7 ms·

US debt surpasses $23T for first time

63 points by spking 7y ago

crb002 7y ago
Only $120 billion in fed overnight loans to prop up liquidity to keep blowing money on short term treasury auctions. Totally not a 5 alarm economic fire raging.
- crb002 7y ago
  The one chart to rule them all, https://fred.stlouisfed.org/series/HTRUCKSSAAR https://fred.stlouisfed.org/series/HTRUCKSSAAR If that were lower I would be less worried. The sky high market is why I worry. If the Fed has to prop things up that bad in an all time high economy they will have no control in a free fall crash.
ivalm 7y ago
The US government has been continuously running a deficit for a long while. I'm not sure what is the significance of $23T (over 22T, or any other number). It's not even necessarily bad that we run a deficit, although perhaps it should be limited to be in proportion of nominal GDP growth.
thinkingkong 7y ago
Does it make sense to look at these figures in isolation? Like its psychologically significant but GDP is also growing and so is inflation. It seems like we would need to look at at least all of those together to get a better understanding of whats happening. Is this inherently “bad” ?
- rockinghigh 7y ago
  There are multiple ways to look at it. One bad sign is the large increase in the budget deficit at a time of economy expansion (from $585B in 2016 to $980B in 2019). Another aspect is how much of the budget has to be allocated to paying the interest on the debt ($376B in 2019). The CBO listed consequences of high debt in 2014: http://www.crfb.org/blogs/cbo-consequences-growing-national-debt http://www.crfb.org/blogs/cbo-consequences-growing-national-...
perfunctory 7y ago
Absolute numbers like these are not very interesting and quite meaningless. Much more interesting is debt to gdp ratio. Which also happens to be quite high at the moment.
supernova87a 7y ago
Well, just to inject a little bit of perspective here -- high absolute or (or even) relative debt levels are not necessarily a hugely bad thing. For example, Japan has 2x or more the per-capita debt that we in the US do. Their debt is 2X their GDP! [1] But Japan has a pretty high likelihood of repaying it, so it's not a problem. We also are highly likely to repay our US backed debt (and we have the hidden but dangerous capability to devalue our currency). And add to that the notion that we've been getting debt issued at highly favorable interest rates, so we borrowed for cheap. With that said, however, as with one's household debt (this is one aspect where comparing with a household is not wildly stupid) -- did we spend it on things that were worthwhile? Are we getting a lot for having borrowed this money or stimulus? Did we spend for future potential in our economy? Just because we got it cheap doesn't mean it was a good expenditure. I am inclined to say no. Our borrowing in this last year was pissed away on unsustainable tax cuts, frivolous give backs, and a brute force cutting for the symbolic gesture based on mostly fallacious logic. And when the recession comes, our ammo will have been already spent. I mean borrowed. And the kids will pay of course, for our midlife crisis Camaro. [1] https://www.marketwatch.com/story/heres-a-lesson-from-japan-about-the-threat-of-a-us-debt-crisis-2018-05-14 https://www.marketwatch.com/story/heres-a-lesson-from-japan-...
- cperciva 7y ago
  And the kids will pay of course And that's the big problem here. The policy of "run large deficits funded by residents buying government bonds" effects a large wealth transfer from millennials and post-millennials to baby boomers.
  - AmericanChopper 7y ago
    That’s really not how it works at all. Total dollar value of debt is irrelevant, only thing that matters is ratio to GDP. It will also never (and should never) be paid down. Because growing the GDP is the same thing as paying down debt. The GDP will continue to grow, so even if its 50T by the time kids today are grown up, that’s fine as long as the GDP has kept up. Unlike people, governments don’t have a fixed lifespan, so it’s not like the current generation is going to be on the hook for it when they’re older. It would be a problem if debt was $0, because that would mean the government had paid an enormous opportunity cost at the expense of growing the economy.
mdorazio 7y ago
And as long as the treasury can sell debt for basically nothing it will continue to surpass higher and higher numbers. I'm not holding out hope for spending getting under control regardless of who gets elected in a year.
- wahern 7y ago
  Most treasuries were held by the U.S. government itself, particularly the Social Security Trust Fund. But the trust fund has now switched to net withdrawal of its savings, which means the total outstanding debt will increasingly be held by commercial and foreign ownership, rates may increase, and, worse, become more volatile as the Trust Fund won't be there as a cushion. The upshot is that the ability of the U.S. to fund and service debt will become increasingly vulnerable to the global economy. One reason why demand for U.S. treasuries are so high is because it was cushioned from global economic forces. The U.S. was a safe haven. Debt-to-GDP ratio is important as an indicator of your ability to weather global slowdowns and remain in control of domestic budgeting. So what the future brings is accelerating volatility as the forces which conspired to keep rates stable and low will begin to conspire to do the opposite. Whether rates become burdensome long-term depends on many factors, but the increased volatility alone could be hugely disruptive and costly.
  - mdorazio 7y ago
