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> You can easily find many articles explaining why the national debt is very different from how we think about personal debt (e.g. http://money.com/money/429391

> You can easily find many articles explaining why the national debt is very different from how we think about personal debt (e.g. http://money.com/money/4293910/national-debt-investors/ http://money.com/money/4293910/national-debt-investors/). Article: "Things aren’t at a boiling point — yet." Well I am now definitely comforted...

ianai 7y ago
Chris Hayes did a podcast that helps explain the difference. Basically, the government is the sole source of money. If it were to balance its books it would mean the entire economy was zero sum. The government being in debt means its leaving value out in the economy. There’s a surplus of money on the not-government balance sheet. Source: https://www.nbcnews.com/think/opinion/debunking-deficit-hysteria-stephanie-kelton-podcast-transcript-ncna1003301 https://www.nbcnews.com/think/opinion/debunking-deficit-hyst...
- mehrdadn 7y ago
  Glancing through it I can't find any mention of what's supposed to happen when the country ends up with so much debt that most of the government's income ends up going toward interest... leaving little/no funds for all its other expenses. Or for the rest of the interest it'll accumulate the following year. Is the idea that you just print money and the problem goes away ("what could possibly go wrong?")?
  - User23 7y ago
    The most likely outcome is that interest rates will asymptotically approach zero as debt increases and the theoretical claim that the natural rate of interest is zero will be proven. And obviously a zero interest treasury security is essentially the exact same thing as a normal currency note. Keep in mind that a 0% federal funds rate doesn't mean commercial banks won't charge interest. Which, by the way, leads to another important point. Something like 90% of the money in use isn't even created by the government, rather it's created from thin air by licensed banks. This is why a banking license is a huge deal. It is, subject to some restrictions, an actual license to create new money.
    - mehrdadn 7y ago
      Sorry, I don't follow. Zero interest? Are we talking about the same interest? We're paying hundreds of billions of dollars to China in interest. In what world is China going to let the US keep its money and lower the interest it receives in return to zero?
      - atq2119 7y ago
        In the world where China wants to keep its own currency at a low value in order to continue the export-driven economic policy. Look, obviously China can sell its US treasuries in exchange for "cash" (electronic balances in a current account). If it did that, the US would only benefit. If China then exchanged this USD "cash" into another currency, the worst that would happen is for the USD to reduce in value in the foreign exchange markets, which would boost US exports and therefore boost the US economy. Yeah, US consumers would have somewhat less purchasing power for some time, but that only balances out the fact that US consumers currently have somewhat more purchasing power than they would "naturally" have.
        ianai 7y ago
        That’s the most straightforward explanation ive seen yet!
        deleted 7y ago
        [deleted]
      - almost_usual 7y ago
        Don’t think China has _let_ power over the United States. I’d imagine some agreement would be met that would be in the best interest of both nations. At least I would hope for that...
- User23 7y ago
  Another good treatment with graphs that make it virtually crystal clear: https://americanaffairsjournal.org/2019/02/does-america-need-global-savings-to-finance-its-fiscal-and-trade-deficits/ https://americanaffairsjournal.org/2019/02/does-america-need...

ianai 7y ago

Chris Hayes did a podcast that helps explain the difference. Basically, the government is the sole source of money. If it were to balance its books it would mean the entire economy was zero sum. The government being in debt means its leaving value out in the economy. There’s a surplus of money on the not-government balance sheet. Source: https://www.nbcnews.com/think/opinion/debunking-deficit-hysteria-stephanie-kelton-podcast-transcript-ncna1003301 https://www.nbcnews.com/think/opinion/debunking-deficit-hyst...

mehrdadn 7y ago
Glancing through it I can't find any mention of what's supposed to happen when the country ends up with so much debt that most of the government's income ends up going toward interest... leaving little/no funds for all its other expenses. Or for the rest of the interest it'll accumulate the following year. Is the idea that you just print money and the problem goes away ("what could possibly go wrong?")?
- User23 7y ago
  The most likely outcome is that interest rates will asymptotically approach zero as debt increases and the theoretical claim that the natural rate of interest is zero will be proven. And obviously a zero interest treasury security is essentially the exact same thing as a normal currency note. Keep in mind that a 0% federal funds rate doesn't mean commercial banks won't charge interest. Which, by the way, leads to another important point. Something like 90% of the money in use isn't even created by the government, rather it's created from thin air by licensed banks. This is why a banking license is a huge deal. It is, subject to some restrictions, an actual license to create new money.
  - mehrdadn 7y ago
    Sorry, I don't follow. Zero interest? Are we talking about the same interest? We're paying hundreds of billions of dollars to China in interest. In what world is China going to let the US keep its money and lower the interest it receives in return to zero?
    - atq2119 7y ago
      In the world where China wants to keep its own currency at a low value in order to continue the export-driven economic policy. Look, obviously China can sell its US treasuries in exchange for "cash" (electronic balances in a current account). If it did that, the US would only benefit. If China then exchanged this USD "cash" into another currency, the worst that would happen is for the USD to reduce in value in the foreign exchange markets, which would boost US exports and therefore boost the US economy. Yeah, US consumers would have somewhat less purchasing power for some time, but that only balances out the fact that US consumers currently have somewhat more purchasing power than they would "naturally" have.
      - ianai 7y ago
        That’s the most straightforward explanation ive seen yet!
      - deleted 7y ago
        [deleted]
    - almost_usual 7y ago
      Don’t think China has _let_ power over the United States. I’d imagine some agreement would be met that would be in the best interest of both nations. At least I would hope for that...
User23 7y ago
Another good treatment with graphs that make it virtually crystal clear: https://americanaffairsjournal.org/2019/02/does-america-need-global-savings-to-finance-its-fiscal-and-trade-deficits/ https://americanaffairsjournal.org/2019/02/does-america-need...