11 ms·

US National Debt Tops $31T

94 points by lxm 4y ago

sss111 4y ago
Debt as percent GDP: 2000–55% 2008–68% 2016–105% 2020–129% 2022–123%
- JumpCrisscross 4y ago
  Good source: https://fred.stlouisfed.org/series/GFDEGDQ188S https://fred.stlouisfed.org/series/GFDEGDQ188S
  - sbelskie 4y ago
    I think the cost to service the loans is much more relevant: https://fred.stlouisfed.org/graph/?g=Utqq https://fred.stlouisfed.org/graph/?g=Utqq
- HPsquared 4y ago
  Making the "per year" explicit: 2000: 6.6 months 2008: 8.2 months 2016: 12.6 months 2020: 15.5 months 2022: 14.8 months
- rllearneratwork 4y ago
  holy cow! what could possibly go wrong
- _justinfunk 4y ago
  The 2020 number should probably be considered an outlier, since the dramatic drop in GDP in 2020 due to the pandemic increases the ratio. Now that GDP is recovering, we are falling back onto the trend line towards higher and higher Debt/GDP.
  - bena 4y ago
    The 2008 number is misleading as well since some of the cost of the Iraq War wasn't considered part of the national debt for some reason. When Obama took office, a lot of the gimmicks to make the bad numbers look smaller were ended. So a lot of ignored dollars stopped being ignored even though, in reality, nothing really changed.
- sbelskie 4y ago
  Much more relevant is the cost of servicing the debt which has trended down/flat over time. Recent rising interest rates will change that somewhat but I see no real area of concern. https://fred.stlouisfed.org/graph/?g=Utqq https://fred.stlouisfed.org/graph/?g=Utqq
  - jnwatson 4y ago
    I see the opposite. Even if interest rates don’t rise more, we’re talking about a tripling of the service cost relative to GDP. That is going to put pressure on budgets for sure.
    - sbelskie 4y ago
      Where do you see a tripling? Are you mixing up the lines and their respective x-axis?
    - jeffbee 4y ago
      As you can see from the graph, the tripling of the debt ratio did not triple or even raise the service costs, because the debt market was absorbing debt for free or even at negative cost. The United States would have been very foolish indeed to have not borrowed under these terms.
      - missedthecue 4y ago
        The weighted average maturity of federal debt is less than 65 months and dropping. Only a very very small portion of the national debt is locked in for thirty years.
- CyberDildonics 4y ago
  Government interest payments as a percentage of revenue are much more important, because that's when governments actually default.
ARandomerDude 4y ago
This will be solved by taxes, inflation, war, or a combination of the three, sadly.
- deleted 4y ago
  [deleted]
- throwaway5959 4y ago
  I doubt it will be solved by taxes. Americans would rather have their currency devalued than pay higher taxes. (Yes I know the dollar is strong now, but what does that say about other currencies?) We’re screwing future generations and ourselves due to the greediness of the ruling class and the stupidity of the working class that keeps voting with the ruling class. Edit: I’m surprised people were able to even read this post before they downvoted it. I don’t mind downvotes, but at least comment why I’m wrong please.
  - jjoonathan 4y ago
    Currency devaluation pumps exports and dumps assets/services, so it's not necessarily a bad thing. It promotes a diversified economy that builds real things. Many countries seek it out as a matter of policy. Currency appreciation dumps exports and pumps assets/services. You know how "we used to make shit in this country, build shit. Now we just stick our hand in the next guy's pocket"? Yeah, that's what currency appreciation does (or, more specifically: reserve currency status where we can/must run a current account deficit without seeing the usual depreciation). Economists call it "Dutch Disease" because they first described it in the Dutch empire, but it happened to the British and American empires too. Think of it like a resource curse, but the resource is finance. It's good for people with fat brokerage accounts, it's good for Wall St, but if you earn your money by building regular shit for regular people, it's bad news for you. I agree with your conclusion -- our taxation and monetary policy is run for the benefit of wealthy Americans at the expense of poor Americans -- I just think you have the particular issue of currency devaluation a bit backwards. I didn't downvote, but I imagine this is why someone else did.
  - zuminator 4y ago
herpderperator 4y ago
So... does this just go up indefinitely without consequence? It seems like it's rarely spoken about vs the 10-year, inflation, mortgage rates, and other metrics. It looks like it has never gone down in any meaningful way. [0] [0] https://fred.stlouisfed.org/series/GFDEBTN https://fred.stlouisfed.org/series/GFDEBTN
- nsxwolf 4y ago
  Why do I have to pay taxes if the government can just print all the money it needs?
  - haskellandchill 4y ago
    You don't have to pay taxes, you just have to deal with the consequences.
  - yamtaddle 4y ago
    To the Feds? To temper inflation. To state and local governments? Because they can't print money and do actually need taxes in order to spend.
    - rglover 4y ago
  - yazaddaruvala 4y ago
    Inflation is a tax. It’s just regressive (the poorest are paying the most). income tax and ideally a wealth tax get the richest to pay the most. Obviously the US could use some fixing in both regards.
    - Spivak 4y ago
      > It’s just regressive (the poorest are paying the most). What? If I have $1,000,000, inflation is 10%, and prices readjust I just lost $100k in purchasing power but if I have $1000 I lost $100 in purchasing power. Proportional taxes aren't regressive. Inflation hits wage earners hardest because it lags behind prices but that's not the same thing.
thedangler 4y ago
How about stop giving money to wall street and banks and actually take money away from them when margin called or when they fail. It's not like the money is going anywhere. Everyone is hoarding. Hey i gambled away all the money you gave me. Cool here have some more.
- rayiner 4y ago
  What money are we giving Wall Street? The 2008 bailout was long ago paid off with interest. America’s debt problem is because neither party wants to raise taxes to sustainable levels. Taxes on the middle and upper middle class are still at Reagan-era lows and there is no chance they’ll ever be increased.