    This is an interesting point. For those curious about how US debt actually breaks down among holders, there's a good summary in [1]. It depends "which" debt you're talking about to determine who owns the most of it. [1] https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124 https://www.thebalance.com/who-owns-the-u-s-national-debt-33...
throwaway07Ju19 7y ago
The US is ruled by two political parties and neither care about the debt. Saving for a rainy day during times of prosperity is the exception rather than the rule. If we owe future generations anything it is 1) a sustainable environment and 2) a sustainable balance sheet. We may leave them neither.
- purplezooey 7y ago
  It's not correct to say that neither party cares about the debt. Only one has made it a lot worse.
  - Fjolsvith 7y ago
    Agreed. It's always the one who happens to be in control of the purse strings at any given time.
fnord77 7y ago
It's the debt to income ratio that really matters.
segfaultbuserr 7y ago
Only marginally related, but I highly recommend reading Debt: The First 5000 Years [0] by David Graeber. By examining and analyzing anthropological records, the author proposed a heterodox economic theory. Unlike the conventional economic model which says the human economic system comes from barter, currency, and finally debt/credit, the author argued that most historical evidence showed that the origin of the human economic system is actually debt/credit - The concept of debt came from the gift economy of early human communities: one friendly person shares one item to one's neighbor, and expect the neighbor provides something in return to help in the future. Barter was the extraordinary rather than the norm: it was only used with outside strangers (because they were not accountable under the human credit system of the local gift economy). Money and currency is actually a much later development as a method to quantify the debt, in this process, subjective human emotion is removed and replaced with an autonomous and objective economic machine. From this point, the author gave an alternative interpretation and analysis of human history. His conclusion is that the boom and bust of debt is an important driving force in human history, in this process, the debt bubble becomes bigger and bigger - until the unavoidable explosion of debt crisis. Then there will be a radical breakdown of social order, Finally, a new society is rebuilt, and all the debt from the previous society is canceled - this is a periodic cycle that occurs at a scale of 100-300 years. And the author argued, since the 1970, we have returned to (the beginning) of a new cycle. You don't have to agree everything that the author claims, but the author is good at telling a story, and it's a fascinating read. My summary is not exactly what the author said, the Wikipedia article the P2P Foundation Wiki [1] has a better summary, it includes transcripts of interviews. [0] https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years [1] https://wiki.p2pfoundation.net/First_Five_Thousand_Years_of_Debt https://wiki.p2pfoundation.net/First_Five_Thousand_Years_of_...
- lisper 7y ago
  > And the author argued, since the 1970, we are reaching the next cycle. So... when was the last time this supposedly happened? Because I can't think of even a single time in human history where there has been "a radical breakdown of social order... a new society is rebuilt, and all the debts from the previous society is canceled."
Phil_Latio 7y ago
That's the way it is. If the US has a trade deficit and the companies and private households are net savers, then there is only one sector left who can make the required debt (without new debt, no new savings). Simple accounting. If you don't want the government to make new debt (or at least not as much), you have to force one of the other 3 sectors to make it. - Private households: You can't do that. - Companies: Everywhere we see tax cuts, so why would a country increase taxes? Bad, but that's the way the world is these days. - Foreign countries (trade deficit): Looks like the only way at the moment. Sorry, but Trump is on to something if he talks about fair trade.
- bilbo0s 7y ago
  In all honesty, even foreign countries won't work. You would need to find foreign nations meeting all three of the following criteria: -Wealthy enough to buy goods. Can't really sell much to Lesotho for instance. -Net consumers as opposed to net savers. Places like China you have that dreaded 90/90 trap. Where 90 percent or more of families feel a need to save 90 percent or more of their disposable income. Probably because they have both a one child policy and a completely nonexistent social safety net. -Which is a good segué for the third necessary condition, a government willing to grease the gears of consumption with fiscal and monetary policy. Policies like, for instance, providing their citizens with a reliable safety net. (In addition to cultural tendencies of course.) At any rate, as we look around the world, you just don't see any nations out there meeting all those criteria. The trade war is more about trying to turn China into a country that does meet those criteria. I'm not too hopeful that will happen though to be honest. The Chinese proclivity to save is not born simply of a lack of a safety net to look after you in old age, it's also deeply ingrained culturally. Has been for thousands of years. Chinese have to be pretty wealthy before they become spendthrifts. And like you said, how do you force a guy to spend money instead of saving? It's a tough problem all the way around.
guelo 7y ago
My suspicion is that the GOP strategy, if there is one, is to run large deficits when they have power so that when Democrats get power they feel that they are unable to spend on social welfare . Reagan, W, and Trump increased the deficits while Clinton and Obama, after the stimulus, reduced it.
