6 ms·

Moody's lowers outlook on US debt to 'negative'

mark_l_watson 3y ago
The US financial system is interesting. Government and consumer debt is so very high, yet because of our military we so far have been able to preserve the dollar as the reserve currency. I have no idea when this house of cards will fall, but I would bet we still have many years of financial privilege. I think it is ironic though that the more we throw our weight around the more other countries are motivated to use the US dollar but also want alternatives. I am really curious how this will all play out.
- Supermancho 3y ago
  Rome managed to keep it together for centuries. Change 1 thing (like hiding it) and release a media blitz that it will all turn around. There are plenty of tricks to play and the US has had the advantage of seeing what hasn't worked in other countries.
- sertbdfgbnfgsd 3y ago
  > ( ... ) because of our military we so far have been able to preserve the dollar as the reserve currency. Would you care to spell out the connection between our military and preserving the dollar as reserve currency? It's not like foreign governments decide not to pay and we threaten them with our military - in fact, we're the borrowers and we're not threatening not to pay. So I don't see the connection.
  - abrichr 3y ago
    e.g. https://thenewamerican.com/us/economy/markets/gadhafi-s-gold-money-plan-would-have-devastated-dollar/ https://thenewamerican.com/us/economy/markets/gadhafi-s-gold...
    - apwell23 3y ago
      Gahdafi was suicidal then ? Doesn't make any sense.
  - darkclouds 3y ago
    [dead]
  - hellojesus 3y ago
    > Would you care to spell out the connection between our military and preserving the dollar as reserve currency? I don't know much about it but quick introspection leads me to the conclusion that it is partially because the US military does a lot to ensure free trade continues smoothly around the world. Without military might, any transport ship would be at risk of piracy. But there are other factors. Most notably, the US dollar was once pegged to gold such that you could redeem a fixed amount of gold for a dollar. The US used this to sell the world on exchanging in dollars instead of gold because it was just as stable while being more efficient to exchange. Once the world switched to it, primarily to trade oil, FDR (decidely the worst president of all time) then pulled the rug out from everyone and decoupled the US dollar from gold. But everyone already traded in dollars and basically gave up their gold since they had the dollar guarantee, so it was not so easy going back. The US is living way above its means. Most counties have to export goods in exchange for imports. The US only has to export printed dollars for tangible goods, and they can do so while ignoring that those printed dollars decrease the value of all existing dollars precisely because there is still demand for dollars driven by petroleum trade (hence the common term, petrodollar). The adjacent sibling's comment is correct. Gadafi tried to take Libya out of the dollar market and into a gold based market, seeking to trade internationally with gold. The US knows that if this happens, the country will implode. The US has no goods to export and doesn't make hardly anything. If other countries switch to the gold standard, the US will almost instantly run out of goods, and will go straight into hyperinflation and die. I'm of the firm belief that the US will start WW3 if that ever happens so that they can throw up their hands when the dust settles and "reset" global debt if BRICS manages to achieve enough momentum or if any other countries try to start a gold trade standard. The US is way beyond default. Our politicans say that the US always pays it's debts, but then they openly don't! For example, our politicans say we need to keep increasing the debt limit because otherwise we would default on our debt obligations. That doesn't make any sense! By increasing the debt limit, we are definitionally defaulting. We are choosing not to pay. We could pay, but then how could we give away more unconstitutional welfare? Show me one credit card company that will let you borrow more to pay them back. Tell them it's fine, you'll pay last month's bill so long as they let you borrow another $5k. Peter Shiff's most recent podcast did a great job of describing how our past politicans described how we would fund social security in the future: we would never not pay, we would instead print and deliver, even if the money was worthless.
  - mark_l_watson 3y ago
