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We’ll Be $1Trillion in the Red in 2020. No Big Deal
- H8crilA 7y agoNever forget about the main US "export product" that in a large part finances this growing monster - financial securities. All the foreigners want the S&P500 (growth!) and Treasuries (positive yield!). https://fred.stlouisfed.org/series/IIPUSNETIQ https://fred.stlouisfed.org/series/IIPUSNETIQ The cumulative "exports" stand at around -$11T, 50% of GDP.
- throwaway3157 7y agoCould you elaborate? I don't understand the link you posted. What is the U.S. Net International Investment Position (IIPUSNETIQ)
- dontdoitpls 7y agoIn 40 years kids will be blaming millennials for wreckless spending and ruining the currency. While I like the idea of responsibility, I've mentally given up. The populist demagogues have taken over US election and media time, I'm not sure how we can go back to rational policy conversation.
- alexfromapex 7y agoI wish I could get away with infinite debt
- RcouF1uZ4gsC 7y agoIt is simple, just print your own money and have it be the reserve currency of the world. Once you do that, you can get away with near infinite debt like the US Government.
- astrodust 7y agoWith all that money you also need to buy the stupidly largest army in the world so if anyone has a problem with your debt you can solve that problem militarily.
- briandear 7y agoThe US military is not the largest army in the world, China is, followed by India. The US isn’t even in the top 15 by percentage of government spending. Not even in the top 15 as a percentage of GDP.
- hirsin 7y agoThe US still spends more than any other country on Earth and indeed more than almost all of them combined. Any random country can spend more by GDP or by percent, but by dollar the US is the clear largest spender. Focusing on those two points does say.. something, but it doesn't rebut the point being made, and does serve to obfuscate it.
- astrodust 7y agoMost countries have, at most, one or two aircraft carriers, maybe four little ones if they're really ambitious like France or Japan. These are the pinnacle of power projection and are extraordinarily expensive to build, own and operate. The United States has eleven of the largest carriers in the world and a bunch more that are smaller that are still bigger than what other countries consider a carrier. That's an example of how disproportionate it is in terms of overall size. Not manpower, not GDP percentage, just size. Where other countries have one or two of something the United States has at least ten. This goes for planes, tanks, cruisers, helicopters, missiles, pretty much whatever, they've got more.
- melling 7y agoDon’t we pay a small fortune in interest every year on our national deficit? Interest rates are historically low. Wait until they go to 6 or 7%.
- arcticbull 7y agoYou know the fed can print money to pay off that debt right? That's the difference between you being personally $1T in the hole every year and the government. That's also why nobody really cares. At this point it's easier to do that than to find $1T in annual cuts the folks in office can agree on. Not that it's a good thing, of course.
- RhodesianHunter 7y agoThis would cause inflation, increasing interest rates, exacerbating the problem and spiraling out of control. QE is not "printing money".
- JDiculous 7y agoQE is money printing to buy financial securities. It is money printing.
- aphextron 7y ago>This would cause inflation, increasing interest rates, exacerbating the problem and spiraling out of control. So you would think from Econ 101, but that empirically has not been the case. We're in uncharted waters at this point.
- TylerE 7y agoOwe the bank $100,000? The bank owns you. Owe the bank $1,000,000,000,000? You own the bank.
- neural_thing 7y agoNot uncharted, just takes some persistence to find a precedent. See John Law.
- mindvirus 7y agoThe national debt is weird and complicated. About half of the national debt is to the federal government, the federal reserve or state and local governments. In other words - the US government is primarily in debt to itself - in a currency that it can print! The government could wipe out half the debt overnight by just forgiving the loans it made to itself. And it could pay off the rest by printing money - which would lead to inflation, but how much really?
- api 7y agoPublic debt should really be called something other than debt since it behaves very differently from private debt, especially for nations with sovereign currencies.