- harryh 7y ago
  You don't have to be suspicious, this has been explicitly stated by many fiscal conservatives on many occasions. https://en.wikipedia.org/wiki/Starve_the_beast https://en.wikipedia.org/wiki/Starve_the_beast
  - curtis3389 7y ago
    This quote from Alan Greenspan (emphasis mine) is a little unsettling: > Let us remember that the basic purpose of any tax cut program in today's environment is to reduce the momentum of expenditure growth by restraining the amount of revenue available and trust that there is a political limit to deficit spending. I wonder where that limit lies and what circumstances will we be in when we find it.
- hedvig 7y ago
  Any conservative users here mind to denounce this?
- Fjolsvith 7y ago
  Expecting to get downvoted to death without any discussion for this comment but here goes. The GOP plan is to audit the Federal Reserve and discover how badly they have misused their authority. Once that is done, they'll cancel that debt and disband the Fed and its IRS arm. That's why the military spending bill was so big. Running up the credit card before filing bankruptcy.
cft 7y ago
Exit stock positions into cash, short most "unicorns" that are pure product of QE: Pinterest, PagerDuty, etc. Exchange some cash for BTC, in case the Fed won't be able to contains inflation when the bottom falls out.
- crb002 7y ago
  As someone who bought on the dip in 2008, 30% cash is the sweet spot. 20% buying into the dip. 10% to keep you from having any cash flow problems that make you sell off to stay above water.
mempko 7y ago
It's clear most people have no idea how government debt works. Everyone thinks it's like a household, that the government spends it's revenue and borrows money from someone else. Imagine you are the JohnDoe family. You are able to issue JohnDoe bucks. You spend the JohnDoe bucks first and then later ask for some of them back (as taxes). The difference between what you spend and what you get back is called the JohnDoe deficit. And the aggregate of the deficit is the JohnDoe "debt". On the other side of the transaction, those that provide services to the JohnDoe family now have JohnDoe bucks and because they didn't have to give all of them back to the JohnDoe family they keep some in bank accounts. Another way to say this, the US debt can also be called "US people's savings". JohnDoe also issues bonds with a percent return. Some of the people with these JohnDoe bucks might buy the bonds to get the return. The question is, is the JohnDoe family ever in danger of not paying those bonds back? The clear answer is no, they can always pay back any debt as long as it's denominated in JohnDoe bucks. Wouldn't you like to be the JohnDoe family?
turtlecloud 7y ago
Current gov has no interest in paying off debt. All conspiracy theories lead to the elites plundering the existing system and then defaulting. This will lead to the collapse of the USD and a new digital currency will take its place.
- purplezooey 7y ago
  the elites!
oarabbus_ 7y ago
Serious question - who cares? I'm really not trying to be flippant. We keep kicking the can down the road and that will never change.
hn_throwaway_99 7y ago
Lots of comments saying "the absolute numbers don't matter". Which is pretty much true, but the debt to GDP ratio is currently ~105%. The last time it was that high was WWII. The scary thing about that is we are in a booming expansion. Next time we hit a recession or some other even mild shock to the system debt-to-GDP will skyrocket even further. Related, remember when the Republicans cared about the debt[1]? [1] https://www.crfb.org/blogs/23-senate-republicans-urge-obama-address-deficit https://www.crfb.org/blogs/23-senate-republicans-urge-obama-...
cabaalis 7y ago
Combine this with the fact that the largest asset the US government holds $1.5T in student loans, and we've got a recipe for disaster. "Let's borrow more from China, we can repay it with the proceeds from Billy's liberal arts degree"
zaptheimpaler 7y ago
I'm not sure the existence of debt in itself is as much of a problem on a macro scale as people think it is - the negative association to debt comes from an intuition over personal debt like loans/credit cards, which doesn't necessarily make sense on a macro scale. Say company A lends $10 to B. B lends that $10 to C. C lends $1 each to 5 people. The total debt in this case is $10 (B owes A) + $10 (C owes B) + $5 (5 people owe C) = $25. Each borrower-lender pair increases the debt, even though its all about the same $10. Now if C defaults on their debt, it has ramifications all the way upto A. But it won't cause a collapse unless the lenders start treating the debt as less risky than it is. In the case of 2008, banks treated mortgage debt as virtually risk-free and borrowed using that debt as collateral - so the problem was that the debt was certified and treated as much less risky than it really was.
- ianai 7y ago
  I’d like the next person and all the people following who veto an idea because of national debt to be forced to provide a thing which one dollar of debt keeps the US government from doing. They need to provide 23T worth of effects in the economy that are positive from paying 23T in USD debt off.
  - ianai 7y ago
    If I own 1000$ in US treasury bonds then I will make some return (like 3%) after it vests some time from now. But if the US government tracts me down and pays me the principle of 1000$ ahead of schedule then I have lost the scheduled rate of return. It’s a harm to me and in aggregate a harm to social wealth growth.
purplezooey 7y ago
One wonders when the US currency/debt crisis will occur. It will be bad.
gbajson 7y ago
Does anyone of you know who owns this debt? What will happen when citizens decide to null it?

