5 ms·

You're ignoring interest. If there is 100T of outstanding debt at 3% annual interest, that's 3T in interest per year. At a certain point it may be impossible to

You're ignoring interest. If there is 100T of outstanding debt at 3% annual interest, that's 3T in interest per year. At a certain point it may be impossible to keep the overall interest payments going and the debt graph will collapse like dominoes. The great recession was also mainly caused by debts within the US economy.

chgs 2y ago
So country A pays 3% to country b, who pays 3% to country c who pays 3% to country A
- nkmskdmfodf 2y ago
  What happens when country A can't pay?
  - cannonpr 2y ago
    Very bad things, or maybe very good things, depends on your perspective, a reset in any case and a restructuring of debt, usually just after a crash.
    - scott_w 2y ago
      Which isn’t free either. Consider the interest levels of countries considered unstable vs those considered stable (UK/US compared to Türkiye/Argentina for example). It massively changes what actions the respective governments can take.
  - deleted 2y ago
    [deleted]
  - selectodude 2y ago
    https://en.m.wikipedia.org/wiki/European_debt_crisis https://en.m.wikipedia.org/wiki/European_debt_crisis Everything old is new again. https://www.youtube.com/watch?v=OrhJcqgXrlw https://www.youtube.com/watch?v=OrhJcqgXrlw
stouset 2y ago
You’re ignoring inflation. At 2.5% inflation, this is a 0.5% real interest rate.
- carlosjobim 2y ago
  Inflation can only come with an increase in the money supply and the money supply only increases by issuing debt, which carries more interest.
  - scott_w 2y ago
    Not true. Inflation is defined as the increase in the cost of goods. This can come about by an increase in money supply, a reduction in demand for the money that exists, a restriction in supply of certain goods or an increase in the demand for enough key goods. I’m not an economist so I’m sure one could come up with more examples.
    - carlosjobim 2y ago
      No, inflation is only because of an increase in the money supply, which is increased by lending in modern economies. Rulers will make false definitions and false measurements in order to try to hide this. Just as Roman emperors would debase the metal in their currency and demand that people treated the money as pure. But the truth is still the truth, no matter the lies.
      - scott_w 2y ago
        Actual economists and monetary policy staff disagree with you: 1. HBR: https://hbr.org/2022/12/what-causes-inflation https://hbr.org/2022/12/what-causes-inflation 2. IMF: https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Inflation https://www.imf.org/en/Publications/fandd/issues/Series/Back... 3. Reserve Bank of Australia: https://www.rba.gov.au/education/resources/explainers/causes-of-inflation.html https://www.rba.gov.au/education/resources/explainers/causes... 4. The Bank of England: https://www.amazon.co.uk/Cant-Just-Print-More-Money-ebook/dp/B09HZX7355/ref=sr_1_1 https://www.amazon.co.uk/Cant-Just-Print-More-Money-ebook/dp... Shall I continue?

chgs 2y ago

So country A pays 3% to country b, who pays 3% to country c who pays 3% to country A

nkmskdmfodf 2y ago
What happens when country A can't pay?
- cannonpr 2y ago
  Very bad things, or maybe very good things, depends on your perspective, a reset in any case and a restructuring of debt, usually just after a crash.
  - scott_w 2y ago
    Which isn’t free either. Consider the interest levels of countries considered unstable vs those considered stable (UK/US compared to Türkiye/Argentina for example). It massively changes what actions the respective governments can take.
- deleted 2y ago
  [deleted]
- selectodude 2y ago
  https://en.m.wikipedia.org/wiki/European_debt_crisis https://en.m.wikipedia.org/wiki/European_debt_crisis Everything old is new again. https://www.youtube.com/watch?v=OrhJcqgXrlw https://www.youtube.com/watch?v=OrhJcqgXrlw

stouset 2y ago

You’re ignoring inflation. At 2.5% inflation, this is a 0.5% real interest rate.

carlosjobim 2y ago
Inflation can only come with an increase in the money supply and the money supply only increases by issuing debt, which carries more interest.
- scott_w 2y ago
  Not true. Inflation is defined as the increase in the cost of goods. This can come about by an increase in money supply, a reduction in demand for the money that exists, a restriction in supply of certain goods or an increase in the demand for enough key goods. I’m not an economist so I’m sure one could come up with more examples.
  - carlosjobim 2y ago
    No, inflation is only because of an increase in the money supply, which is increased by lending in modern economies. Rulers will make false definitions and false measurements in order to try to hide this. Just as Roman emperors would debase the metal in their currency and demand that people treated the money as pure. But the truth is still the truth, no matter the lies.
    - scott_w 2y ago
      Actual economists and monetary policy staff disagree with you: 1. HBR: https://hbr.org/2022/12/what-causes-inflation https://hbr.org/2022/12/what-causes-inflation 2. IMF: https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Inflation https://www.imf.org/en/Publications/fandd/issues/Series/Back... 3. Reserve Bank of Australia: https://www.rba.gov.au/education/resources/explainers/causes-of-inflation.html https://www.rba.gov.au/education/resources/explainers/causes... 4. The Bank of England: https://www.amazon.co.uk/Cant-Just-Print-More-Money-ebook/dp/B09HZX7355/ref=sr_1_1 https://www.amazon.co.uk/Cant-Just-Print-More-Money-ebook/dp... Shall I continue?