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> but if the alternative is to have shrinking GDP and massive unemployment, I would rather have some inflation. This is the general problem with central bankin

> but if the alternative is to have shrinking GDP and massive unemployment, I would rather have some inflation. This is the general problem with central banking. Politicians and governments will ALWAYS take action to "save the economy", whether that is a small downturn or a big one. There's too much pressure to not use the magic money printer. Short term election cycles incentivize everyone to just fix the problem as fast as we can, future consequences be damned. You can get away with it in the short term, but over a long enough time horizon, you start to run out of bullets, as all the real value has already been plundered. The US Federal debt is currently $30 trillion USD. This is never getting balanced, ever. There's only one possible eventual outcome with this system.

JackFr 5y ago
> The US Federal debt is currently $30 trillion USD. This is never getting balanced, ever. There's only one possible eventual outcome with this system. The US debt to GDP ratio is currently slightly higher than it was at the end of WWII. It is significantly lower than that of Japan, who has a debt to GDP ration similar to those the UK ran during portions of the 19th century. There are very good reasons for governments should be prudent in their spending and high levels of debt are to be avoided. But no, it will never be balanced, the national debt is permanent and exists by design. > There's only one possible eventual outcome with this system. I don't think that's true, and I'm really not even sure what you're ominously hining at.
- foolinaround 5y ago
  > the national debt is permanent and exists by design. Can you pls point me to something about its design?
  - tharne 5y ago
    If you read history books covering the time just before and after the American revolution, there was a lot of discussion of this topic at the time. A lot of the founder fathers, most notably Alexander Hamilton, believed a national debt was a good thing for the country. The belief is/was that by carrying a substantial debt, you give the bank and financial institutions skin the game and make their success tied to the success of the country. In the modern era it also gives individuals and other types of institutions a stake in the country's success. When people take about the U.S. national debt, much of the conversation goes to China and how much money we owe them. We owe them a lot, however, the biggest holders of U.S. debt are individual Americans with their 401ks and things like pension funds and university endowments.
    - JackFr 5y ago
      The largest holder of treasury bonds by far is the Social Security Trust Fund. (Which is, of course, an accounting fiction.)
  - imtringued 5y ago
    Monetary savings = debt by definition. No debt no money. One should ask why money is taking a one way route though. It remains stuck in bank accounts.
ericmay 5y ago
A couple of thoughts (may be wrong, interested in the discussion) When the government borrows money it borrows it at an interest rate. When rates are low, like close to 0% low like they are now, that's exactly when you want to borrow money. Want to fix bridges and invest in things? Now is the time to borrow money to do that. It also has the added benefit of making past debt cheaper. This scenario that we're in is made even more interesting by the fact that many governments also had to print tons and tons of money. While we're now over 100% debt-to-GDP, it's not unheard of and not so catastrophic that we can't recover from. I'm also unsure about rising wages here. If they continue to rise won't prices continue to rise to reflect wages? I'm also of the opinion that slow sales from 2020/2021 + supply chain issues have caused companies to raise prices. I don't think cereal actually needs to be more expensive. Shareholders do though.
overtonwhy 5y ago
Disregard new accounts that claim the sky will be falling. The debt will always be going up and there will always be inflation. That's how fiat currencies work. Research the federal reserve and it's stated objectives to understand why.
- scottiebarnes 5y ago
  If the way fiat currencies work is constant devaluation in the name of increased short term spending, then it makes the currency utterly terrible to invest and save in in the long term. If this is how its supposed to work, then your money is a toxic asset which should be handed off as quickly as possible to someone else. And so if no one actually wants this asset, then it makes it valueless.
  - dragonwriter 5y ago
    > then it makes the currency utterly terrible to invest and save in in the long term. That's why it's called “current-sy” (only slightly joking) It's for current use as a medium of exchange. For investment/savings, you go to productive assets. That's the whole point. Mixing those functions doesn't help anything.
    - scottiebarnes 5y ago
      No, money is supposed to be good at storing value as well. That's why gold evolved as the world currency over the last 8000 years, and that's why central banks still hoard it in bunkers. You can't easily devalue it by creating more of it. You're failing to understand that treasury bond markets have an important function in the macro economy; ideally, a safe way to save and store value with low risk. And they are larger than stock markets.
      - ericmay 5y ago
        > No, money is supposed to be good at storing value as well. I think you’re confusing wealth/assets with mediums of exchange. Gold for example is a pretty decent store of value but a nightmare for exchange. Want to buy a pack of gum? Why don’t you shave a tenth of a gram off right here on the counter so I can measure it.. etc. You can see how crappy that is. USD however have never been great stores of value but are great currency because they’re so liquid. Everybody accepts dollars. It’s easy to trade and convert to other assets. How much is that pack of gum? Oh it’s a dollar. Ok here you go. And that’s that. The name of the game has always been converting dollars to productive assets. Along comes Bitcoin and cryptocurrency and now crypto currencies in general have features. Bitcoin sucks as a currency for buying stuff but is great at storing deflationary value (or so it seems). Monero sucks as a currency compared to the dollar but has privacy features. Etc.
imtringued 5y ago
Have you ever wondered why the people that have the money that represents the government's debt isn't returning, ever? When go the austerity route your economy collapses faster than you can pay your debts back, isn't there something odd with that? If money is supposedly cheap why does it refuse to show itself?

