4 ms·

The US can issue currency to cover debt obligations. There should never be a situation where debts wouldn't be paid, the problem can just be printed away. The i

The US can issue currency to cover debt obligations. There should never be a situation where debts wouldn't be paid, the problem can just be printed away. The idea that the people who can print more money and pay the interest just wouldn't do it, out of what, spite? Incompetence? Seems pretty bad. The fact that one party is always behind this financial profligacy, and the US keeps putting it in charge, probably means that the US' debt rating is still much too high.

deleted 1y ago
[deleted]
A4ET8a8uTh0_v2 1y ago
Unfortunately, even in games, infinity money can only get you so far.
- potato3732842 1y ago
  At the end of the day we either reign in the debt or the currency collapses and we're forced to reign in the debt. On a long timeline there is no way to not reign in the debt.
  - mullingitover 1y ago
    The US is effectively the world's bank. Everyone saying the US needs to cut its debt is basically saying, "The most successful bank in town needs to stop taking deposits," which seems like bad business for a bank. The debt is just the sum of deposits. The problem isn't the debt, the problem is a lack of imagination/ambition in finding good investments for the capital that's being handed to the US. Saying the debt should be cut is saying "We're terrible at business, don't have good ideas, you all need to find smarter and more responsible people to entrust with your capital. We plan to underachieve."
    - s1artibartfast 1y ago
      banks make money on investing their on their deposits, governments do not.
      - tekla 1y ago
        The US Govt quite famously makes fuck tons of money investing on its debts
        s1artibartfast 1y ago
        no it doesnt. Intragovernmental debt is an IOU to yourself with interest. The remainder is an IOU to others with interest. Neither is an investment with returns. I dont make money running up my credit card or withdrawing from my retirement and promising to pay it back later
        mullingitover 1y ago
        Here's an example of how the government invests: the government uses the revenue from bonds to build a bridge. That bridge delivers returns on the investment in the form of tolls. These pay back the bonds with interest and continue to pay dividends to the government. Another: the government uses bonds to build core infrastructure for a city. That infrastructure allows businesses to set up shop in the city. The business activity yields tax revenues, which pay back the bonds with interest and continue to pay dividends long term. Multiply that by hundreds of thousands to millions of investments in infrastructure, people, services, etc.
        s1artibartfast 1y ago
        That is common misconception, and far from the norm. Financially productive investments are a negligible part of the budget. 22% Social Security 14% Debt interest. 13% General Health 13% Medicare 13% National Defense 11% income security 5% Veterans Benefits 3% Education 2% Transportation Most is a cost center, not revenue center. Keeping grandma alive isnt an investment. In fact, it incurs even more costs outside the budget. Government spending = investment is a very poor heuristic. Most is simple consumption, the way buying a nice dinner is consumption, not an investment. That isn't to say it cant or shouldn't be done. The point of having money it so be able to enjoy nice things. It is just important to not get lost in the sauce and forget the difference. Someone is always ready to argue a nice dinner is an investment because you cant work tomorrow without food. That makes it an expense.
- SoftTalker 1y ago
  The bonds have a face value and a rate. That is what has to be paid. The fact that the money being used to make the payments might not be worth anything is a risk borne by the bond holders, but there will be no default. However, if this becomes apparent, it will become increasingly difficult to find buyers for new bond issues.
  - Iwan-Zotow 1y ago
    Rollover will stop working. New debt issued to retire old debt
  - A4ET8a8uTh0_v2 1y ago
    << there will be no default. Heh. You have a point on a technicality, but I can assure you that people, who lend other people money would likely be a lot less technical about it. In other words, the default may be a shorthand for 'immediately unable to borrow more at the previous rate', but I suppose it is not as catchy.
roxolotl 1y ago
While I do not agree with it the common argument against indiscriminate money printing is inflation. Given that we are exiting an inflationary period and likely entering another it will be interesting to see what they say this time.
czhu12 1y ago
Curious as to why this comment got downvoted. From my basic understanding, this is indeed true. At the cost of rampant inflation, the US can simply print more currency, inflate away historical debts, and not have to default. If the Moody's credit rating is a measure of the stability of the asset, then a downgrade makes sense. If its to measure the likelihood of a default -- it does seem unlikely the US would simply default. But maybe there's something I'm missing
- ViewTrick1002 1y ago
  The second it happens all new debt will either be extremely expensive or not denominated in dollars. Doing it is the end to the dollar backed global financial system.
- aprilthird2021 1y ago
  It's true. Maybe, the consequences of doing so are so drastic and would ripple throughout the globe such that getting pennies on the dollar for debt obligations may be a more attractive approach but still a loss for creditors?
- satellite2 1y ago
  That's correct, but that also imply negative interests in inflation adjusted dollars. Isn't that included in this score?
- ewanmcteagle 1y ago
  What you are missing is fairly straightforward. Inflating away debt is a form of default. People don't want to lend you money when that is how you plan to pay it back -- same outcome as a default. I guess you could do it once but only if you plan to not borrow again.
- scoofy 1y ago
  Intentionally inflating a currency to pay down debt is effectively a de facto partial default, even if it's not de jure.
  - 1y ago
sandytoast 1y ago
Most likely the question isn’t ’can they pay’ but ‘can they be trusted to pay’
- lesuorac 1y ago
  The stories only 3 paragraphs. > “This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,” the agency wrote. It's that moody is grading on a curve.
JumpCrisscross 1y ago
> idea that the people who can print more money and pay the interest just wouldn't do it, out of what Self preservation. Have we already forgotten what inflation does to incumbents?
mike_hearn 1y ago
Not all of them. There are TIPS which are inflation linked US treasuries. About 7%-10% of the total issuance, apparently. It would be higher but for unfavourable tax treatment.
riffraff 1y ago
If you issue currency you invite inflation (at least according to most economists), and there's an argument that it's better to screw foreign debt owners rather than make people who elect you unhappy.
whimsicalism 1y ago
this is one of the most harmful ways of thinking to come out of the post-2016 era. monetizing the debt is an effective default in the eyes of the market, nevermind economically disastrous. MMT idiocy caused major problems for the Biden admin and likely contributed significantly to Trumps reelection.