63 points by spking 7y ago

Only $120 billion in fed overnight loans to prop up liquidity to keep blowing money on short term treasury auctions. Totally not a 5 alarm economic fire raging.

crb002 7y ago
The one chart to rule them all, https://fred.stlouisfed.org/series/HTRUCKSSAAR https://fred.stlouisfed.org/series/HTRUCKSSAAR If that were lower I would be less worried. The sky high market is why I worry. If the Fed has to prop things up that bad in an all time high economy they will have no control in a free fall crash.

ivalm 7y ago

The US government has been continuously running a deficit for a long while. I'm not sure what is the significance of $23T (over 22T, or any other number). It's not even necessarily bad that we run a deficit, although perhaps it should be limited to be in proportion of nominal GDP growth.

thinkingkong 7y ago

Does it make sense to look at these figures in isolation? Like its psychologically significant but GDP is also growing and so is inflation. It seems like we would need to look at at least all of those together to get a better understanding of whats happening. Is this inherently “bad” ?

rockinghigh 7y ago
There are multiple ways to look at it. One bad sign is the large increase in the budget deficit at a time of economy expansion (from $585B in 2016 to $980B in 2019). Another aspect is how much of the budget has to be allocated to paying the interest on the debt ($376B in 2019). The CBO listed consequences of high debt in 2014: http://www.crfb.org/blogs/cbo-consequences-growing-national-debt http://www.crfb.org/blogs/cbo-consequences-growing-national-...

perfunctory 7y ago

Absolute numbers like these are not very interesting and quite meaningless. Much more interesting is debt to gdp ratio. Which also happens to be quite high at the moment.

