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Complaining about the “national debt” is the clearest sign that someone does not understand economics. What do you think happens if the debt goes up? Do you th

Complaining about the “national debt” is the clearest sign that someone does not understand economics. What do you think happens if the debt goes up? Do you think the government is gonna go bankrupt? That’s literally not how it works. Do you think inflation is gonna happen? Again, literally not how it works. In fact, too low public spending means you get deflation which is even worse than inflation.

roenxi 2y ago
1. I don't think you have a theory for how it works. > means you get deflation which is even worse than inflation 2. People regularly come up with this theory that prices dropping is a terrible thing. An extraordinary claim for which I've never seen an argument I accepted and the evidence is as thin as a rake. Typically the countries that experience the horrors of deflation go on to be unusually wealthy and prosperous - I'd like to see more of it. But it is easy to see why the governments would believe deflation is bad that since they are typically enormous debtors and inflation favours debtors. Frankly I suspect that if prices go down all else equal most people will be better off and able to afford more stuff. Wild take, I know.
- chr1 2y ago
  People who bring up this theory, bring the great depression as evidence, forgetting that the problem there was caused by the law forbidding to reduce salaries, which made prices going down equivalent to minimal wage going up, which of course leads to unemployment.
  - roenxi 2y ago
    Given the confusion around, eg, the 2008 financial crisis I just flat out reject that there was 1 lesson in the 1930s that was so unambiguous that the debate is settled. It is a ridiculous claim. There was so much going on and so many people always pop up in a crisis trying to muddy the waters to get their preferred policy through. Look at the minimum wage debate - still unsettled despite what I would consider overwhelming evidence in theory and practice. And whatever anyone's personal beliefs, if that can't be settled there is no way at all that the inflation/deflation question has a firm answer from one event in the 1930s. Especially given that "prices always up"="good" is counter-intuitive and I can't find anyone with a clear argument in favour of inflation. There is lots of gobbledegook and occasionally people who make arguments equivalent to holidays being bad because they reduce economic output. Which is an argument but not very persuasive, I'd prefer to optimise towards an end state where I get to live out a permanent comfortable holiday; even if the economic metrics go down. I like comfort.
- kristianbrigman 2y ago
  What countries did you have in mind? (Haven’t heard that before, would like to investigate)
  - roenxi 2y ago
    Well if I want to talk about inflation we have things like the Nazis, Zimbabwe, a long list of collapses that countries never really recover from. But if we look up deflation... https://en.wikipedia.org/wiki/Deflation#Historical_examples https://en.wikipedia.org/wiki/Deflation#Historical_examples EU - Still to see the long term consequences, but it isn't obvious the deflation was the bad thing in the story. Hong Kong - Jewel of Asia. Ireland - Very high HDI and GDP ppp per capita. Japan - Economic success story. UK - Can't argue that they're a success! But their problems after WWI wasn't the deflation. US - Some good some bad, lots to debate, but the latest episode (Great depression in the 1930s) set them up to conquer the world and establish the Not-An-Empire they have now. If that is a bad outcome I fear the good ones. I'm not seeing the Zimbabwe equivalent. In fact it looks a lot like deflation is associated with - if not a precursor to - long term economic success and prosperity.
    - kristianbrigman 2y ago
      Is there an example where you can explain how the deflation actually led to economic success? The above feel like very distant correlations more than a result. 'prices dropping' often includes labor as well, since currency is primarily a medium of exchange.
      - roenxi 2y ago
        I'm not arguing that deflation leads to economic success. I'm arguing the evidence that it is bad is nonexistent. Although it has some interesting interactions with the tax system and government policies. If you go through the arguments, inflation/deflation are both mostly neutral because people just adjust their expectations by whatever they think the rate will be. In practice though inflation policy is typically masking money printing projects or policies that destroy wealth. And by reversing that, deflation is usually positive but only because it suggests that the political leadership at the time was interested in honest market signals rather than seizing an opportunity to conduct handouts. > 'prices dropping' often includes labor as well, since currency is primarily a medium of exchange. Inflation or deflation, by definition, doesn't impact how much someone can buy in real terms. Because wages and goods are theoretically changing at the same rate.
deleted 2y ago
[deleted]
nomel 2y ago
Have there been any efforts to remove the limit completely, so we can spend freely? I will admit that I don't understand economics, but infinite free money hacks seem too good to be true.
- amrocha 2y ago
  Infinite free money hacks is literally how fiat currencies work. The government wants the economy to operate at close to full capacity, so it creates money and spends it into the private sector. Eventually that money makes it to individuals, who want to save some of that money. There’s also foreign agents that might want to hold on to your currency, and trade happening that means some of your money leaves your country. If the government maintains steady spending, this money supply slowly dwindles, which leads to a shrinking economy. So governments issue debt to offset that dwindling money supply. The catch is that spending that doesn’t create real resources is inflationary, so you have to spend money on things that eventually earn you more money. At the end of the day, that’s the idea of macro economics. Spend enough to get your economy growing, while making sure inflation doesn’t go up too much. Which is why people that complain about debt have no idea what they’re talking about.
  - mostertoaster 2y ago
    The reason Trump won was because “the economy is doing great since Joe Biden”, meant the billionaires tripled their wealth as mega corporations went from less than a trillion market cap to more than 3 trillion, while me and millions others fixed salaries went up 5% if you were fortunate.
    - amrocha 2y ago
      I don’t see how that’s relevant to the macro economics discussion, and I don’t see how Trumps tax cuts for billionaires are going to help you in any way.
      - navane 2y ago
        If you don't see how that's relevant to the macro economics discussion, i don't see how the macro economics discussion is relevant. We're sending in the young guns to save on government spending because trump won partly on "Biden ruined the economy". The government spending leads to the increase of government debt. Or is the debt coming from a separate source?
timacles 2y ago
> What do you think happens if the debt goes up? Do you think the government is gonna go bankrupt? That’s literally not how it works. You're the one that has no idea what hes talking about. Debt uncontrollably going up without something to balance it means exactly that. If the debt exceeds the GDP, which is where the US is clearly going, we are looking at a collapse of the US dollar and its global influence. Theres no telling what will happen after that because its unfathomable This is also why the techbros are staging a coup on the US, so the US doesnt come for the billions when it goes bankrupts
- amrocha 2y ago
  Japans debt is 300% of their GDP and yet their society seems to work a lot better than the US. Maybe there’s more to economics than debt ratios.
  - roenxi 2y ago
    Well, yes. Japan as a nation is a net creditor. Net creditor don't generally struggle when paying back their debts. The question of where the money will come from has an obvious answer. If the US was a net creditor then the story would be completely different.
  - imwillofficial 2y ago
    Japan's currency is in the toilet. They are struggling.
    - amrocha 2y ago
      The value of a currency has nothing to do with how that country’s economy is doing. It’s mostly a factor of international trade. That has nothing to do with debt ratios.
- navane 2y ago
  The debt exceeds the GDP since 2012: https://fred.stlouisfed.org/series/GFDEGDQ188S https://fred.stlouisfed.org/series/GFDEGDQ188S
ericd 2y ago
I think you're arguing against a position that not many people here hold - people aren't worried about bankruptcy so much as inflation. My understanding is that the reason the USD is unusually resistant to inflation is that there's artificially high demand due to international demand for the currency as the global reserve currency. But yeah, if that effect weakens (and the BRICS are trying to challenge the USD as reserve currency), then I think you'll see the USD weaken/inflation spike in response to large deficits.

