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I wish I knew the truth on which camp is "right". You've got camp 1 saying "you can go to 300% Gross Federal Debt to GDP without side effects/it's a new paradi

I wish I knew the truth on which camp is "right". You've got camp 1 saying "you can go to 300% Gross Federal Debt to GDP without side effects/it's a new paradigm that history can't guide us on/there are no downsides to printed funny money/everything is fine/there's no risk of the US defaulting/spending 7% of tax revenue a year on interest on the debt" and the other camp says it's going to lead to our demise, etc. Will we ever see a surplus or breakeven in the next 10-50 years? Why should/shouldn't we? Is it worth it to target a surplus? Obviously it must not be because we're nowhere near it.

testTED 4y ago
80% of currency printed very recently, plus effectively never existing in a surplus status, doesn't invoke huge confidence.
gizmondo 4y ago
I wonder how the first camp reconcile their views with the current struggle Italy has with their debt caused by excessive deficit spending in the past.
- mijamo 4y ago
  Mostly by saying this is Italy's fault for being in the Eurozone and thus not being able to print its own money. Also the USA is in a unique situation in the world due to the status of the dollar, so comparison with other countries have very little validity. If argentina prints money it just loses value immediately and triggers crazy inflation. If the US prints money it is still not that big of a deal compared to all the dollars used everywhere in the world so the negative effects are much lower.
  - TexanFeller 4y ago
    > Also the USA is in a unique situation in the world due to the status of the dollar I hope this remains true. I fear for the USD's status as the world's reserve currency due to our abusing it to print, our oil producing Arab allies starting to accept other currencies, our disconnecting Russia from our financial system motivating countries to try to be independent of us etc.
    - yazzku 4y ago
      Must be sad for other countries to have an independent financial system, right?
sashu123 4y ago
The simple answer is we are debasing our currency in a very complex way, that we cannot measure how much we debased it. In the past kings printed new coins to fund their wars or whatever and it was easier to track how much the currency lost value. In the present because economies have gotten complex + tools to debase have gotten complex we cannot estimate how much we have actually debased our currency by. If it’s 100% then there’s going to be a lot of inflationary pain, if it’s 10% we can probably handle it but I wouldn’t hold my breadth on getting any good estimate
- SQueeeeeL 4y ago
  >it was easier to track how much the currency lost value. I think this is a glamorization of the past. I'll bet most exchange throughout history was being done with some level of fraud baked into the system highly up the chain. Our modern fiscal institutions haven't even been cooking for 100 years and look at all the shit the weird sages in the crown city keep pulling with our green coinage.
- dsfyu404ed 4y ago
  >that we cannot measure how much we debased it. "it's a feature not a bug."
- deleted 4y ago
  [deleted]
- arrosenberg 4y ago
  You don't debase fiat currency, since there isn't a limited supply. Markets are distorted because of a poor distribution of money (too much where demand is low, too little where demand is high), because the Fed handed out money to the wealthy (who hoard it in the form of assets) and Congress refuses to tax it back and redistribute it to the working class who can't currently pay their rent.
  - everforward 4y ago
    > You don't debase fiat currency, since there isn't a limited supply. That doesn't sound correct. There isn't a limited supply, but introducing more currency into circulation can reduce the value of it, which is a proper use of debasing. As a contrived example, if the treasury printed 100 trillion dollars and handed it out to everyone, I'm doubtful that bread would still be $1 a loaf.
A4ET8a8uTh0 4y ago
There is no right, because a lot of people pull in all sorts of directions, which means there are simultaneously multiple perceptions of what is "right". It may not be apparent until you realize that 1) not everyone wants US to continue being a superpower 2) not everyone thinks expensive dollar is a good thing.. by which I mean, lots of people have different idea of what right actually is. And since I am looking at it all through a lens of an individual of US, to me it is clear that making US drown in debt is bad for USD price against, well, everything. For the longest time, US had been the place to park your cash due to stability alone ( and the fact that dollar was worth something ). That stability is currently not assured. That said, any analysis on the matter I heard was oddly optimistic ( and I will admit that I don't get the optimism ). Not sure if it is the lack of alternatives or something else, but it does not seem US treasury has problems selling bonds.
paulpauper 4y ago