  - thebooktocome 4y ago
    Some large fraction of funds distributed through the Paycheck Protection Program never made it into the pockets of the people it was intended to protect.
    - rayiner 4y ago
      They didn’t go to Wall Street.
  - scifibestfi 4y ago
    Neither party wants to cut the fat. When a company becomes unsustainable, they have to make tradeoffs and get smarter about their expenses. The government just grows and grows and grows. They should have to cut the fat like everyone else and get more efficient.
    - silisili 4y ago
      This is also my line of thinking. I'd much rather the government at least show a valid, true attempt to cut the fat before even talking about raising my taxes. It seems like, in theory, a government should be bounded by its revenue and raise taxes if it needs more(as voted upon). Instead, tax rates and government spending both seem mainly arbitrary.
m348e912 4y ago
Anyone smart at economics able to share what type of pressure the US is facing on servicing the growing debt (making interest payments) with rates increasing? Does the fed fund rate directly affect how much interest has to be paid on national debt?
- adam_arthur 4y ago
  I haven't run the numbers, but cost of servicing the debt will depend on the structure of debt issued. A 30y treasury doesn't need to be refinanced/paid back for 30 years, 10y for 10 years etc. A smart Treasury would have locked in a lot of the debt in longer dated treasuries back when they were yielding 1% or less. This would have made the debt payments largely fixed, regardless of Fed hikes. Unfortunately from what I've heard, they are mostly financing through the fed funds/overnight rate. So yes, US debt service costs are more variable than they could have been. But maybe somebody can chime in with hard numbers
  - Ekaros 4y ago
    Doesn't that also mean that carrying cost of debt now and while rates are up issued will carry these high rates for long time? Even if rates go back down.
- dkjaudyeqooe 4y ago
  Doesn't affect existing debt but as bonds mature they need to be replaced and that's when servicing costs go up. That happens all the time since bonds are always maturing, but there are different maturities (2, 10, 30 year) so servicing costs go up relatively slowly.
- 55873445216111 4y ago
  Fed funds rate and total interest paid on outstanding treasury bonds are not a 1:1 relationship. The coupon payments of a bond are determined at the time of issuance. So for example if a 30 year bond was issued 10 years ago, the ongoing coupon payments that the US treasury is paying today on that bond are a fixed amount that was determined at the time the bond was issued 10 years ago. Every individual issuance of bonds has a specific coupon payment which is determined at time of issuance.
newaccount2021 4y ago
US has successfully made every other currency worse, so rest easy, the USD is the least-dirty-shirt in the laundry now, and everyone knows it Euro - sunk by energy concerns and war Yuan - sunk by China's isolation from global community Yen/Pound - sunk by being too much like America without the clout Gold/Silver/Crypto - never got off the launch pad as a global pricing mechanism the world has no choice but to embrace the USD
jl6 4y ago
I really struggle to wrap my head around the idea that the largest holder of US debt is the US government itself: https://www.thebalancemoney.com/who-owns-the-u-s-national-debt-3306124 https://www.thebalancemoney.com/who-owns-the-u-s-national-de...
- dkjaudyeqooe 4y ago
  Why would the US invest in anything other than the safest bonds on the planet?
  - qclibre22 4y ago
    Higher returns in equities.
    - dkjaudyeqooe 4y ago
      Higher risk too.
  - jl6 4y ago
    But why is the US government investing excess cash in US government debt rather than paying down that debt?
- subsubzero 4y ago
  Interesting article, under foreign debt one thing that really stuck out to me is how a tiny country like Luxembourg with a population of only 632k people is the 4th largest holder of US debt at $306B. That to me seems very suspicious.
- boppo1 4y ago
  If you imagine a 'simple' economy, the way to store your wealth is to buy gold and stick it in a safe. In a 'simple' economy, gold is the least risky commodity of exchange. Now consider that US treasuries are arguably less risky than gold, and are easier to exchange. US debt is basically like "big-boy cash".
- boppo1 4y ago
simonlc 4y ago
Someone tell them to stop buying lattes so they can pay off their debt.
scifibestfi 4y ago
Ray Dalio has a great educational video on the history of debt and how nations always end up dealing with it. https://www.youtube.com/watch?v=xguam0TKMw8 https://www.youtube.com/watch?v=xguam0TKMw8 We know how this story ends, yet we seem helpless to do something different. Why?
- CyberDildonics 4y ago
  Because the negative consequences of inflation and disdain for inflation are not felt by the people who create it.
- waynenilsen 4y ago
  incorrect incentive structure
tonymet 4y ago
young people your future has been stolen .
- deleted 4y ago
  [deleted]
- throwaway98797 4y ago
  the young will eat the old, if you let them jerry
anm89 4y ago
One aspect to this that is less obvious: A bubble in equities accompanied by low unemployement is also basically a bubble in tax receipts. If this reverts to the mean, we could quickly be in a painful situation. Macro analyst Luke Gromen likes to point out that non discretionary expenditures (entitlement PAYGOs + interest on the debt + TGA drawdowns) already equals more than 100% of tax reciepts. Meaning even if we had focused politicians who were aggressively cuttting (which we don't), even at our elevated tax receipts, it would be structurally impossible to get back to a budget surplus without structural changes. Again, this does not bode well for the likely event where tax receipts fall off of a cliff next year. If anything, it's a good argument that despite all the tough talk, the Fed cannot keep rates elevated for too long.
icyfox 4y ago
