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Remember way back in Feb 2025 when a bunch of people were claiming that Elon and Doge were going to fix the national debt?! I recall a lot of skepticism from so

• mempko 1y ago
  People forget that every transaction has two parties. Someone's debt is another's asset. The national debt is mostly owned by Americans. That means the national debt is an asset to the private sector. This is the way all money works because money IS debt. The real crisis is high debt loads in the private sector, not the government. Why? Because the government owns the currency it's debts are denominated in. There is zero risk the government couldn't pay it's dollar debts if there is still a US government. The only reason to downgrade is if there is a real risk the US government will collapse and cease to exist for political reasons. There is no fiscal risk. The deficit hawks don't understand how money works. The real concern is private debts, not government debts. But you never hear about that in the media.
  • jaredklewis 1y ago
    > The real crisis is high debt loads in the private sector, not the government. Why? Because the government owns the currency it's debts are denominated in. There is zero risk the government couldn't pay it's dollar debts. Right, but it isn't like the government controlling the money supply is some sort of get out of jail free card. If it was, why would the government even have debts? US could just pay off all the debt right now. If the government starts printing money to pay interest on or pay off our $35+ trillion dollar debt, that will cause inflation, which is like a regressive tax. If the government doesn't start printing money, then a greater and greater share of our tax revenues go towards paying the interest. Neither of those outcomes seem particularly good to me. Debts in the private sector have other downside like economic instability, but it seems to me that private sector lending is responsible for a lot of great economic developments (of course including our little VC funded corner of the world).
    • mempko 1y ago
      The government doesn't need to sell bonds, but does for practical reasons. It provides a safe asset for wealthy people and organizations. If you haven't realized, but banks only insure accounts up to $250k. There needs to be a safe mechanism to store more and treasuries serve that purpose. Also bonds help drain bank reserves! Selling bonds actually slows down bank lending and reduces risk taking in the banking sector. Also too many reserves make monetary policy from fed ineffective. The national debt is simply all the money the government created minus the money it destroyed from taxes. Another way of thinking about it is it's national savings. The boom and bust cycles happen because of private sector debt cycles not government debt.
      • jaredklewis 1y ago
        So is it your assertion that if the government decided to stop selling bonds (because let's say it no longer cared about those "practical reasons") and just paid off all the debt by printing money, that doing so would NOT cause high levels of inflation? Or that it would, but that high inflation is not a problem? Or that the status quo of ~20% of tax revenues going to interest payments is not a problem? I guess I don't see the great societal benefit of the super wealthy a safe asset to park their wealth in, but I do see the societal harms of government borrowing (mentioned above).
        • mempko 1y ago
          Bonds are just money that pays interest. If you exchange interest bearing money with money that doesn't return interest, you tell me what you think will happen.
          • mitthrowaway2 1y ago
            Interest rates will fall but beyond that it's very non-obvious what will happen. Money becomes a hot potato? Cashflow-generating assets get bid up to extreme valuations? Speculative assets like crypto gets carried along for the ride? An increase in private borrowing, the money supply, the velocity of money, and inflation? On the other hand, the government debt interest burden goes down, which means a slowdown in the growth of the base money supply (even while borrowed money increases). Perhaps this slows long-term inflation, but that in turn might mean inflation driven by growing private debt and speculative malinvestment swings well past equilibrium and turns into a bubble that pops into eventual deflation.
  • s1artibartfast 1y ago
    >There is zero risk the government couldn't pay it's dollar debts if there is still a US government. The real concern is not that the government cant pay it, it is that the government has to pay it out of revenue alongside obligations, leading to runaway inflation and economic damage. In theory, governments can run on new printed money. It just makes for a terrible market to conduct business. High inflation wipes out currency denominated debt holders and creates a terrible environment for investment and contracting. It increases transaction costs to a level that is often prohibitive.
    • mempko 1y ago
      Inflation only correlates with money supply growth if there are real resource constraints, otherwise you just get new businesses and services. Also people also tend to save more when they can, which takes money out of circulation.