- toomuchtodo 7y agoIt’s more of a security that tracks future national GDP; as long as you believe the US government will continue to exist and have the ability to tax a functioning US economy, treasuries have value.
- badrabbit 7y agoPrinting money to pay off debt will not affect the value of the dollar, making the payment less valuable than the debt? If so, wouldn't this affect future ability to sell bonds at a valuable price?
- lmm 7y agoThe argument I've heard is that T-bills are accepted as basically cash-equivalent by all the serious financial players, so whatever inflationary effect that has has already happened. Replacing them with actual dollars would simplify the system and create more of a level playing field.
- sailfast 7y agoSo many of these arguments assume that financial players will keep doing things the way they always have once the monetary playbook since Breton Woods gets thrown out the window. Why would actors continue to behave the same way given a massive change to the market and policy?
- perardi 7y agoWish there was an anchor link to the most relevant chart, but: https://www.cbo.gov/publication/55342 https://www.cbo.gov/publication/55342 I worry about the debt, too, in some fairly abstract way, but I don't know what realistically gets cut. Social Security? Good luck, because old people vote. Medicare? Good luck, old people vote. Defense spending? Good luck, you better believe that defense contractors vote, in perfect synchronized-by-lobbyists lockstep.
- taurath 7y agoInfrastructure, education, and food stamps.
- sandoooo 7y agoThe problem is that defunding Medicare / SocialSec on a large scale is effectively defaulting on government's debt obligations and has the same effects as defaulting on treasuries. Defense will probably go first, since it's technically discretionary spending, but it won't be anywhere near enough because SS and Medicare balloons fast and will put the squeeze on all other government spends. Eventually something will give. No idea which part though.
- mcny 7y agoWhy can’t we do the obvious: 1. increase income tax rates on everyone 2. Remove ceiling on payroll. Or call it a tax as well. 3. Slightly lower the floor for estate tax and close loopholes (like buying an insurance to inherit...) and slightly increase estate tax rates (I think 60% estate tax of the estate value over a limit of about $5M is fair). 4. Higher Medicare and social security tax rates to pay for Medicare for all. I hate how people treat this as an unsolvable problem: the solution is obvious: increase taxes and cut expenses where we can. It isn’t that hard.
- millstone 7y agoThe answer to "why can't we" is that the benefits are diffused over the next decade+, while the pain is felt immediately. The problem is political.
- readhn 7y agowell the music is going to stop playing sooner than later. 11 years since this bull market started...the clock is ticking. History tells us this wont go on forever. The only question is how deep we will "correct" and will it develop into something bigger than a simple correction. At these levels even a 20% correction will drop SnP >600points. Interestingly a 50% correction will drop us right on top of the 2000-2006 market tops which would still be considered bullish long term, if it holds.
- sandoooo 7y agoI'm suspicious of statements like this because there never seems to be any money placed where all the talk is. There were lots of people saying the same thing a couple of years back, too. They seem to still be around and haven't lost their shirts. Are you buying long term puts on the SnP? Is anybody?
- readhn 7y agoyes. I am out of equities in my 401K. so i consider this a short position by being out of the market. i am not dumb enough to short the bull, its like stopping a freight train, might be deadly - my plan is to have cash ready to hopefully pick up some bargains when SHTF eventually. My time line is next 2-4 years. I am ok with losing some upside here, IMO downside risk is bigger than trying to squeeze last few bucks out of this thing.
- readhn 7y agoAre you a believer now??
- quickthrowman 7y agoYou can look at the open interest of the option chain, check out the SPY Dec 21 LEAPS, there are hundreds to thousands of open put contracts at most of the strikes, which start at $25
- sandoooo 7y agosure, but how much of it are actual shorts and how much of it is just hedging against long positions? it is a meaningless metric unless it's lopsidedly in favor of puts, which it isn't.
- marricks 7y agoIt’s fun how people only seem to talk or care about the national debt when it’s an election year. Almost as if it’s all a ploy to convince voters big projects that help them can’t be paid for. But sure enough the other 3 years of the cycle will be spent raising the defense budget and cutting taxes mostly for businesses and the 1%. Hmmm....