    One example: in 2000-2001, Russia, Iran, and Venezuela all publicly stated that they would also sell oil in non-US currency (in addition to, of course, selling in dollars). Instantly all three countries were labeled “axis of evil” status, and our government became very threatening to all three countries (most obviously Venezuela where we did what we could to destabilize their government and parked our navy right off their shore). I used to think that it was worth our tax payers’ money to enforce US hegemony, but now I don’t think it makes sense anymore for the benefit of the US tax payer. It does benefit the pro-war industries, and if you work in the “defense” industry then I don’t blame you at all if you support our current system. Anyway, my perspective is that times change, and we should now push back against the continuous war lobby in Washington, and come up for a new plan going into the future that optimizes for prosperity and security. I believe we achieve security by have the best trained and supplied military on the planet, but keep them at home unless Congress agrees to formally declare war, and going to war has some form of public consensus. I want to go back to being a representative democracy.
    - seanmcdirmid 3y ago
      Pretty sure the axis of evil back then was declared as iran, North Korea, and Iraq. See https://www.armscontrol.org/act/2002-03/press-releases/bush-labels-north-korea-iran-iraq-axis-evil#:~:text=Bush%20characterized%20North%20Korea%2C%20Iran,State%20of%20the%20Union%20address https://www.armscontrol.org/act/2002-03/press-releases/bush-.... Russia was just beginning to be run by PutIn, but he wasn’t seen as antagonist to the USA yet. Ortega didn’t take power in Venezuela until 2007.
      - jjjjmoney 3y ago
        I think the OC was speaking more figuratively. Another more recent example might be the US throwing its weight around in the South China Sea - thus trying to protect it interests (and the dollar).
        seanmcdirmid 3y ago
        I’m pretty sure the only reason the USA is in the SCS at all is because of the amount of weight being thrown around by the PRC (to the detriment of USA allies Vietnam and Philippines).
- sanp 3y ago
  The US is by far the largest consumer market. That is the real power we hold.
  - AnimalMuppet 3y ago
    The US is the deepest investment market. That's the bigger power.
  - ptsneves 3y ago
    Damn right. Japan sank in the early 90s when the US imposed duties on their goods. Cue neutering their industrial power. I expect the same to happen to China and I believe we are already seeing that happening. If the Americans say they won’t buy then your economy will die. Indeed, the largest consumer market is the real power.
    - mark_l_watson 3y ago
      You bring up a good point. From my perspective, I am amazed that Japan went along with the Plaza Accords (worth researching and reading about, intersecting stuff!)
      - AnimalMuppet 3y ago
        Exports were essential to their economy. The alternative to the Plaza Accords was therefore worse.
    - bawana 3y ago
      sure only 1/3 of the world's transactions happen in yuan. 2/3 in dollars. but an embargo on chinese (and taiwanese goods) is not going to sink them. They have the largest world population and along with the BRICs could freeze out the US. Japan was a drop in the bucket compared to the BRICs
      - hellojesus 3y ago
        Agreed. Such an action would most likely hurt the US significantly, as where else would we get our goods? Tariffs were added to imports during the start of the great depression to try and make American goods more attractive (stamp out competition), and it is one of the significant reasons the depression went on so long. How did Trump's tarrifs against China do? https://www.forbes.com/sites/stuartanderson/2021/05/20/trumps-tariffs-were-much-more-damaging-than-thought/ https://www.forbes.com/sites/stuartanderson/2021/05/20/trump... https://taxfoundation.org/research/all/federal/tariffs-trump-trade-war/ https://taxfoundation.org/research/all/federal/tariffs-trump... > They have the largest world population and along with the BRICs could freeze out the US. This is a very real possibility and what I believe is the most likely catalyst for ww3.
- pyuser583 3y ago
  The large government debt is a cause and effect of the dollar being the reserve currency. Other countries want American debt to peg their own currencies to.
- jjeaff 3y ago
  Our military is not the primary driver of the US dollar being the world reserve currency. It is our stability and predictability. A strong military helps in maintaining those things. But our court system and political system following our laws and executing them faithfully is a very important part of that stability. Which is one of the reasons that our recent less-than-peaceful transfer of presidential power and current serious accusations of a stolen election are so very dangerous and damaging to the US on the world stage.
  - givemeethekeys 3y ago
    For what it's worth, the election-stealing accusations started at least as early as 2000 when Gore lost to GWB. The current state of affairs is just a escalation beyond the status quo. Who knows, the next election might be another step above what has already happened.
    - jjeaff 3y ago