supernova87a 7y ago

Well, just to inject a little bit of perspective here -- high absolute or (or even) relative debt levels are not necessarily a hugely bad thing. For example, Japan has 2x or more the per-capita debt that we in the US do. Their debt is 2X their GDP! [1] But Japan has a pretty high likelihood of repaying it, so it's not a problem. We also are highly likely to repay our US backed debt (and we have the hidden but dangerous capability to devalue our currency). And add to that the notion that we've been getting debt issued at highly favorable interest rates, so we borrowed for cheap. With that said, however, as with one's household debt (this is one aspect where comparing with a household is not wildly stupid) -- did we spend it on things that were worthwhile? Are we getting a lot for having borrowed this money or stimulus? Did we spend for future potential in our economy? Just because we got it cheap doesn't mean it was a good expenditure. I am inclined to say no. Our borrowing in this last year was pissed away on unsustainable tax cuts, frivolous give backs, and a brute force cutting for the symbolic gesture based on mostly fallacious logic. And when the recession comes, our ammo will have been already spent. I mean borrowed. And the kids will pay of course, for our midlife crisis Camaro. [1] https://www.marketwatch.com/story/heres-a-lesson-from-japan-about-the-threat-of-a-us-debt-crisis-2018-05-14 https://www.marketwatch.com/story/heres-a-lesson-from-japan-...

cperciva 7y ago
And the kids will pay of course And that's the big problem here. The policy of "run large deficits funded by residents buying government bonds" effects a large wealth transfer from millennials and post-millennials to baby boomers.
- AmericanChopper 7y ago
  That’s really not how it works at all. Total dollar value of debt is irrelevant, only thing that matters is ratio to GDP. It will also never (and should never) be paid down. Because growing the GDP is the same thing as paying down debt. The GDP will continue to grow, so even if its 50T by the time kids today are grown up, that’s fine as long as the GDP has kept up. Unlike people, governments don’t have a fixed lifespan, so it’s not like the current generation is going to be on the hook for it when they’re older. It would be a problem if debt was $0, because that would mean the government had paid an enormous opportunity cost at the expense of growing the economy.

mdorazio 7y ago

And as long as the treasury can sell debt for basically nothing it will continue to surpass higher and higher numbers. I'm not holding out hope for spending getting under control regardless of who gets elected in a year.

wahern 7y ago
Most treasuries were held by the U.S. government itself, particularly the Social Security Trust Fund. But the trust fund has now switched to net withdrawal of its savings, which means the total outstanding debt will increasingly be held by commercial and foreign ownership, rates may increase, and, worse, become more volatile as the Trust Fund won't be there as a cushion. The upshot is that the ability of the U.S. to fund and service debt will become increasingly vulnerable to the global economy. One reason why demand for U.S. treasuries are so high is because it was cushioned from global economic forces. The U.S. was a safe haven. Debt-to-GDP ratio is important as an indicator of your ability to weather global slowdowns and remain in control of domestic budgeting. So what the future brings is accelerating volatility as the forces which conspired to keep rates stable and low will begin to conspire to do the opposite. Whether rates become burdensome long-term depends on many factors, but the increased volatility alone could be hugely disruptive and costly.
- mdorazio 7y ago
  This is an interesting point. For those curious about how US debt actually breaks down among holders, there's a good summary in [1]. It depends "which" debt you're talking about to determine who owns the most of it. [1] https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124 https://www.thebalance.com/who-owns-the-u-s-national-debt-33...

throwaway07Ju19 7y ago

The US is ruled by two political parties and neither care about the debt. Saving for a rainy day during times of prosperity is the exception rather than the rule. If we owe future generations anything it is 1) a sustainable environment and 2) a sustainable balance sheet. We may leave them neither.

purplezooey 7y ago
It's not correct to say that neither party cares about the debt. Only one has made it a lot worse.
- Fjolsvith 7y ago
  Agreed. It's always the one who happens to be in control of the purse strings at any given time.

fnord77 7y ago

It's the debt to income ratio that really matters.