- briandear 7y agoI am not in the 1% and I had a substantially reduced tax bill from the tax cuts. The perception that they only benefit the 1% is propaganda. It’s also patently false.
- notadoc 7y agoMy tax bill went up, as did many other people I know. I assume a large number of people in high tax states had a higher bill due to SALT changes amongst others. > The perception that they only benefit the 1% is propaganda. It’s also patently false. The primary benefit went to the ultra wealthy, not surprising given lobbying. You can write off the cost of a private jet, for example. https://www.economist.com/leaders/2019/03/07/private-jets-receive-ludicrous-tax-breaks-that-hurt-the-environment https://www.economist.com/leaders/2019/03/07/private-jets-re... https://www.businessinsider.com/private-jet-trump-tax-bill-deduction-for-richest-people-2018-3 https://www.businessinsider.com/private-jet-trump-tax-bill-d... But what did you save? $500?
- marricks 7y agoI mean I got 50 dollars back a paycheck too but some how the top 1% grew their wealth by something like 30%... that 50 bucks did not have the same effect on me somehow.
- deleted 7y ago[deleted]
- baron816 7y agoPeople only care about the national debt when a Democrat is in the White House. The GOP’s tone will completely change once Trump is gone. A natural disaster strikes? “Oh, we can’t afford to send any aid. Have you seen the debt? We need to cut spending from some social program.” Unless, that is, there’s a recession, then it’ll be “we need to provide some tax relief.”
- eanzenberg 7y agoGiven cheap interest rates, constant inflation, increased regulation and cost to produce, it makes sense to borrow from the future to build now.
- sailfast 7y agoI would prefer to stay somewhat solvent so that we can use actual money to stave off the inevitable crisis in the 2-20 years. We know these are coming, we know we need reserves of capital to fight them. Going into debt now (except maybe in initial expenditure that will realize gains in efficiency in the out-years) is folly.
- nradov 7y agoYes except very little of the deficit is being used for investments that will increase future economic growth. Most of the money is just being spent on current year consumption.
- 8bitsrule 7y agoDeeper and deeper in debt ... what a surprise. Makes you wonder who collects the interest. And ... maybe the chickens won't come home to roost.
- epicgiga 7y agoDon't worry, we'll just "grow our way out of it". But seriously, buy gold.
- neonate 7y agohttps://archive.md/gSTD9 https://archive.md/gSTD9
- dreamcompiler 7y agoThis is not about the national debt. That's been measured in the $trillions for many years. This is about the deficit, which is the short-term delta between tax revenues and government expenditures. (The debt is basically the time integral of the deficit). For the deficit to be over $1 trillion really is a big deal, and it's not good news.
- AmericanChopper 7y agoAnytime somebody talks in absolute numbers they’re more often than not trying to be deceptive. Absolutely numbers don’t mean anything at all in relation to nation debt, the only way to meaningfully quantify it is as a % of GDP (or interest charged as a % of government revenue). The article would give you the impressions that government debt is spiralling out of control, but really the debt/GDP is pretty stable.
- jariel 7y agoSomeone below mentioned interest rates which is a fundamental thing and cannot be overlooked. We are in a 'weird new normal' of low-interest rates for a variety of reasons, partly artificially induced. But if you put your finance hat on and contemplate for a moment what that means ... well it means debt and a lot of it and rationally so. If super low-interest rates become normative, our thinking has to change quite fundamentally because it's rational to lever up quite dramatically. We may have to reconsider entirely how the national balance sheet works.
- stOneskull 7y agojust don't pay it. what are the bankers going to do?
- kamaal 7y agoFor starters, not give you money again, and make it a point nobody else does either. Once this kind of a situation arises, a lot of trust is gone from the system. Eventually the spill over spreads to the larger parts of your economy.