It is not as bad as the headline would suggest. The economy presumably is growing at the same time that the $19 trillion debt is being added. US GDP has grown a lot since 2012. Debt to GDP the highest since ww2, which seems bad, but the economy still boomed after ww2 anyway, so it's not saying much.
- yCombLinks 4y ago
  Grown on paper only. I don't think most people's lives are any better than 2012. Stock and house prices have skyrocketed is all.
ALittleLight 4y ago
My intuition is that it's obviously right that borrowing money could be a neutral or positive thing - but that depends on the borrowed money being spent in ways that will have a positive return. If you borrow money, when borrowing is cheap, to buy a car so you can go to work, smart! If you borrow money to spend it on booze and concert tickets - not smart! I think the issue is that one side is saying "Borrowing is terrible!" And the other side is saying "No, borrowing cheap money is somewhere between fine and great!" And the real answer is "Borrowing can be smart if you use it well, but we are using it poorly." If the US was borrowing money to build and renovate roads, bridges, ports, update the electrical grid, build new nuclear power plants, engage in basic science research and similar projects likely to yield good return on investment - that was be amazing financial planning. My limited understanding of what the government actually spends its money on - wasteful healthcare, social security, the military, and intelligence agencies - is that the money is actually just being squandered.
2OEH8eoCRo0 4y ago
As long as they can continue making interest payments on the debt then what's the problem? It's all relative.
- lotsofpulp 4y ago
  Which the feds can always do since they can issue money. The relevant question is can the US continue producing goods and services that are desirable on a global scale, one of which is a trustworthy society where you can mostly depend on the judicial system keeping things in order, for better or for worse.
  - Ekaros 4y ago
    And more importantly will others keep accepting USD. Or will they expect to be settled in something else be it other currency or some commodity. If others start to want something else than USD things can go sideways.
- scottiebarnes 4y ago
  The problem is the fundamentals. The US will "never default on its debt" because it issues debt in its own currency, which it can control the creation of necessary to service that debt (money printer go brrrr). So nobody is ever concerned about debt; you just say screw it let someone else worry about it, usually future generations. The value has to come from somewhere, and in this case its from the debasement of the dollar.
  - notch898a 4y ago
    They defaulted when they stopped honoring gold backing, which was the debt against the legal tender.
legitster 4y ago
A budget surplus would be pretty irrelevant target in the grand scheme of things. There are foreign policy implications (other countries waiting for us to pay them back is a good thing). But also, just like corporate finance, if the government can get good rates on debt, it almost always makes sense to just take the money and make the payments. So some small and sustainable amount of budget deficit is probably a good thing. But we are clearly on the wrong side of that equation.
jononomo 4y ago
Go with the camp that doesn't immediately change their tune when a Republican is elected president.
SilverBirch 4y ago
There's a lot of scary numbers, but here's a graph of the US budget deficit as a percentage of GDP[1] according to the CBO. Yes, the US has a deficit most years, and yes both the financial crisis and COVID lead to very large dficits. But between 1992 and 2000 a deficit of 4.5% became a surplus of 2.3%. So it's well within the possible to decrease the deficit by 7% of GDP over a relatively short period of time. If we started that process today we'd be back to the long term average deficit within 8 years - and we're starting from a crazy base because of all the hangovers of COVID. So whilst it's obviously a policy choice whether that happens, it's definitely well within the possible. [1]: https://www.cbo.gov/publication/58268 https://www.cbo.gov/publication/58268
- MuffinFlavored 4y ago
  > If we started that process today But we're not, right? Not only are we not doing that, we're nowhere close to that? We're still on tracking to collect roughly the same in taxation (leaving loopholes open for corporations on purpose) and spending more than ever (growing every year).
  - ashwagary 4y ago
    Even worse, $19T added to the debt is an extreme lowball by some expectations. Many estimates put the US national debt closer to $90T by the end of the decade. The country is right on the edge of walking into one of the most expensive wars in its history as well as a few delayed economic disasters that would kick the money printer into much higher gear. Trump adding $10T+ in a relatovely uneventful 4 years even before the massive inflation spike hit should give you an idea how quickly diminishing returns on QE can escalate spending.