I'd like to see some compelling evidence that supports the seemingly prevailing economic theory that the US can issue an unlimited amount of debt just because it's denominated in USD and interest rates are historically low. From another NY Times opinion piece (in [1]). > And the new paradigm suggests both that public debt isn’t a major problem and that government borrowing for the right purposes is actually the responsible thing to do. > Here’s where it becomes crucial to realize that the world has changed: Interest rates are much lower than they were in the past, and all indications are that they’ll stay low for years to come. The phrase "for the right purposes" sounds like a scape goat for government spending. What is a right purpose? Morally speaking - almost anything. Economically speaking, I imagine only things that are likely to increase net GDP over the long haul. It seems clear to me that you can draw a pretty clear line between quantitate easing & government bailouts of companies during COVID to a sizable quantity of current inflation. Asset prices rose in the market, which bubbled down to housing, rent, and consumer products. Supply shocks for oil and trade commodities were part of the equation but only a part. From everything I've read on federal bank history, the more money that's in supply means the higher inflation - almost by definition. You can only issue so much debt out of nothing before dollars are fighting over the same core commodities. [1] https://www.nytimes.com/2020/12/03/opinion/biden-republicans-debt.html https://www.nytimes.com/2020/12/03/opinion/biden-republicans...
- misiti3780 4y ago
  - thebooktocome 4y ago
    One of the few things both sides can agree on.
  - irrational 4y ago
    Is there a Wikipedia List of Charlatan article? I would have zero idea about Paul Krugman. Though, it’s not like I’m going to research the author of every article. What I really need is a browser extension that will do a background search for the author of any article I open and throw up an alert if there are concerns. Hmmm, sounds like we need a charlatan API the extension can hit up.
baby 4y ago
I thought it was OK because countries are allowed to operate ponzi schemes?
- Ekaros 4y ago
  It is fine, until it isn't... And we have been pushing that long time. Then again Japan has been doing it for very long time now.
bcx 4y ago
I'd be curious to understand the interest rate the US government is paying on the debt verses some other highly indebted countries. I poked around on google, and it looks like China has around 50% Debt to GDP ratio , Japan had something like 250%, and Russia's was around 20%. I have no idea what I should conclude from this -- other than I don't think it's possible for someone to foreclose on the US for not paying it's debt --- and that if we had massive inflation, and Debt is not inflation adjusted you could drastically reduce the debt -- but you'd have to increase the interest rate on new debt you were issuing.
- mostlysimilar 4y ago
  China is 77.84% as of 2022. Source: https://www.statista.com/statistics/270329/national-debt-of-china-in-relation-to-gross-domestic-product-gdp/ https://www.statista.com/statistics/270329/national-debt-of-...
- andsoitis 4y ago
  China is currently around 75%, Japan just under 100%, US at just over 100%. For comparison the UK was at 340% in 2017 (not sure what now). https://en.wikipedia.org/wiki/List_of_countries_by_external_debt https://en.wikipedia.org/wiki/List_of_countries_by_external_...
  - fomine3 4y ago
    I wonder is EUR countries' debt for other EUR countries should be counted as internal or external. It's same currency so not affected to currency inflation.
everybodyknows 4y ago
Note that this is federal only: no accounting for debt carried on state, county, city, or public utility district balance sheets.
asn0 4y ago
Yet another "unprecedented" data point - that doesn't even make the Top 10 for world-wide public debt-vs-GDP: https://www.visualcapitalist.com/global-debt-to-gdp-ratio/ https://www.visualcapitalist.com/global-debt-to-gdp-ratio/
elephanlemon 4y ago
Something interesting I learned recently is that the debt load carried by the US is not anything special (when considered as a percentage of GDP) compared with other countries. (e.g. most of Europe is actually worse off, China isn’t far behind.) https://en.m.wikipedia.org/wiki/List_of_countries_by_external_debt https://en.m.wikipedia.org/wiki/List_of_countries_by_externa...
- anm89 4y ago
  Look at the historical series. These are all "special" values (outliers).
- deleted 4y ago
  [deleted]
- bjornsing 4y ago
  True. And the US has one more thing going for it, compared to many European countries: it controls the currency it’s borrowing in. Greece and Italy for example do not.
- s_dev 4y ago
  Looks at Ireland. 700% GDP! I suspect most of that is private debt though being funneled through the IFSC.
  - boole1854 4y ago
    Looks to me like it's just bad data in the table in Wikipedia. Ireland has a GDP of $499 billion [1]. That would mean an external debt of $228 billion would be 46% of GDP, not 700%. I wonder what other numbers are wrong in that table. [1] https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=IE https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?location...
    - kspacewalk2 4y ago
      Another source pitting Ireland's debt to GDP at 56%[1]. This was >100% in 2012, showing how quickly this stat can change when you regain some fiscal discipline and your GDP grows in the meantime. Looks like Ireland actually did proper counter-cyclical fiscal policy[2] during the good times, to help them keep their debt in check during the bad times. How quaint of them. [1] https://tradingeconomics.com/ireland/government-debt-to-gdp https://tradingeconomics.com/ireland/government-debt-to-gdp [2] https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Glossary:Counter-cyclical_fiscal_measures https://ec.europa.eu/eurostat/statistics-explained/index.php...
0xbadcafebee 4y ago
Correct me if I'm wrong, but this combined with high borrowing rates and a looming recession, basically mean that we are going to again destroy the economies of countries who depend on low borrowing rates, the way we did with Greece and others in 2007? That could mean a second global financial recession. Which would prompt the world to more seriously begin moving their business to China. The promises of stability from the US dollar are obviously a sham if it means destroying their economies every 15-20 years.