deleted 1y ago

[deleted]

A4ET8a8uTh0_v2 1y ago

Unfortunately, even in games, infinity money can only get you so far.

potato3732842 1y ago
At the end of the day we either reign in the debt or the currency collapses and we're forced to reign in the debt. On a long timeline there is no way to not reign in the debt.
- mullingitover 1y ago
  The US is effectively the world's bank. Everyone saying the US needs to cut its debt is basically saying, "The most successful bank in town needs to stop taking deposits," which seems like bad business for a bank. The debt is just the sum of deposits. The problem isn't the debt, the problem is a lack of imagination/ambition in finding good investments for the capital that's being handed to the US. Saying the debt should be cut is saying "We're terrible at business, don't have good ideas, you all need to find smarter and more responsible people to entrust with your capital. We plan to underachieve."
  - s1artibartfast 1y ago
    banks make money on investing their on their deposits, governments do not.
    - tekla 1y ago
      The US Govt quite famously makes fuck tons of money investing on its debts
      - s1artibartfast 1y ago
        no it doesnt. Intragovernmental debt is an IOU to yourself with interest. The remainder is an IOU to others with interest. Neither is an investment with returns. I dont make money running up my credit card or withdrawing from my retirement and promising to pay it back later
        mullingitover 1y ago
        Here's an example of how the government invests: the government uses the revenue from bonds to build a bridge. That bridge delivers returns on the investment in the form of tolls. These pay back the bonds with interest and continue to pay dividends to the government. Another: the government uses bonds to build core infrastructure for a city. That infrastructure allows businesses to set up shop in the city. The business activity yields tax revenues, which pay back the bonds with interest and continue to pay dividends long term. Multiply that by hundreds of thousands to millions of investments in infrastructure, people, services, etc.
        s1artibartfast 1y ago
        That is common misconception, and far from the norm. Financially productive investments are a negligible part of the budget. 22% Social Security 14% Debt interest. 13% General Health 13% Medicare 13% National Defense 11% income security 5% Veterans Benefits 3% Education 2% Transportation Most is a cost center, not revenue center. Keeping grandma alive isnt an investment. In fact, it incurs even more costs outside the budget. Government spending = investment is a very poor heuristic. Most is simple consumption, the way buying a nice dinner is consumption, not an investment. That isn't to say it cant or shouldn't be done. The point of having money it so be able to enjoy nice things. It is just important to not get lost in the sauce and forget the difference. Someone is always ready to argue a nice dinner is an investment because you cant work tomorrow without food. That makes it an expense.
SoftTalker 1y ago
The bonds have a face value and a rate. That is what has to be paid. The fact that the money being used to make the payments might not be worth anything is a risk borne by the bond holders, but there will be no default. However, if this becomes apparent, it will become increasingly difficult to find buyers for new bond issues.
- Iwan-Zotow 1y ago
  Rollover will stop working. New debt issued to retire old debt
- A4ET8a8uTh0_v2 1y ago
  << there will be no default. Heh. You have a point on a technicality, but I can assure you that people, who lend other people money would likely be a lot less technical about it. In other words, the default may be a shorthand for 'immediately unable to borrow more at the previous rate', but I suppose it is not as catchy.

