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Certainly, there are countries in a worse place than the United States. Japan or Italy are the first to be likely to blow up in a big way. Greece is a good ca

Certainly, there are countries in a worse place than the United States. Japan or Italy are the first to be likely to blow up in a big way. Greece is a good candidate for blowing up first, but it is small enough to be backstopped by the ECB. Italy is too big to be backstopped. The USA may fall, but it probably won't be the first major economy to do so. Historically, governments have been prone to currency crises when their debt-to-GDP ratio exceeds 100%. The USA is just slightly above that now, and interest rates have remained low here (and in other countries) because central banks are monetizing the debt. But that can't be sustained forever.

zeroonetwothree 4y ago
Many countries have been above 100% for a while now without any apparent issues
- Ekaros 4y ago
  Central banks are only recently been making things harder. Previous 10 or so years were quite easy on government debt. Even in some cases being negative.
  - landemva 4y ago
    Central bank zero interest rates decimated pension and annuity earnings.
- LastNevadan 4y ago
  It's not a hard-and-fast rule. The problem is this: once you have a high level of debt, you become sensitive to interest rate changes. Your debt rises, so you have to increase interest rates to lure investors to buy the bonds. The high interest rate forces to you run a bigger deficit, do you have to borrow even more money. Then investors demand an even high risk premium. That's the cycle. Once that process takes hold, the only way out is some combination of lower living standards, higher taxes, higher inflation and currency devaluation. You're right that it hasn't happened yet in the modern era. But it will. Remember where you heard it first.
  - ProjectArcturis 4y ago
    >Remember where you heard it first. I first heard it in a book written in 1986. It showed debt growing exponentially and forecast hyperinflation and economic collapse. People have been crying about that particular wolf for quite a long time.
digitaltrees 4y ago
Only if you assume that the US economy will stop growing, and with it the tax base. The US government’s ability to pay debt isn’t just its ability to print money. It’s also the ability to collect tax revenues and given how stable economic growth in the US has been for hundreds of years, it’s reasonable to assume that it can easily pay debts well over 100% of gdp.

zeroonetwothree 4y ago

Many countries have been above 100% for a while now without any apparent issues

Ekaros 4y ago
Central banks are only recently been making things harder. Previous 10 or so years were quite easy on government debt. Even in some cases being negative.
- landemva 4y ago
  Central bank zero interest rates decimated pension and annuity earnings.
LastNevadan 4y ago
It's not a hard-and-fast rule. The problem is this: once you have a high level of debt, you become sensitive to interest rate changes. Your debt rises, so you have to increase interest rates to lure investors to buy the bonds. The high interest rate forces to you run a bigger deficit, do you have to borrow even more money. Then investors demand an even high risk premium. That's the cycle. Once that process takes hold, the only way out is some combination of lower living standards, higher taxes, higher inflation and currency devaluation. You're right that it hasn't happened yet in the modern era. But it will. Remember where you heard it first.
- ProjectArcturis 4y ago
  >Remember where you heard it first. I first heard it in a book written in 1986. It showed debt growing exponentially and forecast hyperinflation and economic collapse. People have been crying about that particular wolf for quite a long time.

digitaltrees 4y ago

Only if you assume that the US economy will stop growing, and with it the tax base. The US government’s ability to pay debt isn’t just its ability to print money. It’s also the ability to collect tax revenues and given how stable economic growth in the US has been for hundreds of years, it’s reasonable to assume that it can easily pay debts well over 100% of gdp.