segfaultbuserr 7y ago

Only marginally related, but I highly recommend reading Debt: The First 5000 Years [0] by David Graeber. By examining and analyzing anthropological records, the author proposed a heterodox economic theory. Unlike the conventional economic model which says the human economic system comes from barter, currency, and finally debt/credit, the author argued that most historical evidence showed that the origin of the human economic system is actually debt/credit - The concept of debt came from the gift economy of early human communities: one friendly person shares one item to one's neighbor, and expect the neighbor provides something in return to help in the future. Barter was the extraordinary rather than the norm: it was only used with outside strangers (because they were not accountable under the human credit system of the local gift economy). Money and currency is actually a much later development as a method to quantify the debt, in this process, subjective human emotion is removed and replaced with an autonomous and objective economic machine. From this point, the author gave an alternative interpretation and analysis of human history. His conclusion is that the boom and bust of debt is an important driving force in human history, in this process, the debt bubble becomes bigger and bigger - until the unavoidable explosion of debt crisis. Then there will be a radical breakdown of social order, Finally, a new society is rebuilt, and all the debt from the previous society is canceled - this is a periodic cycle that occurs at a scale of 100-300 years. And the author argued, since the 1970, we have returned to (the beginning) of a new cycle. You don't have to agree everything that the author claims, but the author is good at telling a story, and it's a fascinating read. My summary is not exactly what the author said, the Wikipedia article the P2P Foundation Wiki [1] has a better summary, it includes transcripts of interviews. [0] https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years [1] https://wiki.p2pfoundation.net/First_Five_Thousand_Years_of_Debt https://wiki.p2pfoundation.net/First_Five_Thousand_Years_of_...

lisper 7y ago
> And the author argued, since the 1970, we are reaching the next cycle. So... when was the last time this supposedly happened? Because I can't think of even a single time in human history where there has been "a radical breakdown of social order... a new society is rebuilt, and all the debts from the previous society is canceled."

Phil_Latio 7y ago

That's the way it is. If the US has a trade deficit and the companies and private households are net savers, then there is only one sector left who can make the required debt (without new debt, no new savings). Simple accounting. If you don't want the government to make new debt (or at least not as much), you have to force one of the other 3 sectors to make it. - Private households: You can't do that. - Companies: Everywhere we see tax cuts, so why would a country increase taxes? Bad, but that's the way the world is these days. - Foreign countries (trade deficit): Looks like the only way at the moment. Sorry, but Trump is on to something if he talks about fair trade.

bilbo0s 7y ago
In all honesty, even foreign countries won't work. You would need to find foreign nations meeting all three of the following criteria: -Wealthy enough to buy goods. Can't really sell much to Lesotho for instance. -Net consumers as opposed to net savers. Places like China you have that dreaded 90/90 trap. Where 90 percent or more of families feel a need to save 90 percent or more of their disposable income. Probably because they have both a one child policy and a completely nonexistent social safety net. -Which is a good segué for the third necessary condition, a government willing to grease the gears of consumption with fiscal and monetary policy. Policies like, for instance, providing their citizens with a reliable safety net. (In addition to cultural tendencies of course.) At any rate, as we look around the world, you just don't see any nations out there meeting all those criteria. The trade war is more about trying to turn China into a country that does meet those criteria. I'm not too hopeful that will happen though to be honest. The Chinese proclivity to save is not born simply of a lack of a safety net to look after you in old age, it's also deeply ingrained culturally. Has been for thousands of years. Chinese have to be pretty wealthy before they become spendthrifts. And like you said, how do you force a guy to spend money instead of saving? It's a tough problem all the way around.

guelo 7y ago

My suspicion is that the GOP strategy, if there is one, is to run large deficits when they have power so that when Democrats get power they feel that they are unable to spend on social welfare . Reagan, W, and Trump increased the deficits while Clinton and Obama, after the stimulus, reduced it.

harryh 7y ago
You don't have to be suspicious, this has been explicitly stated by many fiscal conservatives on many occasions. https://en.wikipedia.org/wiki/Starve_the_beast https://en.wikipedia.org/wiki/Starve_the_beast
- curtis3389 7y ago
  This quote from Alan Greenspan (emphasis mine) is a little unsettling: > Let us remember that the basic purpose of any tax cut program in today's environment is to reduce the momentum of expenditure growth by restraining the amount of revenue available and trust that there is a political limit to deficit spending. I wonder where that limit lies and what circumstances will we be in when we find it.
hedvig 7y ago
Any conservative users here mind to denounce this?
Fjolsvith 7y ago
Expecting to get downvoted to death without any discussion for this comment but here goes. The GOP plan is to audit the Federal Reserve and discover how badly they have misused their authority. Once that is done, they'll cancel that debt and disband the Fed and its IRS arm. That's why the military spending bill was so big. Running up the credit card before filing bankruptcy.