testTED 4y ago

80% of currency printed very recently, plus effectively never existing in a surplus status, doesn't invoke huge confidence.

gizmondo 4y ago

I wonder how the first camp reconcile their views with the current struggle Italy has with their debt caused by excessive deficit spending in the past.

mijamo 4y ago
Mostly by saying this is Italy's fault for being in the Eurozone and thus not being able to print its own money. Also the USA is in a unique situation in the world due to the status of the dollar, so comparison with other countries have very little validity. If argentina prints money it just loses value immediately and triggers crazy inflation. If the US prints money it is still not that big of a deal compared to all the dollars used everywhere in the world so the negative effects are much lower.
- TexanFeller 4y ago
  > Also the USA is in a unique situation in the world due to the status of the dollar I hope this remains true. I fear for the USD's status as the world's reserve currency due to our abusing it to print, our oil producing Arab allies starting to accept other currencies, our disconnecting Russia from our financial system motivating countries to try to be independent of us etc.
  - yazzku 4y ago
    Must be sad for other countries to have an independent financial system, right?

sashu123 4y ago

The simple answer is we are debasing our currency in a very complex way, that we cannot measure how much we debased it. In the past kings printed new coins to fund their wars or whatever and it was easier to track how much the currency lost value. In the present because economies have gotten complex + tools to debase have gotten complex we cannot estimate how much we have actually debased our currency by. If it’s 100% then there’s going to be a lot of inflationary pain, if it’s 10% we can probably handle it but I wouldn’t hold my breadth on getting any good estimate

SQueeeeeL 4y ago
>it was easier to track how much the currency lost value. I think this is a glamorization of the past. I'll bet most exchange throughout history was being done with some level of fraud baked into the system highly up the chain. Our modern fiscal institutions haven't even been cooking for 100 years and look at all the shit the weird sages in the crown city keep pulling with our green coinage.
dsfyu404ed 4y ago
>that we cannot measure how much we debased it. "it's a feature not a bug."
deleted 4y ago
[deleted]
arrosenberg 4y ago
You don't debase fiat currency, since there isn't a limited supply. Markets are distorted because of a poor distribution of money (too much where demand is low, too little where demand is high), because the Fed handed out money to the wealthy (who hoard it in the form of assets) and Congress refuses to tax it back and redistribute it to the working class who can't currently pay their rent.
- everforward 4y ago
  > You don't debase fiat currency, since there isn't a limited supply. That doesn't sound correct. There isn't a limited supply, but introducing more currency into circulation can reduce the value of it, which is a proper use of debasing. As a contrived example, if the treasury printed 100 trillion dollars and handed it out to everyone, I'm doubtful that bread would still be $1 a loaf.

A4ET8a8uTh0 4y ago

There is no right, because a lot of people pull in all sorts of directions, which means there are simultaneously multiple perceptions of what is "right". It may not be apparent until you realize that 1) not everyone wants US to continue being a superpower 2) not everyone thinks expensive dollar is a good thing.. by which I mean, lots of people have different idea of what right actually is. And since I am looking at it all through a lens of an individual of US, to me it is clear that making US drown in debt is bad for USD price against, well, everything. For the longest time, US had been the place to park your cash due to stability alone ( and the fact that dollar was worth something ). That stability is currently not assured. That said, any analysis on the matter I heard was oddly optimistic ( and I will admit that I don't get the optimism ). Not sure if it is the lack of alternatives or something else, but it does not seem US treasury has problems selling bonds.

paulpauper 4y ago

It is not as bad as the headline would suggest. The economy presumably is growing at the same time that the $19 trillion debt is being added. US GDP has grown a lot since 2012. Debt to GDP the highest since ww2, which seems bad, but the economy still boomed after ww2 anyway, so it's not saying much.

yCombLinks 4y ago
Grown on paper only. I don't think most people's lives are any better than 2012. Stock and house prices have skyrocketed is all.