      Nah, I don't think that is fair. Gore conceded the election promptly once all his legal options were exhausted. He said in his speech that although he may not agree with the decision by the courts, he respects the constitutional process and accepts their decision. (even though quite a bit of research has indicated that Gore likely did win Florida) Hillary conceded late that very night of her election. (Even though there was Russian interference in the election and a Republican head of the FBI spoke out against policy that they were reopening the emails investigation.) Trump never conceded and continues to openly state that the election was totally rigged and stolen and illegitimate. There is no comparison. Everyone has the right to claim it wasn't fair or that the other side cheated. But when the courts have decided, you accept the decision and you concede and you say you support the candidate that beat you and you wish for their success.
      - givemeethekeys 3y ago
        I agree, that Gore did the right thing. But talking about how Bush stole the election didn't go out of style until Bush left the White House. Then came Obama vs Romney. Obama won by a landslide, so people who opposed him said, "not my president". When Trump won, his opposers did the same. People acted like foreign interference in elections was something new. I'm not comparing as mucha as pointing out the logical escalation in rhetoric. How people communicate and act sets a precedent for future communications and action. It would be good if the next election was as clean as Bush vs Clinton.
- prepend 3y ago
  It’s more like there’s not an alternative. Only an insane country would use China as their reserve country. And Euros have their own problems. So it’s kind of like countries can use dollars or nothing. I remember taking economics classes in the 90s and the professor said the same think you did. About how not sure how much longer the US will be able to have such a privileged position. But still 25 years later we’re in the same boat.
  - seanmcdirmid 3y ago
    Pretty sure China won’t let anyone use its currency for reserve building, given that it isn’t fully convertible.
- 3seashells 3y ago
  It's a curse of resources situation, we're the government ignores the actual economy for a exportproduct(empire security) that can be produced in a relatively small parallel economic world. Quiet similar to Saudi Arabia..
awithrow 3y ago
This has been posted several times already https://news.ycombinator.com/item?id=38228033 https://news.ycombinator.com/item?id=38228033 https://news.ycombinator.com/item?id=38225768 https://news.ycombinator.com/item?id=38225768 https://news.ycombinator.com/item?id=38227582 https://news.ycombinator.com/item?id=38227582 https://news.ycombinator.com/item?id=38226862 https://news.ycombinator.com/item?id=38226862 https://news.ycombinator.com/item?id=38225443 https://news.ycombinator.com/item?id=38225443 https://news.ycombinator.com/item?id=38232269 https://news.ycombinator.com/item?id=38232269
- NewJazz 3y ago
  None of them were highly upvoted or commented, though.
- ChrisArchitect 3y ago
  [dupe]
deleted 3y ago
[deleted]
marcusverus 3y ago
This seems long overdue. The US owes ~$260,000 per taxpayer and is still regularly running trillion-dollar deficits. Our elites care more about retaining power than about solving this problem, as evidenced by the fact that we have a spendy party who refuses to raise taxes on the middle class and a (self-described) thrifty party who refuses to make meaningful cuts to spending. There is zero chance that this debt gets paid off without massive inflation. Zero.
- thfuran 3y ago
  There's zero chance that it gets paid off period. Why bother to zero out the debt?
  - marcusverus 3y ago
    Why have a long-term debt target other than zero? Debt is expensive. We'll spend 7 Trillion dollars servicing this debt over the next decade. The only argument in favor of this is that the debt spending was an "investment" which is paying off, but it's hard to believe that's true about any of this spending, with the only exception being the Keynesian stimulus spending. But even Keynes thought the stimulus debt should be paid off in due course.
- Eisenstein 3y ago
  > There is zero chance that this debt gets paid off without massive inflation. Zero. I mean, yeah. It means either means that the government has done some shenanigans to get it there, devaluing the money supply, or our credit is so worthless that no one will even buy government bonds or do any work without up front payment. There is a difference between having zero debt (which is not necessary nor a good idea) and balancing the budget while having a surplus (more money in than going out), which happened under Clinton and was squandered by Bush Jr. It is possible to get there again with the right economy and a President and Congress that isn't starting endless wars or passing more tax cuts or dealing with a bank caused or a pandemic caused financial crisis.
  - hellojesus 3y ago
bawana 3y ago
why isnt the swiss franc the reserve currency?
sdwr 3y ago
https://archive.is/cV0S9 https://archive.is/cV0S9

