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> 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. The

> 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.
    - Aurornis 1y ago
      It’s extremely well known what happens in this scenario: When governments start printing money like nothing matters and there are no consequence, the currency collapse into a hyper inflationary death spiral. You act like that interest payment is just a technicality or something. It’s not. It’s a market rate that reflects the world’s belief in the soundness of the currency and government. Throw that away and it all comes crashing down. The US doesn’t exist in global isolation. We still buy things internationally as inputs to our factories and to make everything work. If we start a hyper inflationary currency death spiral where the government prints money out of thin air as a solution to spending problems, the value of our dollars becomes progressively less, hence the inflation. Then we all, including the government, have to spend more of those dollars, so the printing increases, and it becomes a self-reinforcing cycle. This entire line of thinking that it doesn’t matter is basically quackery. It has been tried. It does not work.
    - jaredklewis 1y ago
      I've already outlined that in both my posts above: inflation. You don't think so?
- lotsofpulp 1y ago
  > If you haven't realized, but banks only insure accounts up to $250k. If your bank isn’t politically connected enough. See Silicon Valley bank failure. If your money is at BoA/JPM/Wells Fargo/Citi/US Bank/etc, I’d bet the $250k limit turns out to be fictitious and all depositors get bailed out.
  - j_w 1y ago
    It's not "just 250k." There are different classifications that the insurance covers. For example, a trust account (considered any account with a beneficiary listed) should cover 250k + 250k per beneficiary, with a cap (might not be implemented yet) of 1.25m. In addition to that, most FIs purchase some form of excess share insurance to cover deposits beyond the 250k. You would need a very large amount of deposits at a single institution to run up against the insured limits. If you are ever concerned about that, you can reach out to your financial institution(s) and ask them if you have any uninsured deposits.
- Aurornis 1y ago
  > 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 national debt is all the money spent minus money collected via taxes If a government starts printing money like nothing matters, we already know what happens: Hyperinflationary death spiral. The government gets money to spend, but it crushes the value of the currency in the process. In crushing the value of the currency, they then need to print more money for the next round of spending, which further devalues the currency, which accelerates the cycle.

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.
  - Aurornis 1y ago
    It’s extremely well known what happens in this scenario: When governments start printing money like nothing matters and there are no consequence, the currency collapse into a hyper inflationary death spiral. You act like that interest payment is just a technicality or something. It’s not. It’s a market rate that reflects the world’s belief in the soundness of the currency and government. Throw that away and it all comes crashing down. The US doesn’t exist in global isolation. We still buy things internationally as inputs to our factories and to make everything work. If we start a hyper inflationary currency death spiral where the government prints money out of thin air as a solution to spending problems, the value of our dollars becomes progressively less, hence the inflation. Then we all, including the government, have to spend more of those dollars, so the printing increases, and it becomes a self-reinforcing cycle. This entire line of thinking that it doesn’t matter is basically quackery. It has been tried. It does not work.
  - jaredklewis 1y ago
    I've already outlined that in both my posts above: inflation. You don't think so?
lotsofpulp 1y ago
> If you haven't realized, but banks only insure accounts up to $250k. If your bank isn’t politically connected enough. See Silicon Valley bank failure. If your money is at BoA/JPM/Wells Fargo/Citi/US Bank/etc, I’d bet the $250k limit turns out to be fictitious and all depositors get bailed out.
- j_w 1y ago
  It's not "just 250k." There are different classifications that the insurance covers. For example, a trust account (considered any account with a beneficiary listed) should cover 250k + 250k per beneficiary, with a cap (might not be implemented yet) of 1.25m. In addition to that, most FIs purchase some form of excess share insurance to cover deposits beyond the 250k. You would need a very large amount of deposits at a single institution to run up against the insured limits. If you are ever concerned about that, you can reach out to your financial institution(s) and ask them if you have any uninsured deposits.
Aurornis 1y ago
> 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 national debt is all the money spent minus money collected via taxes If a government starts printing money like nothing matters, we already know what happens: Hyperinflationary death spiral. The government gets money to spend, but it crushes the value of the currency in the process. In crushing the value of the currency, they then need to print more money for the next round of spending, which further devalues the currency, which accelerates the cycle.