3 ms·

I'm always bemused by debt ceiling debates. If colossal spending unsustainable by any real resource measure is a moral imperative, then a hyperinflation correct

I'm always bemused by debt ceiling debates. If colossal spending unsustainable by any real resource measure is a moral imperative, then a hyperinflation correction after a scant few generations is also a moral imperative. The universe will correct our hubris with a necessary punishment.

makestuff 3y ago
I saw this quote by buffet where he was talking about the top 10 stocks by market cap 40 years ago. I think 4/10 were Japanese companies. Japan has a very high debt to GDP ratio. As of 2023 none of those companies are in the top 10 anymore. The highest ranked Japanese company is in the 50s (Toyota). I wonder if the US will be in a similar position in 30 years or if the debt to GDP ratio and the USAs spending. I see people say all of the time it doesn't matter because "it's not like household debt" but I fail to see how it doesn't catch up to the US eventually. Maybe correlation != causation here though and the decline of Japan's dominance in the stock market has nothing to do with their debt to GDP ratio.
- netbioserror 3y ago
  When the state's debt growth is unbounded with the feature (not bug) of money printing and suppressed interest rates, eventually that printing and spending outstrips the real economy's ability to extract and utilize resources to generate value; people are unable to produce faster than the currency can inflate. Thus, you then have a net negative economy, where the state's deficits are consuming all newly generated wealth PLUS the wealth generated by previous generations. An inflection point. A country begins to quite literally eat itself alive.
  - brookst 3y ago
    Good platonic philosophy, but it breaks for anyone aware of productivity increases.
    - netbioserror 3y ago
      Yearly productivity increases are finite. States have demonstrated a remarkable ability to out-debase and out-spend productivity increases, well across history, geography, and cultures.
  - mindslight 3y ago
    > where the state's deficits are consuming all newly generated wealth PLUS the wealth generated by previous generations Why focus solely on the state's deficits? To me, this is exactly the situation we currently have with housing - asset inflation for the past few decades has outstripped real growth, and now housing debt/rent is consuming an ever-growing amount of newly generated wealth. (The debt/rent payments go to someone else, but the payments on sovereign debt do so as well. The point is they leave the system under discussion)
    - netbioserror 3y ago
      True, but a big part of this is suppressed interest rates, which are a downstream effect of suppressed bond rates. These two effects hold hands: State largess fuels private sector largess.
- pjc50 3y ago
  How is the stock of a private company linked to the debt of its government? There's no working shown here.
  - makestuff 3y ago
    Just a hypothesis based on research that has shown around 100b of covid relief money went into the stock market. Like I said originally, maybe correlation != causation. So there is a link to more money printed by the fed inflating asset prices. If that printing stops due to debt to gdp being too high then that could cause asset prices to stagnate. https://hbswk.hbs.edu/item/did-pandemic-stimulus-funds-spur-the-rise-of-meme-stocks#:~:text=About%20%24100%20billion%20of%20the,NYU's%20Stern%20School%20of%20Business https://hbswk.hbs.edu/item/did-pandemic-stimulus-funds-spur-....
JumpCrisscross 3y ago
> then a hyperinflation correction after a scant few generations is also a moral imperative This isn't what happens when a reserve unexpectedly currency collapses. The ensuing capital market collapse causes bank failures and depression. To be clear, we're nowhere close to that. The United States isn't going bankrupt, it's heading towards technical default. Nobody questions its ability to pay, just its willingness to do so on time.
- netbioserror 3y ago
  >To be clear, we're nowhere close to that... Nobody questions its ability to pay This is not a statement that will age well.
  - JumpCrisscross 3y ago
    > This is not a statement that will age well I'll stand by it. Ability to pay asks if the U.S. government has the ability to tax its population or incur inflation to meet its domestic-currency denominated debts. Anyone who thinks that's a plausible concern over the next 10 years is nuts. Anyone who is thinking about that as a risk factor over the next 25 years is already extremely comfortable.

makestuff 3y ago

I saw this quote by buffet where he was talking about the top 10 stocks by market cap 40 years ago. I think 4/10 were Japanese companies. Japan has a very high debt to GDP ratio. As of 2023 none of those companies are in the top 10 anymore. The highest ranked Japanese company is in the 50s (Toyota). I wonder if the US will be in a similar position in 30 years or if the debt to GDP ratio and the USAs spending. I see people say all of the time it doesn't matter because "it's not like household debt" but I fail to see how it doesn't catch up to the US eventually. Maybe correlation != causation here though and the decline of Japan's dominance in the stock market has nothing to do with their debt to GDP ratio.

netbioserror 3y ago
When the state's debt growth is unbounded with the feature (not bug) of money printing and suppressed interest rates, eventually that printing and spending outstrips the real economy's ability to extract and utilize resources to generate value; people are unable to produce faster than the currency can inflate. Thus, you then have a net negative economy, where the state's deficits are consuming all newly generated wealth PLUS the wealth generated by previous generations. An inflection point. A country begins to quite literally eat itself alive.
- brookst 3y ago
  Good platonic philosophy, but it breaks for anyone aware of productivity increases.
  - netbioserror 3y ago
    Yearly productivity increases are finite. States have demonstrated a remarkable ability to out-debase and out-spend productivity increases, well across history, geography, and cultures.
- mindslight 3y ago
  > where the state's deficits are consuming all newly generated wealth PLUS the wealth generated by previous generations Why focus solely on the state's deficits? To me, this is exactly the situation we currently have with housing - asset inflation for the past few decades has outstripped real growth, and now housing debt/rent is consuming an ever-growing amount of newly generated wealth. (The debt/rent payments go to someone else, but the payments on sovereign debt do so as well. The point is they leave the system under discussion)
  - netbioserror 3y ago
    True, but a big part of this is suppressed interest rates, which are a downstream effect of suppressed bond rates. These two effects hold hands: State largess fuels private sector largess.
pjc50 3y ago
How is the stock of a private company linked to the debt of its government? There's no working shown here.
- makestuff 3y ago
  Just a hypothesis based on research that has shown around 100b of covid relief money went into the stock market. Like I said originally, maybe correlation != causation. So there is a link to more money printed by the fed inflating asset prices. If that printing stops due to debt to gdp being too high then that could cause asset prices to stagnate. https://hbswk.hbs.edu/item/did-pandemic-stimulus-funds-spur-the-rise-of-meme-stocks#:~:text=About%20%24100%20billion%20of%20the,NYU's%20Stern%20School%20of%20Business https://hbswk.hbs.edu/item/did-pandemic-stimulus-funds-spur-....

JumpCrisscross 3y ago

> then a hyperinflation correction after a scant few generations is also a moral imperative This isn't what happens when a reserve unexpectedly currency collapses. The ensuing capital market collapse causes bank failures and depression. To be clear, we're nowhere close to that. The United States isn't going bankrupt, it's heading towards technical default. Nobody questions its ability to pay, just its willingness to do so on time.

netbioserror 3y ago
>To be clear, we're nowhere close to that... Nobody questions its ability to pay This is not a statement that will age well.
- JumpCrisscross 3y ago
  > This is not a statement that will age well I'll stand by it. Ability to pay asks if the U.S. government has the ability to tax its population or incur inflation to meet its domestic-currency denominated debts. Anyone who thinks that's a plausible concern over the next 10 years is nuts. Anyone who is thinking about that as a risk factor over the next 25 years is already extremely comfortable.