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Do you see the $35 trillion in debt as a problem? How do you think it's going to be resolved? When I see folks habitually complaining about how much the US spe

Do you see the $35 trillion in debt as a problem? How do you think it's going to be resolved? When I see folks habitually complaining about how much the US spend on their military, and then I look at the actual budget and see that they are actually spending more to service their debt than they do on the military, I wonder what the end game is.

kube-system 2y ago
> resolved My entire comment above was to argue that "resolving" the debt is nonsensical. The answer to when the debt needs to be paid off is: never. The government can issue more debt indefinitely. In fact, "paying off the debt" implies the government would stop selling treasuries, which is entirely more scary than the debt. > I wonder what the end game is. There is no end game, ideally, the US wants the US to continue to exist, and continue to fund the things that improve conditions for their citizens. Believe it or not, the single largest holder of US government debt is... the US government itself. And 77.1% of the entire debt is owed to domestic US entities. The US debt is mostly Americans voluntarily financing their own government. This situation isn't something to "resolve", it is entirely okay. Debt to GDP does need to be within some reasonable bounds, but as long as our economy can support the debt, there's no reason to get rid of it, and many reasons not to.
- deleted 2y ago
  [deleted]
- starspangled 2y ago
  > My entire comment above was to argue that "resolving" the debt is nonsensical. The answer to when the debt needs to be paid off is: never. The government can issue more debt indefinitely. Then why do governments place a large importance on minimizing deficit? This isn't a rhetorical question, I'm ignorant about economics and government mechanisms. > Debt to GDP does need to be within some reasonable bounds, but as long as our economy can support the debt, there's no reason to get rid of it, and many reasons not to. What is reasonable and why? What does it mean to support a debt, and why wouldn't that burden be a reason to get rid of it?
  - kube-system 2y ago
    If your country's debt-to-GDP gets too out of control, markets might doubt that you'll be able to pay on your obligations, and then you've got problems. The debt is made up of many tiny obligations (treasury bills, bonds, and notes) that get paid on a regular basis every day, and the US government has always paid every one of them. When these individual obligations are due, they need to be paid, and investors need to be very confident they will be. The point at which this becomes a problem is not a hard and fast rule, but it depends on a lot of situational factors that go even beyond the realm of math and into geopolitics.
    - starspangled 2y ago
      I don't think you really answered my questions, or at least I'm not smart enough to understand. What would out of control mean, and why? What are these problems? I struggle to understand what exactly it is that is entirely not a problem until this difficult to define point where it can become a problem, and what that problem is.
      - kube-system 2y ago
        The US is only able to borrow tens of trillions of dollars for very low interest rates is because investors, big and small, both in the US and around the world, see the US as essentially a risk-free way to store value. People (or investment organizations, or businesses, etc) with many millions or billions of dollars have to put it somewhere. Using vaults to store that much money is expensive to maintain and causes them to lose value to inflation and the cost it entails to run that operation. Basically, the default way to store a lot of money in an extremely safe way (in terms of it being there when you want it, and not losing tons of value) is to buy US treasuries. Financial markets consider them to be zero-risk -- the benchmark by which all other investments are compared. Now, if this were to change, and financial markets thought that buying US treasuries might not be a guarantee that they can get that money back later, a lot of things would be disrupted. In the immediate term, interest rates would likely increase significantly for everything, as many interest models base their rates on treasury interest rates, and treasury interest rates would skyrocket due to the now non-zero risk. That would in turn mean that the US's interest on their outstanding debt would skyrocket, further compounding the issue. Also, because so much of the world economy is based on the assumption that US treasuries are zero risk, this would upend investor confidence in many other financial markets globally that rely on those instruments for their function. Those who were forking over trillions to the US for safekeeping may look for other places to keep their money instead. This would be bad for the US governments ability to raise money to do the things it needs to do, in likely a significant way. And if a default does happen, creditors could seize assets, and depending on who is stuck holding the bag, war has happened in these situations before, although the UN currently disallows it. But at a minimum, the global economy would be hit very hard.
- ljosifov 2y ago
  You are entirely right. If the same number was called "private credit" I believe no one would bat an eyelid about it. Of all the non-issues to spend time on - this is the least worth anyone's time.
- gbacon 2y ago
  “We just owe it to ourselves” is a propaganda line. There must be more productive uses for those funds than paying interest. Being on the creditor side of compound interest is far better than the alternative.
  - kube-system 2y ago
    > “We just owe it to ourselves” is a propaganda line. There must be more productive uses for those funds than paying interest. There are! One of the most productive uses of buying your own treasuries is the ability to manipulate the entire economy as a whole. https://en.wikipedia.org/wiki/Quantitative_easing https://en.wikipedia.org/wiki/Quantitative_easing
  - ljosifov 2y ago
    The literal truth can hardly be a "propaganda line". More constructive criticisms are 1) private sector could have done better with the same finance (ultimately - resources); and 2) interest on that is paying basic income to people that already have money. I am sympathetic to both. So - the debt itself is a signal, a symptom. The solution is not to treat the symptom, but the causes. On 1) - you can say the state needs to do less. Just go down the list of things the state does, and propose those be reduced. From that PoV, the federal gov being "insurance company with and army" is basically correct. So to reduce gov spending, need to look at those two top of the list items. On 2) - that's easier imo. The IR rate is a decision, a vote, by a monopolist, controlled ultimately by the legislature. Just reduce the IR if that's an issue. Then fight inflation (if needed) with other means. People have forgotten that - but can relearn quickly.
georgeecollins 2y ago
If the $35t were a problem US treasury bills would have to have high interest rates. As it is, investors around the world are happy to hold them. Personally I think we should raise taxes, particularly close a lot of loopholes and raise corporate taxes as a first thing to do.
- pclmulqdq 2y ago
  Treasury bills do have high interest rates compared to their recent historical average. That rate is about 5%. You might then say that this is due to inflation, but that inflation almost certainly has something to do with lack of confidence in the dollar.

