3 ms·

It is not like paying credit card bills with a credit card. The US government' debt is not like personal debt. We need to, collectively, stop talking about it t

by tyre 3y ago

It is not like paying credit card bills with a credit card. The US government' debt is not like personal debt. We need to, collectively, stop talking about it that way.

thrawa8387336 3y ago
What is it like then?
- seanmcdirmid 3y ago
  Imagine mom and dad need to stash money away because they are going to retire in 20 years. So money can't be saved without being borrowed, and the USG acts as a safe borrower of last resort (because the world has lots of savings needs ATM). Now if the USG used that money productively, this wouldn't be a big deal, but if we just waste it on military ventures that are never going to payoff, we are going to have a problem when mom and dad need to actually retire. A lot of country's debts can be attributed to people getting old and needing to save for retirement, things will get bloody when those countries go off the demographic cliff (e.g. Japan, western Europe, China eventually, and of course the USA).
  - cool_dude85 3y ago
    Can you give a historical example of a country that this fiscal collapse due to the "demographic cliff" has happened to?
    - thrawa8387336 3y ago
      Weimar Republic count?
      - cool_dude85 3y ago
        I'm not up on my Weimar Republic demographics but it seems unlikely that a nation with too many old people went out and started WW2.
    - seanmcdirmid 3y ago
      We've never been this low in a graph before, at least in modern history: https://www.macrotrends.net/countries/USA/united-states/birth-rate https://www.macrotrends.net/countries/USA/united-states/birt... What happens when we hit 10 births per 1000 people? South Korea has it even worse: https://www.macrotrends.net/countries/KOR/south-korea/birth-rate https://www.macrotrends.net/countries/KOR/south-korea/birth-... They are bottoming at 6. You never know what happens until it does. Hopefully productivity increases along with redistribution away from just the capital that provides those increases will help, or perhaps we will get in a big war or pandemic and the problem will sort itself through excess deaths.
      - cool_dude85 3y ago
        Isn't there another option? Allowing a modest amount of immigration?
        seanmcdirmid 3y ago
        Maybe? I think immigration allows the USA not to be at the bottom anyways (as well as other immigrant friendly countries). But if all the other countries lean in on immigration as their way out, we won't be able to be so picky about what immigrants we take in (e.g. lesser skilled vs. more highly skilled ones). That might cause some problems.
  - mr_toad 3y ago
    > So money can't be saved without being borrowed, and the USG acts as a safe borrower of last resort (because the world has lots of savings needs ATM). Money can be invested in assets other than savings accounts, e.g. the share market. Government borrowing pushes up interest rates attracting saving that might otherwise go into investments that generate returns. Government spending using debt isn’t like saving for retirement, it’s borrowing for retirement and leaving the debt to your kids.
    - seanmcdirmid 3y ago