arpowers 4y ago
Debt is a misnomer when the debt is serviced exclusively with printed money. Seems to me they use the term because it works better politically
divbzero 4y ago
I remember in 2008 the National Debt Clock had to add a 14th digit [1] [2] to accommodate the growing debt. Seems a matter of time before it will need a 15th. [1]: https://www.wsj.com/articles/BL-REB-2108 https://www.wsj.com/articles/BL-REB-2108 [2]: https://observer.com/2008/10/durst-to-add-extra-trillion-dollar-digit-to-national-debt-clock/ https://observer.com/2008/10/durst-to-add-extra-trillion-dol...
kinnth 4y ago
Run FIAT into the ground, then transition to a new form of currency most likely CBDC. Money is all made up anyway. It's a point of transition that I feel will happen in my lifetime.
waynenilsen 4y ago
There is a mathematical certainty implied here that I believe many people here can understand. Compounding interest is exponential. We are borrowing money to pay the interest, this will continue until something breaks.
- standardUser 4y ago
  First, the government services its debt, it doesn't let interest accrue perpetually. Second, inflation continually pushes the value of debt down over time. Third, the US economy continues to grow, which allows for increased government revenue which allows for servicing an increasingly large debt.
tristor 4y ago
No surprise for anyone paying attention. In fact, it's folks like Paul Krugman that have espoused and supported policies that have lead us to this point. We have continuously elected and elevated people who are happy to spend beyond our means from the government coffers, and primarily spend in ways which do not actually directly help the citizens of the US. We have had ineffective and irresponsible leadership in this country for a very long time, nearly my entire lifetime. Unfortunately, the factors that lead to these irresponsible leaders getting elected are only accelerating, so I don't feel positively about the future state of US national debt or fiscal responsibility.
throwaway6734 4y ago
One of the benefits of inflation is that debt becomes worth less! A bigger crisis is the looming social security and Medicare trust running dry and benefits needing to be cut by 25%. It's scheduled to happen within the decade.
yehAnd 4y ago
Yes, and? Tracking debt in nation state currency is spoken tradition, not immutable law of science. Carrying forward spoken tradition about debts of the past is not an obligation of us or the future. Just because some apes wrote an IOU down doesn’t bind my sensibilities and agency to serving that IOU. If I’m not mistaken outside parties are not beholden to contracts they did not sign in our legal system. So no law of physics and no law of man obliges me to care about the burden others agree to carry. Go ahead and come collect, China. We’ll just nuke each other into the Stone Age. The real gap is a thing; we can close ports and make ephemeral debts a non-issue really fast. Headlines like this are to remind people who believe in such things to not forget some debt they don’t owe serving.
thedangler 4y ago
The whole system is fraudulent. Scheme on top of scheme on top of scheme. Look at Payment for order flow. Who benefits. Who created the system in the first place. Bernie Madoff. When he went to jain for his scheme did they remove the systems he built to help make that fortune, absolutely not. Everyone learns inside a fraudulent system so thats what they know. It's a giant echo chamber. Here come the down votes.
opportune 4y ago
I’m a pinko but even I think the debt is a huge problem. With debt above 100% GDP it means servicing our debt (much of which is not in long term notes) takes X% of our GDP where X is basically the prevailing interest rates. So in a high interest rate environment, say 7%, we need to spend 7% of GDP just on interest. This comes out of our taxes where it’s more like 40% of government tax revenue. Essentially that means we can’t raise rates past a certain point without either austerity or risking a debt spiral. If inflation is bad enough that those rates are necessary to stop it, practically it means we’re gonna have to deal with inflation until we are safe to raise rates high enough to stop it. Which also requires some austerity in the short term while we wait for debt to become a smaller portion of GDP. Funnily enough, other countries have it even worse than us, and they’re throwing a hissy fit that we’ve raised rates where we have (already at levels they can’t match) since it weakens their currency relative to the USD. That actually appears to be our current blocker of higher rates moreso than our ability to make payments, per recent Federal Reserve activity.
- tootie 4y ago
  100% debt to GDP is a meaningless milestone. Debt is cumulative and has a built-in maturity timeline whereas GDP is a snapshot. Debt service is relative the interest rate and rates have been so low for so long that debt service has simply not been burdensome even at large volumes. Rates are rising now but still fairly low. It's likely time to slow down debt growth but the current accumulation isn't really worrisome. https://fred.stlouisfed.org/graph/?g=UtFK https://fred.stlouisfed.org/graph/?g=UtFK
  - opportune 4y ago
    Sure, I picked that ratio because it makes reasoning easy since then interest rates = percentage of GDP. My point is precisely that it only works when rates are low. When rates need to go higher you can’t spend so much of your tax base on servicing debt without bad things happening. You cannot simply let the debt mature because it gets refinanced at the current rate unless you’re running a budget surplus to reduce the principal (which is generally considered unwise compared to growing/inflating out of it). Rates don’t stay low forever
howeyc 4y ago
Where do you all think that money in your savings accounts comes from (originally, not your immediate counter-party)? Government spending. The government (or FED) are the only ones that can spend more money into existence. Just imagine what will happen if the government starts to seriously make big changes to reduce that debt. Deflation is my guess, unless the FED prints to counteract them. In which case the "debt" just changes hands.