cft 7y ago

Exit stock positions into cash, short most "unicorns" that are pure product of QE: Pinterest, PagerDuty, etc. Exchange some cash for BTC, in case the Fed won't be able to contains inflation when the bottom falls out.

crb002 7y ago
As someone who bought on the dip in 2008, 30% cash is the sweet spot. 20% buying into the dip. 10% to keep you from having any cash flow problems that make you sell off to stay above water.

mempko 7y ago

It's clear most people have no idea how government debt works. Everyone thinks it's like a household, that the government spends it's revenue and borrows money from someone else. Imagine you are the JohnDoe family. You are able to issue JohnDoe bucks. You spend the JohnDoe bucks first and then later ask for some of them back (as taxes). The difference between what you spend and what you get back is called the JohnDoe deficit. And the aggregate of the deficit is the JohnDoe "debt". On the other side of the transaction, those that provide services to the JohnDoe family now have JohnDoe bucks and because they didn't have to give all of them back to the JohnDoe family they keep some in bank accounts. Another way to say this, the US debt can also be called "US people's savings". JohnDoe also issues bonds with a percent return. Some of the people with these JohnDoe bucks might buy the bonds to get the return. The question is, is the JohnDoe family ever in danger of not paying those bonds back? The clear answer is no, they can always pay back any debt as long as it's denominated in JohnDoe bucks. Wouldn't you like to be the JohnDoe family?

turtlecloud 7y ago

Current gov has no interest in paying off debt. All conspiracy theories lead to the elites plundering the existing system and then defaulting. This will lead to the collapse of the USD and a new digital currency will take its place.

purplezooey 7y ago
the elites!

oarabbus_ 7y ago

Serious question - who cares? I'm really not trying to be flippant. We keep kicking the can down the road and that will never change.

hn_throwaway_99 7y ago

Lots of comments saying "the absolute numbers don't matter". Which is pretty much true, but the debt to GDP ratio is currently ~105%. The last time it was that high was WWII. The scary thing about that is we are in a booming expansion. Next time we hit a recession or some other even mild shock to the system debt-to-GDP will skyrocket even further. Related, remember when the Republicans cared about the debt[1]? [1] https://www.crfb.org/blogs/23-senate-republicans-urge-obama-address-deficit https://www.crfb.org/blogs/23-senate-republicans-urge-obama-...

cabaalis 7y ago

Combine this with the fact that the largest asset the US government holds $1.5T in student loans, and we've got a recipe for disaster. "Let's borrow more from China, we can repay it with the proceeds from Billy's liberal arts degree"

zaptheimpaler 7y ago

I'm not sure the existence of debt in itself is as much of a problem on a macro scale as people think it is - the negative association to debt comes from an intuition over personal debt like loans/credit cards, which doesn't necessarily make sense on a macro scale. Say company A lends $10 to B. B lends that $10 to C. C lends $1 each to 5 people. The total debt in this case is $10 (B owes A) + $10 (C owes B) + $5 (5 people owe C) = $25. Each borrower-lender pair increases the debt, even though its all about the same $10. Now if C defaults on their debt, it has ramifications all the way upto A. But it won't cause a collapse unless the lenders start treating the debt as less risky than it is. In the case of 2008, banks treated mortgage debt as virtually risk-free and borrowed using that debt as collateral - so the problem was that the debt was certified and treated as much less risky than it really was.

ianai 7y ago
I’d like the next person and all the people following who veto an idea because of national debt to be forced to provide a thing which one dollar of debt keeps the US government from doing. They need to provide 23T worth of effects in the economy that are positive from paying 23T in USD debt off.
- ianai 7y ago
  If I own 1000$ in US treasury bonds then I will make some return (like 3%) after it vests some time from now. But if the US government tracts me down and pays me the principle of 1000$ ahead of schedule then I have lost the scheduled rate of return. It’s a harm to me and in aggregate a harm to social wealth growth.

purplezooey 7y ago

One wonders when the US currency/debt crisis will occur. It will be bad.

gbajson 7y ago

Does anyone of you know who owns this debt? What will happen when citizens decide to null it?