      • mitthrowaway2 1y ago
        That's one possibility, but it depends a lot on where the money gets injected and where the inflation happens. If it balloons real estate prices before wages catch up, you don't necessarily get that growth of investment into productive areas. Instead it gets more expensive and riskier to start a business, with higher rent payments, and meanwhile a lot of asset-owners retire on their newfound wealth. It gets harder to convince lenders and investers to put money into real production when speculating on land and collecting rents starts getting such good consistent returns.
      • riffraff 1y ago
        What about the labor market? Where are you getting more workers given unemployment is extremely low and the current administration is against immigration? That should lead to salary increases which could lead to inflation.
      • adrian_b 1y ago
        I am not sure what you mean about saving money. When there is inflation, nobody can save anything, because the value of any savings decreases too quickly. Everybody who has made prior savings loses them, unless they predict the inflation and buy something valuable, like real estate, with all the money they had. As long as there is excessive inflation, any money earned must be spent immediately, before losing too much value. For ordinary people and small businesses this makes it very difficult to buy expensive things, because it is hard to save money for that and credits may become too risky.
  • ActorNightly 1y ago
    This is really weird take. If you were to just erase private sector debt, not much happens on a socio-economic scale. If a company is owed money, but at the same time owes people money, the debt on either side is cancelled out. With government being the actual source of money, if it owes a lot of money, it has to "print" it, which is exactly how you historically get inflation, which then causes rising prices. This literally happened during Covid. Lets also not pretend that the current administration actually understands anything about economy either.
  • Aurornis 1y ago
    > Because the government owns the currency it's debts are denominated in. There is zero risk the government couldn't pay it's dollar debts if there is still a US government. > The deficit hawks don't understand how money works. I’m afraid it’s you who doesn’t understand how national debt works. The US government doesn’t have infinite leverage to do whatever it wants with its currency with no consequences. We have to sell our debt on the public market. If we start acting like we’re going to pull currency tricks as the way to fight the debt, the interest rate we have to pay on the debt goes up quickly. As it goes up, we have to pay more every year to service the interest on that debt. If we’re in a situation of high budget deficits the only way to service that additional interest charge is by issuing more debt, which turns into a debt spiral. Waving it all away as a non-issue is a severe misunderstanding of the threat.
    • chneu 1y ago
      Anyone who has played a Paradox economic/war sim understands this. Lol
  • whimsicalism 1y ago
    sad to see such economically illiterate comments at the top here
• refurb 1y ago
  It's funny when I see people laugh at the abject failure of credit rating agencies to properly forecast the real estate credit bubble of 2007, then when the political stars align, they go all in with "the credit rating agencies said it so it must be true".
• tim333 1y ago
  People don't seem very good at that stuff these days. Back when Bill Clinton was president they did a pretty good job at reducing bureaucracy and bringing down the deficit but now it seems all clown show.
  • coolsunglasses 1y ago
    I'm a fan but Bill Clinton was sweeping away a lot of cold war apparatus that no longer seemed necessary. It's going to be a lot harder to do anything sustainable or worthwhile with our current system without entitlement reform.
    • tim333 1y ago
      I remember Bill Clinton made some significant changes to entitlements in terms of unemployment benefits. At the time it was kind of low hanging fruit. I'm not sure what you'd go for these days but the US medical system seems massively expensive and somewhat inefficient.
    • atmavatar 1y ago
      Or, you know, we could roll back the massive tax cuts passed since his presidency. In the last half century, every Republican administration (except George Bush Sr.) passed huge tax cut bills, and for some reason, everyone here acts as if they are some edicts from above that cannot be touched. It's like the federal government quit its tech job to go work fast food and became convinced the only solution to its debt is to start living in a tent under a nearby bridge rather than try getting the tech job back. The current administration's policies are similar to selling off the tent and using a newspaper for cover because it would rather start panhandling than continue working a real job.
• theptip 1y ago
  Thing is, Musk actually did find some savings. It’s just the admin plans to pass massive unfunded tax cuts that will make those savings a drop in the ocean. It’s almost like destroying state capacity for “woke” causes like foreign aid and science was the actual goal, rather than getting the budget under control.
  • j_w 1y ago
    Source this. What savings did he find that were savings and not just cutting programs ideologically?