roenxi 2y ago

1. I don't think you have a theory for how it works. > means you get deflation which is even worse than inflation 2. People regularly come up with this theory that prices dropping is a terrible thing. An extraordinary claim for which I've never seen an argument I accepted and the evidence is as thin as a rake. Typically the countries that experience the horrors of deflation go on to be unusually wealthy and prosperous - I'd like to see more of it. But it is easy to see why the governments would believe deflation is bad that since they are typically enormous debtors and inflation favours debtors. Frankly I suspect that if prices go down all else equal most people will be better off and able to afford more stuff. Wild take, I know.

chr1 2y ago
People who bring up this theory, bring the great depression as evidence, forgetting that the problem there was caused by the law forbidding to reduce salaries, which made prices going down equivalent to minimal wage going up, which of course leads to unemployment.
- roenxi 2y ago
  Given the confusion around, eg, the 2008 financial crisis I just flat out reject that there was 1 lesson in the 1930s that was so unambiguous that the debate is settled. It is a ridiculous claim. There was so much going on and so many people always pop up in a crisis trying to muddy the waters to get their preferred policy through. Look at the minimum wage debate - still unsettled despite what I would consider overwhelming evidence in theory and practice. And whatever anyone's personal beliefs, if that can't be settled there is no way at all that the inflation/deflation question has a firm answer from one event in the 1930s. Especially given that "prices always up"="good" is counter-intuitive and I can't find anyone with a clear argument in favour of inflation. There is lots of gobbledegook and occasionally people who make arguments equivalent to holidays being bad because they reduce economic output. Which is an argument but not very persuasive, I'd prefer to optimise towards an end state where I get to live out a permanent comfortable holiday; even if the economic metrics go down. I like comfort.
kristianbrigman 2y ago
What countries did you have in mind? (Haven’t heard that before, would like to investigate)
- roenxi 2y ago
  Well if I want to talk about inflation we have things like the Nazis, Zimbabwe, a long list of collapses that countries never really recover from. But if we look up deflation... https://en.wikipedia.org/wiki/Deflation#Historical_examples https://en.wikipedia.org/wiki/Deflation#Historical_examples EU - Still to see the long term consequences, but it isn't obvious the deflation was the bad thing in the story. Hong Kong - Jewel of Asia. Ireland - Very high HDI and GDP ppp per capita. Japan - Economic success story. UK - Can't argue that they're a success! But their problems after WWI wasn't the deflation. US - Some good some bad, lots to debate, but the latest episode (Great depression in the 1930s) set them up to conquer the world and establish the Not-An-Empire they have now. If that is a bad outcome I fear the good ones. I'm not seeing the Zimbabwe equivalent. In fact it looks a lot like deflation is associated with - if not a precursor to - long term economic success and prosperity.
  - kristianbrigman 2y ago
    Is there an example where you can explain how the deflation actually led to economic success? The above feel like very distant correlations more than a result. 'prices dropping' often includes labor as well, since currency is primarily a medium of exchange.
    - roenxi 2y ago
      I'm not arguing that deflation leads to economic success. I'm arguing the evidence that it is bad is nonexistent. Although it has some interesting interactions with the tax system and government policies. If you go through the arguments, inflation/deflation are both mostly neutral because people just adjust their expectations by whatever they think the rate will be. In practice though inflation policy is typically masking money printing projects or policies that destroy wealth. And by reversing that, deflation is usually positive but only because it suggests that the political leadership at the time was interested in honest market signals rather than seizing an opportunity to conduct handouts. > 'prices dropping' often includes labor as well, since currency is primarily a medium of exchange. Inflation or deflation, by definition, doesn't impact how much someone can buy in real terms. Because wages and goods are theoretically changing at the same rate.

