8 ms·

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

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.
    - lp0_on_fire 4y ago
      In a pure economic sense someone who lost 10% of their $1000 in savings is doing far worse than someone who lost 10% of $1,000,000 in savings. To the first person that 10% could be the difference between whether or not they have enough to pay rent that month. To the second it's the difference between whether or not they put a down payment on their second home.
      - Spivak 4y ago
        No disagreement, but that fact doesn't make a proportional tax regressive.
        naveen99 4y ago
        In a binary world, there is regressive and progressive only. Regressive = not progressive (enough). For people that can do math, just follow market response.
    - yazaddaruvala 4y ago
      Any entity with $1,000,000 in cash is making a calculated risk play. They could easily put that cash into gold, bonds, stocks, etc. They are betting on cash inspire of the inflation. Any person with $1,000 is living paycheck to paycheck and has no choice but to keep it in cash (if they can keep it at all). So really you have to compare $1,000,000 in bonds/averaged stock performance to $1,000 of income per month. The latter is far more impacted as the cost of gas and food increases 10%.
- deleted 4y ago
  [deleted]
- opportune 4y ago
  Practically speaking the way the government prints money is by creating treasuries that the Federal Reserve purchases. When the federal reserve purchases them, the government gets the amount of the treasury created de novo. With no taxes all government expenditure would be printed money. That would mean the monetary base increases by the government spending per year. That hasn’t been a problem until recently because only a portion of the government was funded this way, and increasing the monetary base wasn’t (until it did) causing inflation above Fed targets. Let’s say government spending is 25% of GDP. The federal reserve has our monetary base at around 5.5T out of 20T GDP currently. So we’d have to double our monetary base to fund the government this way for one year. This would cause very high inflation - we basically did fund the government 50% this way for 2 years because of COVID and look where that got us. Imagine inflation then with 100% funding in this manner over long periods.
peteradio 4y ago
I think its safe to say there is never going to be any consequence, just like FED infusions has never been shown to contribute to inflation.
MuffinFlavored 4y ago
I could be wrong but... if inflation was 8% year over year, doesn't that mean our national debt (nominated in dollars) got "eroded" by 8%? aka, inflation is good for the debt?
- guyzero 4y ago
  Yes, inflation is good for debt holders. Unfortunately higher inflation is usually accompanied by higher interest rates making for higher debt payments.
- seibelj 4y ago
  Unfortunately we are constantly issuing new debt to pay back the old debt because the government spends far beyond its means. So it doesn’t help.
  - dkjaudyeqooe 4y ago
    To the contrary, while the US can issue debt and people are willing to buy it it is living within its means.
    - seibelj 4y ago
      Only a fool thinks the ability to get a loan is equivalent to living within one’s means
      - jeffbee 4y ago
        The United States is not a person and you can't translate folk economics from your kitchen table to the nation.
        seibelj 4y ago
        That's what everyone says until the government defaults on its debt. The US is a special case because of our unique situation as the military superpower and reserve currency, but look at Argentina, Venezuela, and the UK for a counterpoint.
jedberg 4y ago
There is a branch of economics that feels that is exactly the case -- that national debt could be unlimited as long as its going back into the economy.
- SoftTalker 4y ago
  Spending money we don't have and will never repay except by printing more money is just another form of taxation. It never shows up on your pay statement, but the value of your dollars is diluted.
  - nathancahill 4y ago
    That's true, but it's more palatable to Americans than tax increases.
    - AnimalMuppet 4y ago
      People aren't real happy about inflation these days. I think they're more unhappy about that than they are about taxes.
  - ineptech 4y ago
    The purpose of monetary policy is to stimulate the economy, i.e. increase the value of dollars that are invested in something. The fact that it decreases the value of dollars that aren't invested is a feature, not a bug.
    - dragonwriter 4y ago
      > The purpose of monetary policy is to stimulate the economy no, its not. (1) Monetary policy doesn’t have just one purpose. (2) Sometimes one of its purposes is to slow rather than stimulate the econony. (3) Mostly its high-level purpose is economic stability.
      - ineptech 4y ago
jeffbee 4y ago
Have you seen a graph of GDP?
- throwaway12245 4y ago
  Discussion of debt and effects on GDP growth: https://www.mercatus.org/publications/government-spending/debt-and-growth-decade-studies https://www.mercatus.org/publications/government-spending/de... "the results of every study except two find a negative relationship between high levels of government debt and economic growth"
Andrew_nenakhov 4y ago
You can always cut debt down with some inflation. Ten years of 10% inflation, and your debt is just 38% of what it was before.
- rank0 4y ago
  Yeah and 90% of your citizens had their earnings/savings destroyed.
  - Andrew_nenakhov 4y ago
    Why are you saying it like it is something bad?! Inflation is a great equalizer, as it removes the disparity in society! Also, when people know that their assets will depreciate over time, they will be more economically active, doing more investments and buying more things now, and not later. It is also a chance to get rid of your debts, at a smaller cost!
    - rank0 4y ago
      I can’t tell if you’re joking or not… Financial assets actually do great in inflationary environments. Most people don’t have any. Why do you think most Americans can’t afford housing? Most peoples wages won’t even be close to increasing 10%/yr for a decade.
      - Andrew_nenakhov 4y ago
        I was only half joking. > Most peoples wages won’t even be close to increasing 10%/yr for a decade. It's only because you aren't used to such inflation. Once the cycle kicks in, wages start increasing accordingly. I know it first-hand after living in a country with high inflation. If you are living not in a closed off country, there will be more successful countries out there, so if you won't increase the wages of the workers they'll leave for other economies (or just work remotely), thus, reducing the workforce supply, which drives up wages.
  - 988747 4y ago
blamestross 4y ago
What would the consequences be? We are not defaulting on anything and seem unlikely to. The only consequence that might matter is other countries failing to loan us more money, and that probably isn't primarily decided by our debt to income ratio.
divbzero 4y ago
> It seems like it's rarely spoken about vs the 10-year, inflation, mortgage rates, and other metrics. GDP would be one of the better metrics to compare against [1] since it serves as a taxable base for the US government. [1]: https://www.longtermtrends.net/us-debt-to-gdp/ https://www.longtermtrends.net/us-debt-to-gdp/
incomingpain 4y ago
>So... does this just go up indefinitely without consequence? Oh for sure. history has many examples. Greece and Venezuela are your more recent ones. Basically it goes up until the bankers and funds no longer want your debt. THEN the consequences happen. when the government debt to gdp reaches above 100%, like too many countries have, then credit ratings start dropping. Absolutely nothing will get in your way to pump that up to 200%. The lenders don't care if you're making a terrible decision or not; just whether or not you keep paying. At around 200% is when you struggle to keep paying and your credit rating shifts to junk and nobody wants your debt anymore.