JackFr 5y ago

> The US Federal debt is currently $30 trillion USD. This is never getting balanced, ever. There's only one possible eventual outcome with this system. The US debt to GDP ratio is currently slightly higher than it was at the end of WWII. It is significantly lower than that of Japan, who has a debt to GDP ration similar to those the UK ran during portions of the 19th century. There are very good reasons for governments should be prudent in their spending and high levels of debt are to be avoided. But no, it will never be balanced, the national debt is permanent and exists by design. > There's only one possible eventual outcome with this system. I don't think that's true, and I'm really not even sure what you're ominously hining at.

foolinaround 5y ago
> the national debt is permanent and exists by design. Can you pls point me to something about its design?
- tharne 5y ago
  If you read history books covering the time just before and after the American revolution, there was a lot of discussion of this topic at the time. A lot of the founder fathers, most notably Alexander Hamilton, believed a national debt was a good thing for the country. The belief is/was that by carrying a substantial debt, you give the bank and financial institutions skin the game and make their success tied to the success of the country. In the modern era it also gives individuals and other types of institutions a stake in the country's success. When people take about the U.S. national debt, much of the conversation goes to China and how much money we owe them. We owe them a lot, however, the biggest holders of U.S. debt are individual Americans with their 401ks and things like pension funds and university endowments.
  - JackFr 5y ago
    The largest holder of treasury bonds by far is the Social Security Trust Fund. (Which is, of course, an accounting fiction.)
- imtringued 5y ago
  Monetary savings = debt by definition. No debt no money. One should ask why money is taking a one way route though. It remains stuck in bank accounts.

ericmay 5y ago

A couple of thoughts (may be wrong, interested in the discussion) When the government borrows money it borrows it at an interest rate. When rates are low, like close to 0% low like they are now, that's exactly when you want to borrow money. Want to fix bridges and invest in things? Now is the time to borrow money to do that. It also has the added benefit of making past debt cheaper. This scenario that we're in is made even more interesting by the fact that many governments also had to print tons and tons of money. While we're now over 100% debt-to-GDP, it's not unheard of and not so catastrophic that we can't recover from. I'm also unsure about rising wages here. If they continue to rise won't prices continue to rise to reflect wages? I'm also of the opinion that slow sales from 2020/2021 + supply chain issues have caused companies to raise prices. I don't think cereal actually needs to be more expensive. Shareholders do though.

overtonwhy 5y ago

Disregard new accounts that claim the sky will be falling. The debt will always be going up and there will always be inflation. That's how fiat currencies work. Research the federal reserve and it's stated objectives to understand why.

scottiebarnes 5y ago
If the way fiat currencies work is constant devaluation in the name of increased short term spending, then it makes the currency utterly terrible to invest and save in in the long term. If this is how its supposed to work, then your money is a toxic asset which should be handed off as quickly as possible to someone else. And so if no one actually wants this asset, then it makes it valueless.
- dragonwriter 5y ago
  > then it makes the currency utterly terrible to invest and save in in the long term. That's why it's called “current-sy” (only slightly joking) It's for current use as a medium of exchange. For investment/savings, you go to productive assets. That's the whole point. Mixing those functions doesn't help anything.
  - scottiebarnes 5y ago
    No, money is supposed to be good at storing value as well. That's why gold evolved as the world currency over the last 8000 years, and that's why central banks still hoard it in bunkers. You can't easily devalue it by creating more of it. You're failing to understand that treasury bond markets have an important function in the macro economy; ideally, a safe way to save and store value with low risk. And they are larger than stock markets.
    - ericmay 5y ago
      > No, money is supposed to be good at storing value as well. I think you’re confusing wealth/assets with mediums of exchange. Gold for example is a pretty decent store of value but a nightmare for exchange. Want to buy a pack of gum? Why don’t you shave a tenth of a gram off right here on the counter so I can measure it.. etc. You can see how crappy that is. USD however have never been great stores of value but are great currency because they’re so liquid. Everybody accepts dollars. It’s easy to trade and convert to other assets. How much is that pack of gum? Oh it’s a dollar. Ok here you go. And that’s that. The name of the game has always been converting dollars to productive assets. Along comes Bitcoin and cryptocurrency and now crypto currencies in general have features. Bitcoin sucks as a currency for buying stuff but is great at storing deflationary value (or so it seems). Monero sucks as a currency compared to the dollar but has privacy features. Etc.

imtringued 5y ago

Have you ever wondered why the people that have the money that represents the government's debt isn't returning, ever? When go the austerity route your economy collapses faster than you can pay your debts back, isn't there something odd with that? If money is supposedly cheap why does it refuse to show itself?