ALittleLight 4y ago

My intuition is that it's obviously right that borrowing money could be a neutral or positive thing - but that depends on the borrowed money being spent in ways that will have a positive return. If you borrow money, when borrowing is cheap, to buy a car so you can go to work, smart! If you borrow money to spend it on booze and concert tickets - not smart! I think the issue is that one side is saying "Borrowing is terrible!" And the other side is saying "No, borrowing cheap money is somewhere between fine and great!" And the real answer is "Borrowing can be smart if you use it well, but we are using it poorly." If the US was borrowing money to build and renovate roads, bridges, ports, update the electrical grid, build new nuclear power plants, engage in basic science research and similar projects likely to yield good return on investment - that was be amazing financial planning. My limited understanding of what the government actually spends its money on - wasteful healthcare, social security, the military, and intelligence agencies - is that the money is actually just being squandered.

2OEH8eoCRo0 4y ago

As long as they can continue making interest payments on the debt then what's the problem? It's all relative.

lotsofpulp 4y ago
Which the feds can always do since they can issue money. The relevant question is can the US continue producing goods and services that are desirable on a global scale, one of which is a trustworthy society where you can mostly depend on the judicial system keeping things in order, for better or for worse.
- Ekaros 4y ago
  And more importantly will others keep accepting USD. Or will they expect to be settled in something else be it other currency or some commodity. If others start to want something else than USD things can go sideways.
scottiebarnes 4y ago
The problem is the fundamentals. The US will "never default on its debt" because it issues debt in its own currency, which it can control the creation of necessary to service that debt (money printer go brrrr). So nobody is ever concerned about debt; you just say screw it let someone else worry about it, usually future generations. The value has to come from somewhere, and in this case its from the debasement of the dollar.
- notch898a 4y ago
  They defaulted when they stopped honoring gold backing, which was the debt against the legal tender.

legitster 4y ago

A budget surplus would be pretty irrelevant target in the grand scheme of things. There are foreign policy implications (other countries waiting for us to pay them back is a good thing). But also, just like corporate finance, if the government can get good rates on debt, it almost always makes sense to just take the money and make the payments. So some small and sustainable amount of budget deficit is probably a good thing. But we are clearly on the wrong side of that equation.

jononomo 4y ago

Go with the camp that doesn't immediately change their tune when a Republican is elected president.

SilverBirch 4y ago

There's a lot of scary numbers, but here's a graph of the US budget deficit as a percentage of GDP[1] according to the CBO. Yes, the US has a deficit most years, and yes both the financial crisis and COVID lead to very large dficits. But between 1992 and 2000 a deficit of 4.5% became a surplus of 2.3%. So it's well within the possible to decrease the deficit by 7% of GDP over a relatively short period of time. If we started that process today we'd be back to the long term average deficit within 8 years - and we're starting from a crazy base because of all the hangovers of COVID. So whilst it's obviously a policy choice whether that happens, it's definitely well within the possible. [1]: https://www.cbo.gov/publication/58268 https://www.cbo.gov/publication/58268

MuffinFlavored 4y ago
> If we started that process today But we're not, right? Not only are we not doing that, we're nowhere close to that? We're still on tracking to collect roughly the same in taxation (leaving loopholes open for corporations on purpose) and spending more than ever (growing every year).
- ashwagary 4y ago
  Even worse, $19T added to the debt is an extreme lowball by some expectations. Many estimates put the US national debt closer to $90T by the end of the decade. The country is right on the edge of walking into one of the most expensive wars in its history as well as a few delayed economic disasters that would kick the money printer into much higher gear. Trump adding $10T+ in a relatovely uneventful 4 years even before the massive inflation spike hit should give you an idea how quickly diminishing returns on QE can escalate spending.