The US financial system is interesting. Government and consumer debt is so very high, yet because of our military we so far have been able to preserve the dollar as the reserve currency. I have no idea when this house of cards will fall, but I would bet we still have many years of financial privilege. I think it is ironic though that the more we throw our weight around the more other countries are motivated to use the US dollar but also want alternatives. I am really curious how this will all play out.

Supermancho 3y ago
Rome managed to keep it together for centuries. Change 1 thing (like hiding it) and release a media blitz that it will all turn around. There are plenty of tricks to play and the US has had the advantage of seeing what hasn't worked in other countries.
sertbdfgbnfgsd 3y ago
> ( ... ) because of our military we so far have been able to preserve the dollar as the reserve currency. Would you care to spell out the connection between our military and preserving the dollar as reserve currency? It's not like foreign governments decide not to pay and we threaten them with our military - in fact, we're the borrowers and we're not threatening not to pay. So I don't see the connection.
- abrichr 3y ago
  e.g. https://thenewamerican.com/us/economy/markets/gadhafi-s-gold-money-plan-would-have-devastated-dollar/ https://thenewamerican.com/us/economy/markets/gadhafi-s-gold...
  - apwell23 3y ago
    Gahdafi was suicidal then ? Doesn't make any sense.
- darkclouds 3y ago
  [dead]
- hellojesus 3y ago
  > Would you care to spell out the connection between our military and preserving the dollar as reserve currency? I don't know much about it but quick introspection leads me to the conclusion that it is partially because the US military does a lot to ensure free trade continues smoothly around the world. Without military might, any transport ship would be at risk of piracy. But there are other factors. Most notably, the US dollar was once pegged to gold such that you could redeem a fixed amount of gold for a dollar. The US used this to sell the world on exchanging in dollars instead of gold because it was just as stable while being more efficient to exchange. Once the world switched to it, primarily to trade oil, FDR (decidely the worst president of all time) then pulled the rug out from everyone and decoupled the US dollar from gold. But everyone already traded in dollars and basically gave up their gold since they had the dollar guarantee, so it was not so easy going back. The US is living way above its means. Most counties have to export goods in exchange for imports. The US only has to export printed dollars for tangible goods, and they can do so while ignoring that those printed dollars decrease the value of all existing dollars precisely because there is still demand for dollars driven by petroleum trade (hence the common term, petrodollar). The adjacent sibling's comment is correct. Gadafi tried to take Libya out of the dollar market and into a gold based market, seeking to trade internationally with gold. The US knows that if this happens, the country will implode. The US has no goods to export and doesn't make hardly anything. If other countries switch to the gold standard, the US will almost instantly run out of goods, and will go straight into hyperinflation and die. I'm of the firm belief that the US will start WW3 if that ever happens so that they can throw up their hands when the dust settles and "reset" global debt if BRICS manages to achieve enough momentum or if any other countries try to start a gold trade standard. The US is way beyond default. Our politicans say that the US always pays it's debts, but then they openly don't! For example, our politicans say we need to keep increasing the debt limit because otherwise we would default on our debt obligations. That doesn't make any sense! By increasing the debt limit, we are definitionally defaulting. We are choosing not to pay. We could pay, but then how could we give away more unconstitutional welfare? Show me one credit card company that will let you borrow more to pay them back. Tell them it's fine, you'll pay last month's bill so long as they let you borrow another $5k. Peter Shiff's most recent podcast did a great job of describing how our past politicans described how we would fund social security in the future: we would never not pay, we would instead print and deliver, even if the money was worthless.
- mark_l_watson 3y ago
  One example: in 2000-2001, Russia, Iran, and Venezuela all publicly stated that they would also sell oil in non-US currency (in addition to, of course, selling in dollars). Instantly all three countries were labeled “axis of evil” status, and our government became very threatening to all three countries (most obviously Venezuela where we did what we could to destabilize their government and parked our navy right off their shore). I used to think that it was worth our tax payers’ money to enforce US hegemony, but now I don’t think it makes sense anymore for the benefit of the US tax payer. It does benefit the pro-war industries, and if you work in the “defense” industry then I don’t blame you at all if you support our current system. Anyway, my perspective is that times change, and we should now push back against the continuous war lobby in Washington, and come up for a new plan going into the future that optimizes for prosperity and security. I believe we achieve security by have the best trained and supplied military on the planet, but keep them at home unless Congress agrees to formally declare war, and going to war has some form of public consensus. I want to go back to being a representative democracy.
  - seanmcdirmid 3y ago
    Pretty sure the axis of evil back then was declared as iran, North Korea, and Iraq. See https://www.armscontrol.org/act/2002-03/press-releases/bush-labels-north-korea-iran-iraq-axis-evil#:~:text=Bush%20characterized%20North%20Korea%2C%20Iran,State%20of%20the%20Union%20address https://www.armscontrol.org/act/2002-03/press-releases/bush-.... Russia was just beginning to be run by PutIn, but he wasn’t seen as antagonist to the USA yet. Ortega didn’t take power in Venezuela until 2007.