      > Money can be invested in assets other than savings accounts, e.g. the share market. Yes, that's why we have stock market bubbles and housing bubbles. Our 401Ks are heavily invested in index funds, while the rest of our savings are usually invested heavily in real estate (which is one reason why our housing prices are rising so quickly!). Now imagine leaning in on those 10 times more heavily than we do today... > it’s borrowing for retirement and leaving the debt to your kids. The point is that there is a massive demand for savings now, that money would have to be lent out to someone no matter what, and dollars are safe because US treasuries can soak up billions instantly with some sort of interest rate that will be paid back. You can't just say "oh, we should stop borrowing that money" unless you have a better idea of where to it can go.
    - jfengel 3y ago
      Who leave it to their kids, who leave it to their kids. Individual humans retire. Corporations and governments don't. The latter can roll over debt indefinitely. There is never any reason to pay it off. The only limit is whether they can afford the interest, which is a function of how well they apply the spending to ensure income. It's very different from a household budget and comparisons easily mislead.
      - nradov 3y ago
        On a longer time scale, most corporations eventually go bankrupt. Most countries eventually undergo some kind of violent transition in which the new government repudiates old debts. This is a form of "retirement", but it's harder to predict those events than with individual human retirements.
helf 3y ago
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boringg 3y ago
It is and it isn't. You can't continue to fund the country on high levels of debt or continue to grow the economy and eventually pay off the debt by continuing to leverage the country. It's more like we aren't certain of the limits of debt/deficit for the US economy before we get back knock on effects whereas in personal finance your creditors will come calling much faster. There are other nuances of course but on a large macro scale it is similar.
- throw0101a 3y ago
  > You can't continue to fund the country on high levels of debt or continue to grow the economy and eventually pay off the debt by continuing to leverage the country. Sure you can. The UK has been doing it for four hundred years: they have in several instances been over 150% debt-to-GDP, and twice went over 200%: * https://en.wikipedia.org/wiki/United_Kingdom_national_debt#History https://en.wikipedia.org/wiki/United_Kingdom_national_debt#H... Given the UK has never (AFAICT) had a surplus, that means they've simply continued to roll over debt, dating back to the South Sea Bubble (1700s), Napoleonic Wars (early 1800s), Crimean War (late 1800s), WW1 (1900s), etc: * https://www.theguardian.com/business/blog/2014/oct/31/paying-the-price-of-war-britain-makes-good-on-historic-debts https://www.theguardian.com/business/blog/2014/oct/31/paying... (There current woes are of dumb decisions unrelated to fiscal issues, though the decisions are not helping the economy.) See also Japan, who no one is freaking out about: > As of March 2023, the Japanese public debt is estimated to be approximately 9.2 trillion US Dollars (1.30 quadrillion yen), or 263% of GDP,[1] and is the highest of any developed nation.[2][3][4][5] 43.3% of this debt is held by the Bank of Japan.[6] * https://en.wikipedia.org/wiki/National_debt_of_Japan https://en.wikipedia.org/wiki/National_debt_of_Japan * https://asia.nikkei.com/Spotlight/Asia-Insight/Japan-s-growing-debt-mountain-Crisis-what-crisis https://asia.nikkei.com/Spotlight/Asia-Insight/Japan-s-growi...
HideousKojima 3y ago
The only real difference is that the government has the option to print its way out of debt. Which simply has different devastating economic effects than defaulting, but the effects are still there.