94 points by lxm 4y ago

sss111 4y ago

Debt as percent GDP: 2000–55% 2008–68% 2016–105% 2020–129% 2022–123%

JumpCrisscross 4y ago
Good source: https://fred.stlouisfed.org/series/GFDEGDQ188S https://fred.stlouisfed.org/series/GFDEGDQ188S
- sbelskie 4y ago
  I think the cost to service the loans is much more relevant: https://fred.stlouisfed.org/graph/?g=Utqq https://fred.stlouisfed.org/graph/?g=Utqq
HPsquared 4y ago
Making the "per year" explicit: 2000: 6.6 months 2008: 8.2 months 2016: 12.6 months 2020: 15.5 months 2022: 14.8 months
rllearneratwork 4y ago
holy cow! what could possibly go wrong
_justinfunk 4y ago
The 2020 number should probably be considered an outlier, since the dramatic drop in GDP in 2020 due to the pandemic increases the ratio. Now that GDP is recovering, we are falling back onto the trend line towards higher and higher Debt/GDP.
- bena 4y ago
  The 2008 number is misleading as well since some of the cost of the Iraq War wasn't considered part of the national debt for some reason. When Obama took office, a lot of the gimmicks to make the bad numbers look smaller were ended. So a lot of ignored dollars stopped being ignored even though, in reality, nothing really changed.
sbelskie 4y ago
Much more relevant is the cost of servicing the debt which has trended down/flat over time. Recent rising interest rates will change that somewhat but I see no real area of concern. https://fred.stlouisfed.org/graph/?g=Utqq https://fred.stlouisfed.org/graph/?g=Utqq
- jnwatson 4y ago
  I see the opposite. Even if interest rates don’t rise more, we’re talking about a tripling of the service cost relative to GDP. That is going to put pressure on budgets for sure.
  - sbelskie 4y ago
    Where do you see a tripling? Are you mixing up the lines and their respective x-axis?
  - jeffbee 4y ago
    As you can see from the graph, the tripling of the debt ratio did not triple or even raise the service costs, because the debt market was absorbing debt for free or even at negative cost. The United States would have been very foolish indeed to have not borrowed under these terms.
    - missedthecue 4y ago
      The weighted average maturity of federal debt is less than 65 months and dropping. Only a very very small portion of the national debt is locked in for thirty years.
CyberDildonics 4y ago
Government interest payments as a percentage of revenue are much more important, because that's when governments actually default.

ARandomerDude 4y ago

This will be solved by taxes, inflation, war, or a combination of the three, sadly.

deleted 4y ago
[deleted]
throwaway5959 4y ago
I doubt it will be solved by taxes. Americans would rather have their currency devalued than pay higher taxes. (Yes I know the dollar is strong now, but what does that say about other currencies?) We’re screwing future generations and ourselves due to the greediness of the ruling class and the stupidity of the working class that keeps voting with the ruling class. Edit: I’m surprised people were able to even read this post before they downvoted it. I don’t mind downvotes, but at least comment why I’m wrong please.
- jjoonathan 4y ago
  Currency devaluation pumps exports and dumps assets/services, so it's not necessarily a bad thing. It promotes a diversified economy that builds real things. Many countries seek it out as a matter of policy. Currency appreciation dumps exports and pumps assets/services. You know how "we used to make shit in this country, build shit. Now we just stick our hand in the next guy's pocket"? Yeah, that's what currency appreciation does (or, more specifically: reserve currency status where we can/must run a current account deficit without seeing the usual depreciation). Economists call it "Dutch Disease" because they first described it in the Dutch empire, but it happened to the British and American empires too. Think of it like a resource curse, but the resource is finance. It's good for people with fat brokerage accounts, it's good for Wall St, but if you earn your money by building regular shit for regular people, it's bad news for you. I agree with your conclusion -- our taxation and monetary policy is run for the benefit of wealthy Americans at the expense of poor Americans -- I just think you have the particular issue of currency devaluation a bit backwards. I didn't downvote, but I imagine this is why someone else did.
- zuminator 4y ago

herpderperator 4y ago

So... does this just go up indefinitely without consequence? It seems like it's rarely spoken about vs the 10-year, inflation, mortgage rates, and other metrics. It looks like it has never gone down in any meaningful way. [0] [0] https://fred.stlouisfed.org/series/GFDEBTN https://fred.stlouisfed.org/series/GFDEBTN

nsxwolf 4y ago
Why do I have to pay taxes if the government can just print all the money it needs?
- haskellandchill 4y ago
  You don't have to pay taxes, you just have to deal with the consequences.
- yamtaddle 4y ago
  To the Feds? To temper inflation. To state and local governments? Because they can't print money and do actually need taxes in order to spend.
  - rglover 4y ago
- yazaddaruvala 4y ago
  Inflation is a tax. It’s just regressive (the poorest are paying the most). income tax and ideally a wealth tax get the richest to pay the most. Obviously the US could use some fixing in both regards.
  - Spivak 4y ago
    > It’s just regressive (the poorest are paying the most). What? If I have $1,000,000, inflation is 10%, and prices readjust I just lost $100k in purchasing power but if I have $1000 I lost $100 in purchasing power. Proportional taxes aren't regressive. Inflation hits wage earners hardest because it lags behind prices but that's not the same thing.