roxolotl 1y ago

While I do not agree with it the common argument against indiscriminate money printing is inflation. Given that we are exiting an inflationary period and likely entering another it will be interesting to see what they say this time.

czhu12 1y ago

Curious as to why this comment got downvoted. From my basic understanding, this is indeed true. At the cost of rampant inflation, the US can simply print more currency, inflate away historical debts, and not have to default. If the Moody's credit rating is a measure of the stability of the asset, then a downgrade makes sense. If its to measure the likelihood of a default -- it does seem unlikely the US would simply default. But maybe there's something I'm missing

ViewTrick1002 1y ago
The second it happens all new debt will either be extremely expensive or not denominated in dollars. Doing it is the end to the dollar backed global financial system.
aprilthird2021 1y ago
It's true. Maybe, the consequences of doing so are so drastic and would ripple throughout the globe such that getting pennies on the dollar for debt obligations may be a more attractive approach but still a loss for creditors?
satellite2 1y ago
That's correct, but that also imply negative interests in inflation adjusted dollars. Isn't that included in this score?
ewanmcteagle 1y ago
What you are missing is fairly straightforward. Inflating away debt is a form of default. People don't want to lend you money when that is how you plan to pay it back -- same outcome as a default. I guess you could do it once but only if you plan to not borrow again.
scoofy 1y ago
Intentionally inflating a currency to pay down debt is effectively a de facto partial default, even if it's not de jure.
- 1y ago

sandytoast 1y ago

Most likely the question isn’t ’can they pay’ but ‘can they be trusted to pay’

lesuorac 1y ago
The stories only 3 paragraphs. > “This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,” the agency wrote. It's that moody is grading on a curve.

JumpCrisscross 1y ago

> idea that the people who can print more money and pay the interest just wouldn't do it, out of what Self preservation. Have we already forgotten what inflation does to incumbents?

mike_hearn 1y ago

Not all of them. There are TIPS which are inflation linked US treasuries. About 7%-10% of the total issuance, apparently. It would be higher but for unfavourable tax treatment.

riffraff 1y ago

If you issue currency you invite inflation (at least according to most economists), and there's an argument that it's better to screw foreign debt owners rather than make people who elect you unhappy.

whimsicalism 1y ago

this is one of the most harmful ways of thinking to come out of the post-2016 era. monetizing the debt is an effective default in the eyes of the market, nevermind economically disastrous. MMT idiocy caused major problems for the Biden admin and likely contributed significantly to Trumps reelection.