not unsustainable
indigochill 8y ago
One where expenses <= income. Yes, you can move forward with debt, but that debt accumulates over time and if you stay in that state indefinitely eventually you'll go bankrupt. Ergo, an average of break even is the minimum to be sustainable.
vkou 8y ago
Any exponential growth will eventually become unsustainable.