by tyre 3y ago

It is not like paying credit card bills with a credit card. The US government' debt is not like personal debt. We need to, collectively, stop talking about it that way.

thrawa8387336 3y ago

What is it like then?

seanmcdirmid 3y ago
Imagine mom and dad need to stash money away because they are going to retire in 20 years. So money can't be saved without being borrowed, and the USG acts as a safe borrower of last resort (because the world has lots of savings needs ATM). Now if the USG used that money productively, this wouldn't be a big deal, but if we just waste it on military ventures that are never going to payoff, we are going to have a problem when mom and dad need to actually retire. A lot of country's debts can be attributed to people getting old and needing to save for retirement, things will get bloody when those countries go off the demographic cliff (e.g. Japan, western Europe, China eventually, and of course the USA).
- cool_dude85 3y ago
  Can you give a historical example of a country that this fiscal collapse due to the "demographic cliff" has happened to?
  - thrawa8387336 3y ago
    Weimar Republic count?
    - cool_dude85 3y ago
      I'm not up on my Weimar Republic demographics but it seems unlikely that a nation with too many old people went out and started WW2.
  - seanmcdirmid 3y ago
    We've never been this low in a graph before, at least in modern history: https://www.macrotrends.net/countries/USA/united-states/birth-rate https://www.macrotrends.net/countries/USA/united-states/birt... What happens when we hit 10 births per 1000 people? South Korea has it even worse: https://www.macrotrends.net/countries/KOR/south-korea/birth-rate https://www.macrotrends.net/countries/KOR/south-korea/birth-... They are bottoming at 6. You never know what happens until it does. Hopefully productivity increases along with redistribution away from just the capital that provides those increases will help, or perhaps we will get in a big war or pandemic and the problem will sort itself through excess deaths.
    - cool_dude85 3y ago
      Isn't there another option? Allowing a modest amount of immigration?
      - seanmcdirmid 3y ago
        Maybe? I think immigration allows the USA not to be at the bottom anyways (as well as other immigrant friendly countries). But if all the other countries lean in on immigration as their way out, we won't be able to be so picky about what immigrants we take in (e.g. lesser skilled vs. more highly skilled ones). That might cause some problems.
- mr_toad 3y ago
  > So money can't be saved without being borrowed, and the USG acts as a safe borrower of last resort (because the world has lots of savings needs ATM). Money can be invested in assets other than savings accounts, e.g. the share market. Government borrowing pushes up interest rates attracting saving that might otherwise go into investments that generate returns. Government spending using debt isn’t like saving for retirement, it’s borrowing for retirement and leaving the debt to your kids.
  - seanmcdirmid 3y ago
    > Money can be invested in assets other than savings accounts, e.g. the share market. Yes, that's why we have stock market bubbles and housing bubbles. Our 401Ks are heavily invested in index funds, while the rest of our savings are usually invested heavily in real estate (which is one reason why our housing prices are rising so quickly!). Now imagine leaning in on those 10 times more heavily than we do today... > it’s borrowing for retirement and leaving the debt to your kids. The point is that there is a massive demand for savings now, that money would have to be lent out to someone no matter what, and dollars are safe because US treasuries can soak up billions instantly with some sort of interest rate that will be paid back. You can't just say "oh, we should stop borrowing that money" unless you have a better idea of where to it can go.
  - jfengel 3y ago
    Who leave it to their kids, who leave it to their kids. Individual humans retire. Corporations and governments don't. The latter can roll over debt indefinitely. There is never any reason to pay it off. The only limit is whether they can afford the interest, which is a function of how well they apply the spending to ensure income. It's very different from a household budget and comparisons easily mislead.
    - nradov 3y ago
      On a longer time scale, most corporations eventually go bankrupt. Most countries eventually undergo some kind of violent transition in which the new government repudiates old debts. This is a form of "retirement", but it's harder to predict those events than with individual human retirements.

helf 3y ago

[dead]

boringg 3y ago

It is and it isn't. You can't continue to fund the country on high levels of debt or continue to grow the economy and eventually pay off the debt by continuing to leverage the country. It's more like we aren't certain of the limits of debt/deficit for the US economy before we get back knock on effects whereas in personal finance your creditors will come calling much faster. There are other nuances of course but on a large macro scale it is similar.

throw0101a 3y ago
> You can't continue to fund the country on high levels of debt or continue to grow the economy and eventually pay off the debt by continuing to leverage the country. Sure you can. The UK has been doing it for four hundred years: they have in several instances been over 150% debt-to-GDP, and twice went over 200%: * https://en.wikipedia.org/wiki/United_Kingdom_national_debt#History https://en.wikipedia.org/wiki/United_Kingdom_national_debt#H... Given the UK has never (AFAICT) had a surplus, that means they've simply continued to roll over debt, dating back to the South Sea Bubble (1700s), Napoleonic Wars (early 1800s), Crimean War (late 1800s), WW1 (1900s), etc: * https://www.theguardian.com/business/blog/2014/oct/31/paying-the-price-of-war-britain-makes-good-on-historic-debts https://www.theguardian.com/business/blog/2014/oct/31/paying... (There current woes are of dumb decisions unrelated to fiscal issues, though the decisions are not helping the economy.) See also Japan, who no one is freaking out about: > As of March 2023, the Japanese public debt is estimated to be approximately 9.2 trillion US Dollars (1.30 quadrillion yen), or 263% of GDP,[1] and is the highest of any developed nation.[2][3][4][5] 43.3% of this debt is held by the Bank of Japan.[6] * https://en.wikipedia.org/wiki/National_debt_of_Japan https://en.wikipedia.org/wiki/National_debt_of_Japan * https://asia.nikkei.com/Spotlight/Asia-Insight/Japan-s-growing-debt-mountain-Crisis-what-crisis https://asia.nikkei.com/Spotlight/Asia-Insight/Japan-s-growi...

HideousKojima 3y ago

The only real difference is that the government has the option to print its way out of debt. Which simply has different devastating economic effects than defaulting, but the effects are still there.