    - jjjjmoney 3y ago
      I think the OC was speaking more figuratively. Another more recent example might be the US throwing its weight around in the South China Sea - thus trying to protect it interests (and the dollar).
      - seanmcdirmid 3y ago
        I’m pretty sure the only reason the USA is in the SCS at all is because of the amount of weight being thrown around by the PRC (to the detriment of USA allies Vietnam and Philippines).
sanp 3y ago
The US is by far the largest consumer market. That is the real power we hold.
- AnimalMuppet 3y ago
  The US is the deepest investment market. That's the bigger power.
- ptsneves 3y ago
  Damn right. Japan sank in the early 90s when the US imposed duties on their goods. Cue neutering their industrial power. I expect the same to happen to China and I believe we are already seeing that happening. If the Americans say they won’t buy then your economy will die. Indeed, the largest consumer market is the real power.
  - mark_l_watson 3y ago
    You bring up a good point. From my perspective, I am amazed that Japan went along with the Plaza Accords (worth researching and reading about, intersecting stuff!)
    - AnimalMuppet 3y ago
      Exports were essential to their economy. The alternative to the Plaza Accords was therefore worse.
  - bawana 3y ago
    sure only 1/3 of the world's transactions happen in yuan. 2/3 in dollars. but an embargo on chinese (and taiwanese goods) is not going to sink them. They have the largest world population and along with the BRICs could freeze out the US. Japan was a drop in the bucket compared to the BRICs
    - hellojesus 3y ago
      Agreed. Such an action would most likely hurt the US significantly, as where else would we get our goods? Tariffs were added to imports during the start of the great depression to try and make American goods more attractive (stamp out competition), and it is one of the significant reasons the depression went on so long. How did Trump's tarrifs against China do? https://www.forbes.com/sites/stuartanderson/2021/05/20/trumps-tariffs-were-much-more-damaging-than-thought/ https://www.forbes.com/sites/stuartanderson/2021/05/20/trump... https://taxfoundation.org/research/all/federal/tariffs-trump-trade-war/ https://taxfoundation.org/research/all/federal/tariffs-trump... > They have the largest world population and along with the BRICs could freeze out the US. This is a very real possibility and what I believe is the most likely catalyst for ww3.
pyuser583 3y ago
The large government debt is a cause and effect of the dollar being the reserve currency. Other countries want American debt to peg their own currencies to.
jjeaff 3y ago
Our military is not the primary driver of the US dollar being the world reserve currency. It is our stability and predictability. A strong military helps in maintaining those things. But our court system and political system following our laws and executing them faithfully is a very important part of that stability. Which is one of the reasons that our recent less-than-peaceful transfer of presidential power and current serious accusations of a stolen election are so very dangerous and damaging to the US on the world stage.
- givemeethekeys 3y ago
  For what it's worth, the election-stealing accusations started at least as early as 2000 when Gore lost to GWB. The current state of affairs is just a escalation beyond the status quo. Who knows, the next election might be another step above what has already happened.
  - jjeaff 3y ago
    Nah, I don't think that is fair. Gore conceded the election promptly once all his legal options were exhausted. He said in his speech that although he may not agree with the decision by the courts, he respects the constitutional process and accepts their decision. (even though quite a bit of research has indicated that Gore likely did win Florida) Hillary conceded late that very night of her election. (Even though there was Russian interference in the election and a Republican head of the FBI spoke out against policy that they were reopening the emails investigation.) Trump never conceded and continues to openly state that the election was totally rigged and stolen and illegitimate. There is no comparison. Everyone has the right to claim it wasn't fair or that the other side cheated. But when the courts have decided, you accept the decision and you concede and you say you support the candidate that beat you and you wish for their success.
    - givemeethekeys 3y ago
      I agree, that Gore did the right thing. But talking about how Bush stole the election didn't go out of style until Bush left the White House. Then came Obama vs Romney. Obama won by a landslide, so people who opposed him said, "not my president". When Trump won, his opposers did the same. People acted like foreign interference in elections was something new. I'm not comparing as mucha as pointing out the logical escalation in rhetoric. How people communicate and act sets a precedent for future communications and action. It would be good if the next election was as clean as Bush vs Clinton.
prepend 3y ago
It’s more like there’s not an alternative. Only an insane country would use China as their reserve country. And Euros have their own problems. So it’s kind of like countries can use dollars or nothing. I remember taking economics classes in the 90s and the professor said the same think you did. About how not sure how much longer the US will be able to have such a privileged position. But still 25 years later we’re in the same boat.
- seanmcdirmid 3y ago
  Pretty sure China won’t let anyone use its currency for reserve building, given that it isn’t fully convertible.
3seashells 3y ago
It's a curse of resources situation, we're the government ignores the actual economy for a exportproduct(empire security) that can be produced in a relatively small parallel economic world. Quiet similar to Saudi Arabia..