thedangler 4y ago

How about stop giving money to wall street and banks and actually take money away from them when margin called or when they fail. It's not like the money is going anywhere. Everyone is hoarding. Hey i gambled away all the money you gave me. Cool here have some more.

rayiner 4y ago
What money are we giving Wall Street? The 2008 bailout was long ago paid off with interest. America’s debt problem is because neither party wants to raise taxes to sustainable levels. Taxes on the middle and upper middle class are still at Reagan-era lows and there is no chance they’ll ever be increased.
- thebooktocome 4y ago
  Some large fraction of funds distributed through the Paycheck Protection Program never made it into the pockets of the people it was intended to protect.
  - rayiner 4y ago
    They didn’t go to Wall Street.
- scifibestfi 4y ago
  Neither party wants to cut the fat. When a company becomes unsustainable, they have to make tradeoffs and get smarter about their expenses. The government just grows and grows and grows. They should have to cut the fat like everyone else and get more efficient.
  - silisili 4y ago
    This is also my line of thinking. I'd much rather the government at least show a valid, true attempt to cut the fat before even talking about raising my taxes. It seems like, in theory, a government should be bounded by its revenue and raise taxes if it needs more(as voted upon). Instead, tax rates and government spending both seem mainly arbitrary.

m348e912 4y ago

Anyone smart at economics able to share what type of pressure the US is facing on servicing the growing debt (making interest payments) with rates increasing? Does the fed fund rate directly affect how much interest has to be paid on national debt?

adam_arthur 4y ago
I haven't run the numbers, but cost of servicing the debt will depend on the structure of debt issued. A 30y treasury doesn't need to be refinanced/paid back for 30 years, 10y for 10 years etc. A smart Treasury would have locked in a lot of the debt in longer dated treasuries back when they were yielding 1% or less. This would have made the debt payments largely fixed, regardless of Fed hikes. Unfortunately from what I've heard, they are mostly financing through the fed funds/overnight rate. So yes, US debt service costs are more variable than they could have been. But maybe somebody can chime in with hard numbers
- Ekaros 4y ago
  Doesn't that also mean that carrying cost of debt now and while rates are up issued will carry these high rates for long time? Even if rates go back down.
dkjaudyeqooe 4y ago
Doesn't affect existing debt but as bonds mature they need to be replaced and that's when servicing costs go up. That happens all the time since bonds are always maturing, but there are different maturities (2, 10, 30 year) so servicing costs go up relatively slowly.
55873445216111 4y ago
Fed funds rate and total interest paid on outstanding treasury bonds are not a 1:1 relationship. The coupon payments of a bond are determined at the time of issuance. So for example if a 30 year bond was issued 10 years ago, the ongoing coupon payments that the US treasury is paying today on that bond are a fixed amount that was determined at the time the bond was issued 10 years ago. Every individual issuance of bonds has a specific coupon payment which is determined at time of issuance.

newaccount2021 4y ago

US has successfully made every other currency worse, so rest easy, the USD is the least-dirty-shirt in the laundry now, and everyone knows it Euro - sunk by energy concerns and war Yuan - sunk by China's isolation from global community Yen/Pound - sunk by being too much like America without the clout Gold/Silver/Crypto - never got off the launch pad as a global pricing mechanism the world has no choice but to embrace the USD

jl6 4y ago

I really struggle to wrap my head around the idea that the largest holder of US debt is the US government itself: https://www.thebalancemoney.com/who-owns-the-u-s-national-debt-3306124 https://www.thebalancemoney.com/who-owns-the-u-s-national-de...

dkjaudyeqooe 4y ago
Why would the US invest in anything other than the safest bonds on the planet?
- qclibre22 4y ago
  Higher returns in equities.
  - dkjaudyeqooe 4y ago
    Higher risk too.
- jl6 4y ago
  But why is the US government investing excess cash in US government debt rather than paying down that debt?
subsubzero 4y ago
Interesting article, under foreign debt one thing that really stuck out to me is how a tiny country like Luxembourg with a population of only 632k people is the 4th largest holder of US debt at $306B. That to me seems very suspicious.
boppo1 4y ago
If you imagine a 'simple' economy, the way to store your wealth is to buy gold and stick it in a safe. In a 'simple' economy, gold is the least risky commodity of exchange. Now consider that US treasuries are arguably less risky than gold, and are easier to exchange. US debt is basically like "big-boy cash".
boppo1 4y ago

simonlc 4y ago

Someone tell them to stop buying lattes so they can pay off their debt.

scifibestfi 4y ago

Ray Dalio has a great educational video on the history of debt and how nations always end up dealing with it. https://www.youtube.com/watch?v=xguam0TKMw8 https://www.youtube.com/watch?v=xguam0TKMw8 We know how this story ends, yet we seem helpless to do something different. Why?

CyberDildonics 4y ago
Because the negative consequences of inflation and disdain for inflation are not felt by the people who create it.
waynenilsen 4y ago
incorrect incentive structure

tonymet 4y ago

young people your future has been stolen .

deleted 4y ago
[deleted]
throwaway98797 4y ago
the young will eat the old, if you let them jerry

anm89 4y ago

One aspect to this that is less obvious: A bubble in equities accompanied by low unemployement is also basically a bubble in tax receipts. If this reverts to the mean, we could quickly be in a painful situation. Macro analyst Luke Gromen likes to point out that non discretionary expenditures (entitlement PAYGOs + interest on the debt + TGA drawdowns) already equals more than 100% of tax reciepts. Meaning even if we had focused politicians who were aggressively cuttting (which we don't), even at our elevated tax receipts, it would be structurally impossible to get back to a budget surplus without structural changes. Again, this does not bode well for the likely event where tax receipts fall off of a cliff next year. If anything, it's a good argument that despite all the tough talk, the Fed cannot keep rates elevated for too long.