deleted 2y ago

[deleted]

nomel 2y ago

Have there been any efforts to remove the limit completely, so we can spend freely? I will admit that I don't understand economics, but infinite free money hacks seem too good to be true.

amrocha 2y ago
Infinite free money hacks is literally how fiat currencies work. The government wants the economy to operate at close to full capacity, so it creates money and spends it into the private sector. Eventually that money makes it to individuals, who want to save some of that money. There’s also foreign agents that might want to hold on to your currency, and trade happening that means some of your money leaves your country. If the government maintains steady spending, this money supply slowly dwindles, which leads to a shrinking economy. So governments issue debt to offset that dwindling money supply. The catch is that spending that doesn’t create real resources is inflationary, so you have to spend money on things that eventually earn you more money. At the end of the day, that’s the idea of macro economics. Spend enough to get your economy growing, while making sure inflation doesn’t go up too much. Which is why people that complain about debt have no idea what they’re talking about.
- mostertoaster 2y ago
  The reason Trump won was because “the economy is doing great since Joe Biden”, meant the billionaires tripled their wealth as mega corporations went from less than a trillion market cap to more than 3 trillion, while me and millions others fixed salaries went up 5% if you were fortunate.
  - amrocha 2y ago
    I don’t see how that’s relevant to the macro economics discussion, and I don’t see how Trumps tax cuts for billionaires are going to help you in any way.
    - navane 2y ago
      If you don't see how that's relevant to the macro economics discussion, i don't see how the macro economics discussion is relevant. We're sending in the young guns to save on government spending because trump won partly on "Biden ruined the economy". The government spending leads to the increase of government debt. Or is the debt coming from a separate source?

timacles 2y ago

> What do you think happens if the debt goes up? Do you think the government is gonna go bankrupt? That’s literally not how it works. You're the one that has no idea what hes talking about. Debt uncontrollably going up without something to balance it means exactly that. If the debt exceeds the GDP, which is where the US is clearly going, we are looking at a collapse of the US dollar and its global influence. Theres no telling what will happen after that because its unfathomable This is also why the techbros are staging a coup on the US, so the US doesnt come for the billions when it goes bankrupts

amrocha 2y ago
Japans debt is 300% of their GDP and yet their society seems to work a lot better than the US. Maybe there’s more to economics than debt ratios.
- roenxi 2y ago
  Well, yes. Japan as a nation is a net creditor. Net creditor don't generally struggle when paying back their debts. The question of where the money will come from has an obvious answer. If the US was a net creditor then the story would be completely different.
- imwillofficial 2y ago
  Japan's currency is in the toilet. They are struggling.
  - amrocha 2y ago
    The value of a currency has nothing to do with how that country’s economy is doing. It’s mostly a factor of international trade. That has nothing to do with debt ratios.
navane 2y ago
The debt exceeds the GDP since 2012: https://fred.stlouisfed.org/series/GFDEGDQ188S https://fred.stlouisfed.org/series/GFDEGDQ188S

ericd 2y ago

I think you're arguing against a position that not many people here hold - people aren't worried about bankruptcy so much as inflation. My understanding is that the reason the USD is unusually resistant to inflation is that there's artificially high demand due to international demand for the currency as the global reserve currency. But yeah, if that effect weakens (and the BRICS are trying to challenge the USD as reserve currency), then I think you'll see the USD weaken/inflation spike in response to large deficits.