3 ms·
> But we’re nowhere close to federal debt servicing being a constraint on the Fed or the Congress. Inflation, instead, remains the check. Not a constraint in t
by onlyrealcuzzo 5y ago
> But we’re nowhere close to federal debt servicing being a constraint on the Fed or the Congress. Inflation, instead, remains the check.
Not a constraint in the SHORT TERM. Long term, it is absolutely a constraint. As I said, Interest rates can go up. But long-term trend will be hovering around the negatives (unless there's a MASSIVE boost to productivity).
- JumpCrisscross 5y ago> it is absolutely a constraint For domestic-currency debt, no, it is not. Inflation and politics are always the constraint.
- onlyrealcuzzo 5y agoSo you're saying you think it's possible we can have 5% interest rates and not a massive recession? When you're in 350% public debt (state & local) to GDP - inflation is not a problem! It's a gift! A recession is the problem.
- JumpCrisscross 5y ago> you're saying you think it's possible we can have 5% interest rates and not a massive recession? There would be a massive recession. (And/or inflation.) That's the point. What is not possible is for the federal government to wind up in a situation where interest payments are dominating the budget, inflation is low, there is political will to service the debt, and yet magically the Congress can't appropriate the money. It can. It always can. Federal debt servicing is not a constraint on rates per se. It's a constraint because it requires either debt monetization (inflation) or high rates (recession) which are politically difficult. > inflation is not a problem How did you interpret "inflation and politics are always the constraint" as "inflation is not a problem"?