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I am somewhat confused by all of this. If mostly pension/mutual funds, social security, military, Medicaid, is buying our debt (as in Americans are buying its o

I am somewhat confused by all of this. If mostly pension/mutual funds, social security, military, Medicaid, is buying our debt (as in Americans are buying its own debt? Very confused), aren’t we basically saying the economy can never have a serious prolonged correction? We’d all have to default on the debt we bought to give ourselves? Really confused and scared here.

lotsofpulp 5y ago
>Very confused), aren’t we basically saying the economy can never have a serious prolonged correction? We’d all have to default on the debt we bought to give ourselves? It can have a serious prolonged correction. "The economy" is the sum total of the productivity of a country, and in some ways is a measure of the expectation of what one can expect to come out of the country, especially stability. The glue that holds it together is trust amongst its participants, and I would say that a currency's desirability is a combination of the trust one has in the ability for a society to continue delivery desirable goods (including stability). People in society also have expectations about their future quality of life, based on assumptions that may or may not be true. Debt is priced based on these assumptions, and it is certainly possible that if assumed rates of economic growth are not met, then debt will be defaulted on. It has already happened in some local governments (e.g. Detroit), and I assume it plays out the same way. Members of the society that experience the default will go through pain and suffer losses. On a national level, one might experience revolution or violence. But it all depends on the level of trust and cohesiveness amongst the members of society. Right now, based on the USD's purchasing power, it seems that relative to other societies in the world, a lot of people around the world still assume US society and government will be relatively stable and able to deliver desirable goods and services for the foreseeable future. Of course, this is all speculation, and any society at any given point in time may be in an inevitable downward spiral, or in a temporary downward trajectory, or just about to hit the local minima and about to experience a boom.
- runawaybottle 5y ago
  That’s what scares me. I actually don’t think we have the type of productivity in our country to be so aggressive with awarding ourselves debt. Our major growth industry mostly makes apps. We don’t even have a proper semiconductor industry in America. People are getting older. Where is all this productivity going to come from? From everyone switching to web development and making more TikTok apps? That’s the productivity that we think will pay trillions of dollars worth of Medicare/social security? I don’t really see it. I just read a wsj article about how men have pretty much stopped going to college: https://www.wsj.com/articles/college-university-fall-higher-education-men-women-enrollment-admissions-back-to-school-11630948233 https://www.wsj.com/articles/college-university-fall-higher-... What is this productive future we are envisioning here? Bunch of SaaS apps?
lmm 5y ago
> If mostly pension/mutual funds, social security, military, Medicaid, is buying our debt (as in Americans are buying its own debt? Very confused), aren’t we basically saying the economy can never have a serious prolonged correction? We’d all have to default on the debt we bought to give ourselves? There are various options. You can print money to pay off the debt, which comes with its own tradeoffs. You can reduce the payouts in a way that doesn't look like defaulting - raise the social security / medicaid eligibility age, reduce what's covered by medicaid - or outright reduce the payouts, or take an orderly haircut. Or, yes, you could do an outright disorderly default, which would probably be unwise.

lotsofpulp 5y ago

>Very confused), aren’t we basically saying the economy can never have a serious prolonged correction? We’d all have to default on the debt we bought to give ourselves? It can have a serious prolonged correction. "The economy" is the sum total of the productivity of a country, and in some ways is a measure of the expectation of what one can expect to come out of the country, especially stability. The glue that holds it together is trust amongst its participants, and I would say that a currency's desirability is a combination of the trust one has in the ability for a society to continue delivery desirable goods (including stability). People in society also have expectations about their future quality of life, based on assumptions that may or may not be true. Debt is priced based on these assumptions, and it is certainly possible that if assumed rates of economic growth are not met, then debt will be defaulted on. It has already happened in some local governments (e.g. Detroit), and I assume it plays out the same way. Members of the society that experience the default will go through pain and suffer losses. On a national level, one might experience revolution or violence. But it all depends on the level of trust and cohesiveness amongst the members of society. Right now, based on the USD's purchasing power, it seems that relative to other societies in the world, a lot of people around the world still assume US society and government will be relatively stable and able to deliver desirable goods and services for the foreseeable future. Of course, this is all speculation, and any society at any given point in time may be in an inevitable downward spiral, or in a temporary downward trajectory, or just about to hit the local minima and about to experience a boom.

runawaybottle 5y ago
That’s what scares me. I actually don’t think we have the type of productivity in our country to be so aggressive with awarding ourselves debt. Our major growth industry mostly makes apps. We don’t even have a proper semiconductor industry in America. People are getting older. Where is all this productivity going to come from? From everyone switching to web development and making more TikTok apps? That’s the productivity that we think will pay trillions of dollars worth of Medicare/social security? I don’t really see it. I just read a wsj article about how men have pretty much stopped going to college: https://www.wsj.com/articles/college-university-fall-higher-education-men-women-enrollment-admissions-back-to-school-11630948233 https://www.wsj.com/articles/college-university-fall-higher-... What is this productive future we are envisioning here? Bunch of SaaS apps?

lmm 5y ago

> If mostly pension/mutual funds, social security, military, Medicaid, is buying our debt (as in Americans are buying its own debt? Very confused), aren’t we basically saying the economy can never have a serious prolonged correction? We’d all have to default on the debt we bought to give ourselves? There are various options. You can print money to pay off the debt, which comes with its own tradeoffs. You can reduce the payouts in a way that doesn't look like defaulting - raise the social security / medicaid eligibility age, reduce what's covered by medicaid - or outright reduce the payouts, or take an orderly haircut. Or, yes, you could do an outright disorderly default, which would probably be unwise.