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And the largest deficit in history... Who is going to pay for the debt fueled growth? Hint: Its not the people benefiting most from the markets... The US econom

by 12xo 7y ago

And the largest deficit in history... Who is going to pay for the debt fueled growth? Hint: Its not the people benefiting most from the markets... The US economy is as stable as Trump and as factually real as his skin tone...

Mikeb85 7y ago
Look at interest rates. The cost of borrowing matters more than the amount borrowed.
- 12xo 7y ago
  Wow... That's an interesting assertion and frankly, crazy. Care to explain? Fundamentally there is no difference is the debt at .01% or 15%, if one cannot make the payment, they are in trouble. If the holder of the debt cannot collect, they're in trouble.
  - daxorid 7y ago
    The Unites States will always pay the coupon. QE4 is currently supporting our record issuance in the repo market - you know, the support that was supposed to be unwound by now, but has in fact grown in position since the beginning of the year. We will monetize our debt forever, just like Japan, until there are currency consequences. The MMT people argue there will never be said currency consequences. We shall see.
    - Mikeb85 7y ago
      The currency consequences come in the form of inflation. So it's already happened. But if you mean real, paradigm altering consequences like what's happened to places like Zimbabwe or even Argentina, no, it'll never happen as long as demand for their products (and currencies) remains high.
  - mrosett 7y ago
    Not that I entirely agree with the parent, but as you said: > if one cannot make the payment, they are in trouble. That's a function of cost of borrowing, not the amount borrowed.
    - 12xo 7y ago
      If you also mean negative interest, than yes. Otherwise, the rate of interest is meaningless if the debt cannot be collected.
      - Mikeb85 7y ago
        The cost of borrowing is the difference between the amount borrowed and repayed. So yes it matters. Even with negative interest rates there's principal to repay.
  - Mikeb85 7y ago
    Don't comment on extremely basic financial concepts if you don't understand them SMH... > Fundamentally there is no difference is the debt at .01% or 15% Wow indeed. Literally no words.
    - 12xo 7y ago
      So you truncate my sentence, call me an idiot and cite nothing to back your assertion?. Oh-Kay buddy. Debt requires a payment to the holder. Regardless of the interest rate, if the debtor cannot make the payment, the rate of interest is fully irrelevant. If the holder cannot collect, the value of the debt and the borrowed assets value decrease.
      - Mikeb85 7y ago
        > That's an interesting assertion and frankly, crazy. That's your quote. If you understood debt even at the level of a freshman in an econ 101 course or hell, if you've ever taken out a loan, you wouldn't have written it. My assertion is as basic as saying the sky is blue. Want a citation for that? Hint. Debt is used to purchase assets. Assets have utility. Depreciation is a thing. If utility is more than the cost of borrowing and depreciation over the timeframe of the loan, it's worthwhile. And that's not even considering that governments can print money, so the consideration isn't can they pay it back, more like what's the cost to pay it back in inflation.
        mamon 7y ago
        >> Hint. Debt is used to purchase assets. This is true for corporate loans, but in case of federal budget most of the money borrowed are spent on things like healthcare, pensions, food stamps, etc. which aren't exactly profit-bringing assets.
        Mikeb85 7y ago
        Any money that goes to consumers at least partially is returned in taxes. Infrastructure is a big spending item and again, increases commerce and taxes. Government loans are also special in that money can be printed to repay them.
- endorphone 7y ago
  In the context of the US debt, this is an incredible claim. 1. It's larger than ever 2. It's growing faster than ever 3. T-Bill rates are at record lows If 1. and 2. were false because 3. is true, you'd have a cogent point. But they aren't false. The debt situation is getting dramatically worse despite low rates, and those low rates on the perpetually recycled US debt are unlikely to hold. So when the $5T of debt Trump added is resold at 5%, and the sugar rush of his economic priming is over...yeah, it's not going to look so great.
- jayd16 7y ago
  I assume you mean US bond rates? You're assuming that's an indicator of confidence the US will be able to keep borrowing? Is it not just confidence it will make good on what it currently owes before becoming insolvent? But alright, so we can borrow. Can we pay for healthcare and schools now?
  - Mikeb85 7y ago
    Interest rates are, in economics terms, the same as government bond rates since the interest rates of any safe investment will always trend towards the government bond rate because of the arbitrage principle.
- 12xo 7y ago
  I can only assume you are talking about hard asset based debt... What if there is no collateral, or hard assets? Like the majority of consumer debt? Or corporate debt?
  - Mikeb85 7y ago
    Most consumer debt is mortgage debt which is backed by assets. Most corporate debt is backed by assets. But this is government debt we're talking about anyway, which can always be repayed due to money printing. The cost is in inflation and sentiment.

by 12xo 7y ago

Mikeb85 7y ago

Look at interest rates. The cost of borrowing matters more than the amount borrowed.