awithrow 3y ago

This has been posted several times already https://news.ycombinator.com/item?id=38228033 https://news.ycombinator.com/item?id=38228033 https://news.ycombinator.com/item?id=38225768 https://news.ycombinator.com/item?id=38225768 https://news.ycombinator.com/item?id=38227582 https://news.ycombinator.com/item?id=38227582 https://news.ycombinator.com/item?id=38226862 https://news.ycombinator.com/item?id=38226862 https://news.ycombinator.com/item?id=38225443 https://news.ycombinator.com/item?id=38225443 https://news.ycombinator.com/item?id=38232269 https://news.ycombinator.com/item?id=38232269

NewJazz 3y ago
None of them were highly upvoted or commented, though.
ChrisArchitect 3y ago
[dupe]

deleted 3y ago

[deleted]

marcusverus 3y ago

This seems long overdue. The US owes ~$260,000 per taxpayer and is still regularly running trillion-dollar deficits. Our elites care more about retaining power than about solving this problem, as evidenced by the fact that we have a spendy party who refuses to raise taxes on the middle class and a (self-described) thrifty party who refuses to make meaningful cuts to spending. There is zero chance that this debt gets paid off without massive inflation. Zero.

thfuran 3y ago
There's zero chance that it gets paid off period. Why bother to zero out the debt?
- marcusverus 3y ago
  Why have a long-term debt target other than zero? Debt is expensive. We'll spend 7 Trillion dollars servicing this debt over the next decade. The only argument in favor of this is that the debt spending was an "investment" which is paying off, but it's hard to believe that's true about any of this spending, with the only exception being the Keynesian stimulus spending. But even Keynes thought the stimulus debt should be paid off in due course.
Eisenstein 3y ago
> There is zero chance that this debt gets paid off without massive inflation. Zero. I mean, yeah. It means either means that the government has done some shenanigans to get it there, devaluing the money supply, or our credit is so worthless that no one will even buy government bonds or do any work without up front payment. There is a difference between having zero debt (which is not necessary nor a good idea) and balancing the budget while having a surplus (more money in than going out), which happened under Clinton and was squandered by Bush Jr. It is possible to get there again with the right economy and a President and Congress that isn't starting endless wars or passing more tax cuts or dealing with a bank caused or a pandemic caused financial crisis.
- hellojesus 3y ago

bawana 3y ago

why isnt the swiss franc the reserve currency?

sdwr 3y ago

https://archive.is/cV0S9 https://archive.is/cV0S9