kube-system 2y ago

> resolved My entire comment above was to argue that "resolving" the debt is nonsensical. The answer to when the debt needs to be paid off is: never. The government can issue more debt indefinitely. In fact, "paying off the debt" implies the government would stop selling treasuries, which is entirely more scary than the debt. > I wonder what the end game is. There is no end game, ideally, the US wants the US to continue to exist, and continue to fund the things that improve conditions for their citizens. Believe it or not, the single largest holder of US government debt is... the US government itself. And 77.1% of the entire debt is owed to domestic US entities. The US debt is mostly Americans voluntarily financing their own government. This situation isn't something to "resolve", it is entirely okay. Debt to GDP does need to be within some reasonable bounds, but as long as our economy can support the debt, there's no reason to get rid of it, and many reasons not to.

deleted 2y ago
[deleted]
starspangled 2y ago
> My entire comment above was to argue that "resolving" the debt is nonsensical. The answer to when the debt needs to be paid off is: never. The government can issue more debt indefinitely. Then why do governments place a large importance on minimizing deficit? This isn't a rhetorical question, I'm ignorant about economics and government mechanisms. > Debt to GDP does need to be within some reasonable bounds, but as long as our economy can support the debt, there's no reason to get rid of it, and many reasons not to. What is reasonable and why? What does it mean to support a debt, and why wouldn't that burden be a reason to get rid of it?
- kube-system 2y ago
  If your country's debt-to-GDP gets too out of control, markets might doubt that you'll be able to pay on your obligations, and then you've got problems. The debt is made up of many tiny obligations (treasury bills, bonds, and notes) that get paid on a regular basis every day, and the US government has always paid every one of them. When these individual obligations are due, they need to be paid, and investors need to be very confident they will be. The point at which this becomes a problem is not a hard and fast rule, but it depends on a lot of situational factors that go even beyond the realm of math and into geopolitics.
  - starspangled 2y ago
    I don't think you really answered my questions, or at least I'm not smart enough to understand. What would out of control mean, and why? What are these problems? I struggle to understand what exactly it is that is entirely not a problem until this difficult to define point where it can become a problem, and what that problem is.
    - kube-system 2y ago
      The US is only able to borrow tens of trillions of dollars for very low interest rates is because investors, big and small, both in the US and around the world, see the US as essentially a risk-free way to store value. People (or investment organizations, or businesses, etc) with many millions or billions of dollars have to put it somewhere. Using vaults to store that much money is expensive to maintain and causes them to lose value to inflation and the cost it entails to run that operation. Basically, the default way to store a lot of money in an extremely safe way (in terms of it being there when you want it, and not losing tons of value) is to buy US treasuries. Financial markets consider them to be zero-risk -- the benchmark by which all other investments are compared. Now, if this were to change, and financial markets thought that buying US treasuries might not be a guarantee that they can get that money back later, a lot of things would be disrupted. In the immediate term, interest rates would likely increase significantly for everything, as many interest models base their rates on treasury interest rates, and treasury interest rates would skyrocket due to the now non-zero risk. That would in turn mean that the US's interest on their outstanding debt would skyrocket, further compounding the issue. Also, because so much of the world economy is based on the assumption that US treasuries are zero risk, this would upend investor confidence in many other financial markets globally that rely on those instruments for their function. Those who were forking over trillions to the US for safekeeping may look for other places to keep their money instead. This would be bad for the US governments ability to raise money to do the things it needs to do, in likely a significant way. And if a default does happen, creditors could seize assets, and depending on who is stuck holding the bag, war has happened in these situations before, although the UN currently disallows it. But at a minimum, the global economy would be hit very hard.
ljosifov 2y ago
You are entirely right. If the same number was called "private credit" I believe no one would bat an eyelid about it. Of all the non-issues to spend time on - this is the least worth anyone's time.
gbacon 2y ago
“We just owe it to ourselves” is a propaganda line. There must be more productive uses for those funds than paying interest. Being on the creditor side of compound interest is far better than the alternative.
- kube-system 2y ago
  > “We just owe it to ourselves” is a propaganda line. There must be more productive uses for those funds than paying interest. There are! One of the most productive uses of buying your own treasuries is the ability to manipulate the entire economy as a whole. https://en.wikipedia.org/wiki/Quantitative_easing https://en.wikipedia.org/wiki/Quantitative_easing
- ljosifov 2y ago
  The literal truth can hardly be a "propaganda line". More constructive criticisms are 1) private sector could have done better with the same finance (ultimately - resources); and 2) interest on that is paying basic income to people that already have money. I am sympathetic to both. So - the debt itself is a signal, a symptom. The solution is not to treat the symptom, but the causes. On 1) - you can say the state needs to do less. Just go down the list of things the state does, and propose those be reduced. From that PoV, the federal gov being "insurance company with and army" is basically correct. So to reduce gov spending, need to look at those two top of the list items. On 2) - that's easier imo. The IR rate is a decision, a vote, by a monopolist, controlled ultimately by the legislature. Just reduce the IR if that's an issue. Then fight inflation (if needed) with other means. People have forgotten that - but can relearn quickly.

georgeecollins 2y ago

If the $35t were a problem US treasury bills would have to have high interest rates. As it is, investors around the world are happy to hold them. Personally I think we should raise taxes, particularly close a lot of loopholes and raise corporate taxes as a first thing to do.

pclmulqdq 2y ago
Treasury bills do have high interest rates compared to their recent historical average. That rate is about 5%. You might then say that this is due to inflation, but that inflation almost certainly has something to do with lack of confidence in the dollar.