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.
  - lp0_on_fire 4y ago
    In a pure economic sense someone who lost 10% of their $1000 in savings is doing far worse than someone who lost 10% of $1,000,000 in savings. To the first person that 10% could be the difference between whether or not they have enough to pay rent that month. To the second it's the difference between whether or not they put a down payment on their second home.
    - Spivak 4y ago
      No disagreement, but that fact doesn't make a proportional tax regressive.
      - naveen99 4y ago
        In a binary world, there is regressive and progressive only. Regressive = not progressive (enough). For people that can do math, just follow market response.
  - yazaddaruvala 4y ago
    Any entity with $1,000,000 in cash is making a calculated risk play. They could easily put that cash into gold, bonds, stocks, etc. They are betting on cash inspire of the inflation. Any person with $1,000 is living paycheck to paycheck and has no choice but to keep it in cash (if they can keep it at all). So really you have to compare $1,000,000 in bonds/averaged stock performance to $1,000 of income per month. The latter is far more impacted as the cost of gas and food increases 10%.
deleted 4y ago
[deleted]
opportune 4y ago
Practically speaking the way the government prints money is by creating treasuries that the Federal Reserve purchases. When the federal reserve purchases them, the government gets the amount of the treasury created de novo. With no taxes all government expenditure would be printed money. That would mean the monetary base increases by the government spending per year. That hasn’t been a problem until recently because only a portion of the government was funded this way, and increasing the monetary base wasn’t (until it did) causing inflation above Fed targets. Let’s say government spending is 25% of GDP. The federal reserve has our monetary base at around 5.5T out of 20T GDP currently. So we’d have to double our monetary base to fund the government this way for one year. This would cause very high inflation - we basically did fund the government 50% this way for 2 years because of COVID and look where that got us. Imagine inflation then with 100% funding in this manner over long periods.

peteradio 4y ago

I think its safe to say there is never going to be any consequence, just like FED infusions has never been shown to contribute to inflation.