icyfox 4y ago

I'd like to see some compelling evidence that supports the seemingly prevailing economic theory that the US can issue an unlimited amount of debt just because it's denominated in USD and interest rates are historically low. From another NY Times opinion piece (in [1]). > And the new paradigm suggests both that public debt isn’t a major problem and that government borrowing for the right purposes is actually the responsible thing to do. > Here’s where it becomes crucial to realize that the world has changed: Interest rates are much lower than they were in the past, and all indications are that they’ll stay low for years to come. The phrase "for the right purposes" sounds like a scape goat for government spending. What is a right purpose? Morally speaking - almost anything. Economically speaking, I imagine only things that are likely to increase net GDP over the long haul. It seems clear to me that you can draw a pretty clear line between quantitate easing & government bailouts of companies during COVID to a sizable quantity of current inflation. Asset prices rose in the market, which bubbled down to housing, rent, and consumer products. Supply shocks for oil and trade commodities were part of the equation but only a part. From everything I've read on federal bank history, the more money that's in supply means the higher inflation - almost by definition. You can only issue so much debt out of nothing before dollars are fighting over the same core commodities. [1] https://www.nytimes.com/2020/12/03/opinion/biden-republicans-debt.html https://www.nytimes.com/2020/12/03/opinion/biden-republicans...

misiti3780 4y ago
- thebooktocome 4y ago
  One of the few things both sides can agree on.
- irrational 4y ago
  Is there a Wikipedia List of Charlatan article? I would have zero idea about Paul Krugman. Though, it’s not like I’m going to research the author of every article. What I really need is a browser extension that will do a background search for the author of any article I open and throw up an alert if there are concerns. Hmmm, sounds like we need a charlatan API the extension can hit up.

baby 4y ago

I thought it was OK because countries are allowed to operate ponzi schemes?

Ekaros 4y ago
It is fine, until it isn't... And we have been pushing that long time. Then again Japan has been doing it for very long time now.

bcx 4y ago

I'd be curious to understand the interest rate the US government is paying on the debt verses some other highly indebted countries. I poked around on google, and it looks like China has around 50% Debt to GDP ratio , Japan had something like 250%, and Russia's was around 20%. I have no idea what I should conclude from this -- other than I don't think it's possible for someone to foreclose on the US for not paying it's debt --- and that if we had massive inflation, and Debt is not inflation adjusted you could drastically reduce the debt -- but you'd have to increase the interest rate on new debt you were issuing.

mostlysimilar 4y ago
China is 77.84% as of 2022. Source: https://www.statista.com/statistics/270329/national-debt-of-china-in-relation-to-gross-domestic-product-gdp/ https://www.statista.com/statistics/270329/national-debt-of-...
andsoitis 4y ago
China is currently around 75%, Japan just under 100%, US at just over 100%. For comparison the UK was at 340% in 2017 (not sure what now). https://en.wikipedia.org/wiki/List_of_countries_by_external_debt https://en.wikipedia.org/wiki/List_of_countries_by_external_...
- fomine3 4y ago
  I wonder is EUR countries' debt for other EUR countries should be counted as internal or external. It's same currency so not affected to currency inflation.

everybodyknows 4y ago

Note that this is federal only: no accounting for debt carried on state, county, city, or public utility district balance sheets.

asn0 4y ago

Yet another "unprecedented" data point - that doesn't even make the Top 10 for world-wide public debt-vs-GDP: https://www.visualcapitalist.com/global-debt-to-gdp-ratio/ https://www.visualcapitalist.com/global-debt-to-gdp-ratio/

elephanlemon 4y ago

Something interesting I learned recently is that the debt load carried by the US is not anything special (when considered as a percentage of GDP) compared with other countries. (e.g. most of Europe is actually worse off, China isn’t far behind.) https://en.m.wikipedia.org/wiki/List_of_countries_by_external_debt https://en.m.wikipedia.org/wiki/List_of_countries_by_externa...

anm89 4y ago
Look at the historical series. These are all "special" values (outliers).
deleted 4y ago
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bjornsing 4y ago
True. And the US has one more thing going for it, compared to many European countries: it controls the currency it’s borrowing in. Greece and Italy for example do not.
s_dev 4y ago
Looks at Ireland. 700% GDP! I suspect most of that is private debt though being funneled through the IFSC.
- boole1854 4y ago
  Looks to me like it's just bad data in the table in Wikipedia. Ireland has a GDP of $499 billion [1]. That would mean an external debt of $228 billion would be 46% of GDP, not 700%. I wonder what other numbers are wrong in that table. [1] https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=IE https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?location...
  - kspacewalk2 4y ago
    Another source pitting Ireland's debt to GDP at 56%[1]. This was >100% in 2012, showing how quickly this stat can change when you regain some fiscal discipline and your GDP grows in the meantime. Looks like Ireland actually did proper counter-cyclical fiscal policy[2] during the good times, to help them keep their debt in check during the bad times. How quaint of them. [1] https://tradingeconomics.com/ireland/government-debt-to-gdp https://tradingeconomics.com/ireland/government-debt-to-gdp [2] https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Glossary:Counter-cyclical_fiscal_measures https://ec.europa.eu/eurostat/statistics-explained/index.php...

