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In my naive and ignorant perspective, it _feels_ like it paves the way to spend more now without thought of how to pay it back. A 10-year bond carries the like

In my naive and ignorant perspective, it _feels_ like it paves the way to spend more now without thought of how to pay it back. A 10-year bond carries the likelihood that a way to pay it back will need to be considered in the near future, when many involved in selling the bonds are still around to figure out how to pay them back. Who here, with at least 50% confidence can say they'll be around in 50 years? 100 years? The issuance of bonds on that scale appear to carry the assumption that it will be paid back _somehow_ at _some point_ with little regard as to how. Isn't the current social security crises partly the fault of not thinking at scale of a century? Again, ignorance and nativity, please correct me where I'm not understanding.

JumpCrisscross 7y ago
> A 10-year bond carries the likelihood that a way to pay it back will need to be considered in the near future Consider someone with multiple mortgages. Their taking out a 20y mortgage has little bearing on when that debt will be extinguished. Maybe cash is flowing and it’s gone in two. Maybe it’s repeatedly refinanced for fifty years. There is no evidence that Congress or the electorate even consider the term structure of federal debt when considering spending. Deficits are a fiscal, not Treasury, matter.
- alpha_squared 7y ago
  Mortgages are paid back in monthly installments, ensuring that money is recuperated in the meantime or the property becomes repossessed. Bonds are repaid when mature, no? Seems like an unfair comparison when talking about an inheritance of debt. Am I misunderstanding something?
  - JumpCrisscross 7y ago
    Yes, mortgages are amortised while Treasuries are not. That said, the dominating factor is refinancing. If $1 is financed with a 30y mortgage, it could be paid off in 2 years or the mortgage could be refinanced after 20 years for another 30y. Same with the federal debt. Bottom line is we have no evidence Congress or voters take into account term structure when setting taxes and spending. Those are the drivers of deficits and debt. Not the duration of the bonds issued to finance it.
dragonwriter 7y ago
> In my naive and ignorant perspective, it _feels_ like it paves the way to spend more now without thought of how to pay it back. While the policy recommendations made by people embracing Modern Monetary Theory may be debatable, the core descriptive feature of that theory is correct: when a government is budgeting in its own fiat currency, the treatment of finances as “fiscal”—literally, relating to a purse into which revenue goes and from which spending flows—is fundamentally a misleading metaphor: government spending creates money and government taking in money destroys it. Government “borrowing” is literally destroying money from the hands of the volunteers to offset the monetary impacts of money created by spending with the promise to create more money and give it back to those volunteers at a specified later date. Paying back isn't really an issue the way it is for non-fiat-issuers. There is no fiscal policy, only broad-focus monetary policy and distributionally targeted monetary policy. (Traditional monetary policy is the former, traditional “fiscal” policy is a mix.)
- deleted 7y ago
  [deleted]
- ComputerGuru 7y ago
  Basically, when one of the two parties in a transaction conducted in USD is the US government, all “typical” financial concepts/terms have to be completely redefined. Take for example interest rate, the most basic and straightforward single number in the terms of any loan. It’s really not “interest” when you’re buying government bonds because it’s a fiat currency and you’re going to be paid back in the same. It’s more like buying rights to shares in a shady company on an unregulated exchange that vests after n years, with the hope that decisions the company makes pertaining to issuance of future shares will not “unfairly” dilute your stock (after all, the stock isn’t “split” in the normal sense) beyond what you’re set to gain in the terms of your options... while simultaneously betting on the waxing and waning of the currency’s global usage and adoption subject to foreign policy, investment domestically and abroad, etc. all on top of attempting to “play the market” and win. I don’t know if it’s even possible to fully grasp the sheer complexity of all the factors, let alone the factors themselves.

JumpCrisscross 7y ago

> A 10-year bond carries the likelihood that a way to pay it back will need to be considered in the near future Consider someone with multiple mortgages. Their taking out a 20y mortgage has little bearing on when that debt will be extinguished. Maybe cash is flowing and it’s gone in two. Maybe it’s repeatedly refinanced for fifty years. There is no evidence that Congress or the electorate even consider the term structure of federal debt when considering spending. Deficits are a fiscal, not Treasury, matter.

alpha_squared 7y ago
Mortgages are paid back in monthly installments, ensuring that money is recuperated in the meantime or the property becomes repossessed. Bonds are repaid when mature, no? Seems like an unfair comparison when talking about an inheritance of debt. Am I misunderstanding something?
- JumpCrisscross 7y ago
  Yes, mortgages are amortised while Treasuries are not. That said, the dominating factor is refinancing. If $1 is financed with a 30y mortgage, it could be paid off in 2 years or the mortgage could be refinanced after 20 years for another 30y. Same with the federal debt. Bottom line is we have no evidence Congress or voters take into account term structure when setting taxes and spending. Those are the drivers of deficits and debt. Not the duration of the bonds issued to finance it.

dragonwriter 7y ago

> In my naive and ignorant perspective, it _feels_ like it paves the way to spend more now without thought of how to pay it back. While the policy recommendations made by people embracing Modern Monetary Theory may be debatable, the core descriptive feature of that theory is correct: when a government is budgeting in its own fiat currency, the treatment of finances as “fiscal”—literally, relating to a purse into which revenue goes and from which spending flows—is fundamentally a misleading metaphor: government spending creates money and government taking in money destroys it. Government “borrowing” is literally destroying money from the hands of the volunteers to offset the monetary impacts of money created by spending with the promise to create more money and give it back to those volunteers at a specified later date. Paying back isn't really an issue the way it is for non-fiat-issuers. There is no fiscal policy, only broad-focus monetary policy and distributionally targeted monetary policy. (Traditional monetary policy is the former, traditional “fiscal” policy is a mix.)

deleted 7y ago
[deleted]
ComputerGuru 7y ago
Basically, when one of the two parties in a transaction conducted in USD is the US government, all “typical” financial concepts/terms have to be completely redefined. Take for example interest rate, the most basic and straightforward single number in the terms of any loan. It’s really not “interest” when you’re buying government bonds because it’s a fiat currency and you’re going to be paid back in the same. It’s more like buying rights to shares in a shady company on an unregulated exchange that vests after n years, with the hope that decisions the company makes pertaining to issuance of future shares will not “unfairly” dilute your stock (after all, the stock isn’t “split” in the normal sense) beyond what you’re set to gain in the terms of your options... while simultaneously betting on the waxing and waning of the currency’s global usage and adoption subject to foreign policy, investment domestically and abroad, etc. all on top of attempting to “play the market” and win. I don’t know if it’s even possible to fully grasp the sheer complexity of all the factors, let alone the factors themselves.