12xo 7y ago
Wow... That's an interesting assertion and frankly, crazy. Care to explain? Fundamentally there is no difference is the debt at .01% or 15%, if one cannot make the payment, they are in trouble. If the holder of the debt cannot collect, they're in trouble.
- daxorid 7y ago
  The Unites States will always pay the coupon. QE4 is currently supporting our record issuance in the repo market - you know, the support that was supposed to be unwound by now, but has in fact grown in position since the beginning of the year. We will monetize our debt forever, just like Japan, until there are currency consequences. The MMT people argue there will never be said currency consequences. We shall see.
  - Mikeb85 7y ago
    The currency consequences come in the form of inflation. So it's already happened. But if you mean real, paradigm altering consequences like what's happened to places like Zimbabwe or even Argentina, no, it'll never happen as long as demand for their products (and currencies) remains high.
- mrosett 7y ago
  Not that I entirely agree with the parent, but as you said: > if one cannot make the payment, they are in trouble. That's a function of cost of borrowing, not the amount borrowed.
  - 12xo 7y ago
    If you also mean negative interest, than yes. Otherwise, the rate of interest is meaningless if the debt cannot be collected.
    - Mikeb85 7y ago
      The cost of borrowing is the difference between the amount borrowed and repayed. So yes it matters. Even with negative interest rates there's principal to repay.
- Mikeb85 7y ago
  Don't comment on extremely basic financial concepts if you don't understand them SMH... > Fundamentally there is no difference is the debt at .01% or 15% Wow indeed. Literally no words.
  - 12xo 7y ago
    So you truncate my sentence, call me an idiot and cite nothing to back your assertion?. Oh-Kay buddy. Debt requires a payment to the holder. Regardless of the interest rate, if the debtor cannot make the payment, the rate of interest is fully irrelevant. If the holder cannot collect, the value of the debt and the borrowed assets value decrease.
    - Mikeb85 7y ago
      > That's an interesting assertion and frankly, crazy. That's your quote. If you understood debt even at the level of a freshman in an econ 101 course or hell, if you've ever taken out a loan, you wouldn't have written it. My assertion is as basic as saying the sky is blue. Want a citation for that? Hint. Debt is used to purchase assets. Assets have utility. Depreciation is a thing. If utility is more than the cost of borrowing and depreciation over the timeframe of the loan, it's worthwhile. And that's not even considering that governments can print money, so the consideration isn't can they pay it back, more like what's the cost to pay it back in inflation.
      - mamon 7y ago
        >> Hint. Debt is used to purchase assets. This is true for corporate loans, but in case of federal budget most of the money borrowed are spent on things like healthcare, pensions, food stamps, etc. which aren't exactly profit-bringing assets.
        Mikeb85 7y ago
        Any money that goes to consumers at least partially is returned in taxes. Infrastructure is a big spending item and again, increases commerce and taxes. Government loans are also special in that money can be printed to repay them.
endorphone 7y ago
In the context of the US debt, this is an incredible claim. 1. It's larger than ever 2. It's growing faster than ever 3. T-Bill rates are at record lows If 1. and 2. were false because 3. is true, you'd have a cogent point. But they aren't false. The debt situation is getting dramatically worse despite low rates, and those low rates on the perpetually recycled US debt are unlikely to hold. So when the $5T of debt Trump added is resold at 5%, and the sugar rush of his economic priming is over...yeah, it's not going to look so great.
jayd16 7y ago
I assume you mean US bond rates? You're assuming that's an indicator of confidence the US will be able to keep borrowing? Is it not just confidence it will make good on what it currently owes before becoming insolvent? But alright, so we can borrow. Can we pay for healthcare and schools now?
- Mikeb85 7y ago
  Interest rates are, in economics terms, the same as government bond rates since the interest rates of any safe investment will always trend towards the government bond rate because of the arbitrage principle.
12xo 7y ago
I can only assume you are talking about hard asset based debt... What if there is no collateral, or hard assets? Like the majority of consumer debt? Or corporate debt?
- Mikeb85 7y ago
  Most consumer debt is mortgage debt which is backed by assets. Most corporate debt is backed by assets. But this is government debt we're talking about anyway, which can always be repayed due to money printing. The cost is in inflation and sentiment.