0xbadcafebee 4y ago

Correct me if I'm wrong, but this combined with high borrowing rates and a looming recession, basically mean that we are going to again destroy the economies of countries who depend on low borrowing rates, the way we did with Greece and others in 2007? That could mean a second global financial recession. Which would prompt the world to more seriously begin moving their business to China. The promises of stability from the US dollar are obviously a sham if it means destroying their economies every 15-20 years.

arpowers 4y ago

Debt is a misnomer when the debt is serviced exclusively with printed money. Seems to me they use the term because it works better politically

divbzero 4y ago

I remember in 2008 the National Debt Clock had to add a 14th digit [1] [2] to accommodate the growing debt. Seems a matter of time before it will need a 15th. [1]: https://www.wsj.com/articles/BL-REB-2108 https://www.wsj.com/articles/BL-REB-2108 [2]: https://observer.com/2008/10/durst-to-add-extra-trillion-dollar-digit-to-national-debt-clock/ https://observer.com/2008/10/durst-to-add-extra-trillion-dol...

kinnth 4y ago

Run FIAT into the ground, then transition to a new form of currency most likely CBDC. Money is all made up anyway. It's a point of transition that I feel will happen in my lifetime.

waynenilsen 4y ago

There is a mathematical certainty implied here that I believe many people here can understand. Compounding interest is exponential. We are borrowing money to pay the interest, this will continue until something breaks.

standardUser 4y ago
First, the government services its debt, it doesn't let interest accrue perpetually. Second, inflation continually pushes the value of debt down over time. Third, the US economy continues to grow, which allows for increased government revenue which allows for servicing an increasingly large debt.

tristor 4y ago

No surprise for anyone paying attention. In fact, it's folks like Paul Krugman that have espoused and supported policies that have lead us to this point. We have continuously elected and elevated people who are happy to spend beyond our means from the government coffers, and primarily spend in ways which do not actually directly help the citizens of the US. We have had ineffective and irresponsible leadership in this country for a very long time, nearly my entire lifetime. Unfortunately, the factors that lead to these irresponsible leaders getting elected are only accelerating, so I don't feel positively about the future state of US national debt or fiscal responsibility.

throwaway6734 4y ago

One of the benefits of inflation is that debt becomes worth less! A bigger crisis is the looming social security and Medicare trust running dry and benefits needing to be cut by 25%. It's scheduled to happen within the decade.

yehAnd 4y ago

Yes, and? Tracking debt in nation state currency is spoken tradition, not immutable law of science. Carrying forward spoken tradition about debts of the past is not an obligation of us or the future. Just because some apes wrote an IOU down doesn’t bind my sensibilities and agency to serving that IOU. If I’m not mistaken outside parties are not beholden to contracts they did not sign in our legal system. So no law of physics and no law of man obliges me to care about the burden others agree to carry. Go ahead and come collect, China. We’ll just nuke each other into the Stone Age. The real gap is a thing; we can close ports and make ephemeral debts a non-issue really fast. Headlines like this are to remind people who believe in such things to not forget some debt they don’t owe serving.

thedangler 4y ago

The whole system is fraudulent. Scheme on top of scheme on top of scheme. Look at Payment for order flow. Who benefits. Who created the system in the first place. Bernie Madoff. When he went to jain for his scheme did they remove the systems he built to help make that fortune, absolutely not. Everyone learns inside a fraudulent system so thats what they know. It's a giant echo chamber. Here come the down votes.

opportune 4y ago

I’m a pinko but even I think the debt is a huge problem. With debt above 100% GDP it means servicing our debt (much of which is not in long term notes) takes X% of our GDP where X is basically the prevailing interest rates. So in a high interest rate environment, say 7%, we need to spend 7% of GDP just on interest. This comes out of our taxes where it’s more like 40% of government tax revenue. Essentially that means we can’t raise rates past a certain point without either austerity or risking a debt spiral. If inflation is bad enough that those rates are necessary to stop it, practically it means we’re gonna have to deal with inflation until we are safe to raise rates high enough to stop it. Which also requires some austerity in the short term while we wait for debt to become a smaller portion of GDP. Funnily enough, other countries have it even worse than us, and they’re throwing a hissy fit that we’ve raised rates where we have (already at levels they can’t match) since it weakens their currency relative to the USD. That actually appears to be our current blocker of higher rates moreso than our ability to make payments, per recent Federal Reserve activity.

tootie 4y ago
100% debt to GDP is a meaningless milestone. Debt is cumulative and has a built-in maturity timeline whereas GDP is a snapshot. Debt service is relative the interest rate and rates have been so low for so long that debt service has simply not been burdensome even at large volumes. Rates are rising now but still fairly low. It's likely time to slow down debt growth but the current accumulation isn't really worrisome. https://fred.stlouisfed.org/graph/?g=UtFK https://fred.stlouisfed.org/graph/?g=UtFK
- opportune 4y ago
  Sure, I picked that ratio because it makes reasoning easy since then interest rates = percentage of GDP. My point is precisely that it only works when rates are low. When rates need to go higher you can’t spend so much of your tax base on servicing debt without bad things happening. You cannot simply let the debt mature because it gets refinanced at the current rate unless you’re running a budget surplus to reduce the principal (which is generally considered unwise compared to growing/inflating out of it). Rates don’t stay low forever

howeyc 4y ago

Where do you all think that money in your savings accounts comes from (originally, not your immediate counter-party)? Government spending. The government (or FED) are the only ones that can spend more money into existence. Just imagine what will happen if the government starts to seriously make big changes to reduce that debt. Deflation is my guess, unless the FED prints to counteract them. In which case the "debt" just changes hands.