MuffinFlavored 4y ago

I could be wrong but... if inflation was 8% year over year, doesn't that mean our national debt (nominated in dollars) got "eroded" by 8%? aka, inflation is good for the debt?

guyzero 4y ago
Yes, inflation is good for debt holders. Unfortunately higher inflation is usually accompanied by higher interest rates making for higher debt payments.
seibelj 4y ago
Unfortunately we are constantly issuing new debt to pay back the old debt because the government spends far beyond its means. So it doesn’t help.
- dkjaudyeqooe 4y ago
  To the contrary, while the US can issue debt and people are willing to buy it it is living within its means.
  - seibelj 4y ago
    Only a fool thinks the ability to get a loan is equivalent to living within one’s means
    - jeffbee 4y ago
      The United States is not a person and you can't translate folk economics from your kitchen table to the nation.
      - seibelj 4y ago
        That's what everyone says until the government defaults on its debt. The US is a special case because of our unique situation as the military superpower and reserve currency, but look at Argentina, Venezuela, and the UK for a counterpoint.

jedberg 4y ago

There is a branch of economics that feels that is exactly the case -- that national debt could be unlimited as long as its going back into the economy.

SoftTalker 4y ago
Spending money we don't have and will never repay except by printing more money is just another form of taxation. It never shows up on your pay statement, but the value of your dollars is diluted.
- nathancahill 4y ago
  That's true, but it's more palatable to Americans than tax increases.
  - AnimalMuppet 4y ago
    People aren't real happy about inflation these days. I think they're more unhappy about that than they are about taxes.
- ineptech 4y ago
  The purpose of monetary policy is to stimulate the economy, i.e. increase the value of dollars that are invested in something. The fact that it decreases the value of dollars that aren't invested is a feature, not a bug.
  - dragonwriter 4y ago
    > The purpose of monetary policy is to stimulate the economy no, its not. (1) Monetary policy doesn’t have just one purpose. (2) Sometimes one of its purposes is to slow rather than stimulate the econony. (3) Mostly its high-level purpose is economic stability.
    - ineptech 4y ago

jeffbee 4y ago

Have you seen a graph of GDP?

throwaway12245 4y ago
Discussion of debt and effects on GDP growth: https://www.mercatus.org/publications/government-spending/debt-and-growth-decade-studies https://www.mercatus.org/publications/government-spending/de... "the results of every study except two find a negative relationship between high levels of government debt and economic growth"

Andrew_nenakhov 4y ago

You can always cut debt down with some inflation. Ten years of 10% inflation, and your debt is just 38% of what it was before.

rank0 4y ago
Yeah and 90% of your citizens had their earnings/savings destroyed.
- Andrew_nenakhov 4y ago
  Why are you saying it like it is something bad?! Inflation is a great equalizer, as it removes the disparity in society! Also, when people know that their assets will depreciate over time, they will be more economically active, doing more investments and buying more things now, and not later. It is also a chance to get rid of your debts, at a smaller cost!
  - rank0 4y ago
    I can’t tell if you’re joking or not… Financial assets actually do great in inflationary environments. Most people don’t have any. Why do you think most Americans can’t afford housing? Most peoples wages won’t even be close to increasing 10%/yr for a decade.
    - Andrew_nenakhov 4y ago
      I was only half joking. > Most peoples wages won’t even be close to increasing 10%/yr for a decade. It's only because you aren't used to such inflation. Once the cycle kicks in, wages start increasing accordingly. I know it first-hand after living in a country with high inflation. If you are living not in a closed off country, there will be more successful countries out there, so if you won't increase the wages of the workers they'll leave for other economies (or just work remotely), thus, reducing the workforce supply, which drives up wages.
- 988747 4y ago

blamestross 4y ago

What would the consequences be? We are not defaulting on anything and seem unlikely to. The only consequence that might matter is other countries failing to loan us more money, and that probably isn't primarily decided by our debt to income ratio.

divbzero 4y ago

> It seems like it's rarely spoken about vs the 10-year, inflation, mortgage rates, and other metrics. GDP would be one of the better metrics to compare against [1] since it serves as a taxable base for the US government. [1]: https://www.longtermtrends.net/us-debt-to-gdp/ https://www.longtermtrends.net/us-debt-to-gdp/

incomingpain 4y ago

>So... does this just go up indefinitely without consequence? Oh for sure. history has many examples. Greece and Venezuela are your more recent ones. Basically it goes up until the bankers and funds no longer want your debt. THEN the consequences happen. when the government debt to gdp reaches above 100%, like too many countries have, then credit ratings start dropping. Absolutely nothing will get in your way to pump that up to 200%. The lenders don't care if you're making a terrible decision or not; just whether or not you keep paying. At around 200% is when you struggle to keep paying and your credit rating shifts to junk and nobody wants your debt anymore.