5 ms·

The country is getting forced by markets into realizing pain for overspending, and only congress can manage this pain. Manage the pain, not remove it is key her

The country is getting forced by markets into realizing pain for overspending, and only congress can manage this pain. Manage the pain, not remove it is key here. Manage it. Conrgess is totally inept and ridiculously politicized, so it's unlikely they will do anything except make the problem worse. That leaves only the natural fall out of refusing to acknowledge a financial injury before going out on the field to play hard for your voters. Inflation. The US will be forced, it will not decide, but be forced, to inflate away its debt. Which means that people who cannot bury their wealth in (non-treasury!) assets will pay off the debt.

lotsofpulp 1y ago
>Which means that people who cannot bury their wealth in (non-treasury!) assets will pay off the debt. I.e. people who need to work, which means it disproportionately affects the young. This is what has to happen in a democratic society with a flattened and eventual top heavy population pyramid that will not vote to reduce old people benefits.
- hdgvhicv 1y ago
  Workers will see higher wages as there is more work and fewer people to do the work Everyone will see higher prices as the costs of work increase Interest rates will be low as there’s no other option
  - toomuchtodo 1y ago
    Indeed, demographics are destiny. https://www.suerf.org/wp-content/uploads/2023/12/f_fa99ccdbea597263a88f27075bd6eb49_17385_suerf.pdf https://www.suerf.org/wp-content/uploads/2023/12/f_fa99ccdbe... https://link.springer.com/book/10.1007/978-3-030-42657-6 https://link.springer.com/book/10.1007/978-3-030-42657-6
  - lotsofpulp 1y ago
    The relative rate of change is important, not the absolute change. Politically, asset prices will be inflated quicker than labor prices. You can use SP500 as an easy guage. This is not sustainable forever, of course, but I would bet there are a few more decades it will work.
    - hdgvhicv 1y ago
      Over the last 40 years the S&P has consistently increased around 7% a year more than wages regardless of “money printing” or interest rates
      - lotsofpulp 1y ago
        It’s not regardless of government intervention. There have been numerous bailouts and interest rates deductions specifically to backstop SP500. It is a stealth tax that targets the young (or those too poor to be beneficiaries), because leaders need to maintain purchasing power for their voters’ benefits (the vast majority going to the old) and the solvency of taxpayer funded defined benefit pensions.
  - betaby 1y ago
    > Workers will see higher wages as there is more work and fewer people to do the work Canada effectively has removed immigration cap. So no, not going to happen.
- AnthonyMouse 1y ago
  > I.e. people who need to work, which means it disproportionately affects the young. In general currency devaluation causes nominal wages to increase along with the price of everything else. The people who get screwed are creditors, especially creditors who issued debt at a fixed interest rate. Which is kind of not that bad, except that creditors tend to have a lot of political power and then use it to either get bailed out by the taxpayer or get policies put in place to prevent inflation from eroding existing debts even if those policies have harsh consequences for other people.
sciencesama 1y ago
But how ??
nostromo 1y ago
The issue is that all governments are in roughly the same situation, so there is no alternative other than maybe gold. The US doesn't need to be great or even good, it just needs to be better than the alternatives. The issues facing China and the EU make America's spending problem look mild. (And I agree by the way: America has a massive spending problem.)
- pavlov 1y ago
  EU government debt to GDP ratio is 81.8% with a deficit of 2.9%. US current debt to GDP is 124%, and Trump’s big beautiful bill is projected to increase the deficit to 7% next year. America has long benefited from a more dynamic and attractive labor market than Europe, but the current administration is actively trying destroy that advantage by driving out the immigrants that were fueling it.
  - nostromo 1y ago
    Now look at economic growth rates. To be clear, I think US spending is too high. But I would take a bit more debt and thriving economic growth vs a bit less debt and zero economic growth every time.
    - lossolo 1y ago
      Real GDP growth in 2024 was approximately 2.8%. The federal budget deficit for fiscal year 2024 totaled around 6.4% of GDP. It's unsustainable long term.
  - peterfirefly 1y ago
    Your last line ruined a good post.
- nostrademons 1y ago
  That's not necessarily true - it's possible for all governments to fail. The winner might be something that doesn't even register as a government today, maybe something like privatized micro-nations out of Snow Crash, city-states, or a crypto-economy. There are times in history when a government fails, and then there are times when all governments fail, and the world re-organizes (usually after a long and bloody period of multiple wars) into a new system of social organization. The idea of a modern nation-state is only about 150 years old, dating from a series of wars (the U.S. Civil War, the German and Italian wars of unification, the Franco-Prussian War, the Meiji Restoration) in the 1860s-1880s. Before then, the early nation states and concept of nationalism arose out of European Wars of Religion in the early 1600s. Someone who lived under high-Medieval feudalism c. 1300, when the divine right of Kings was a given, would've found the world of the late 1600s quite alien.
phkahler 1y ago
Agree. But debt to GDP will continue to rise, and that eventually leads to something very bad.
TheOtherHobbes 1y ago
There is no "overspending." There is only undertaxing. The debt is literally just the accumulated difference between spending and taxation. If extreme wealth was taxed, the debt would be zero. The point isn't even to "pay for spending" but to enforce a functional social contract, and to limit the political and democratic distortions created by extreme inequality. "Markets" should not have a veto on policy in a democracy. Making it non-zero is a policy choice. Inflating away this debt is also a policy choice. There is nothing accidental about this. What will not be inflated away is personal debt. That will remain linked to inflation even after the currency is revalued, and will be captured from personal assets wherever possible.
- tobias3 1y ago
  Yeah, but for taxation you need state capacity to enforce it which was chainsawed/DOGED away.
  - nostromo 1y ago
    This isn't true. US tax revenue in 2025 is on track to be the highest ever.
    - const_cast 1y ago
      Perfect, just in time to put a teeny tiny dent in our new 2 Trillion dollar raised deficit! Thanks "party of fiscal responsibility"!
    - dcherman 1y ago
      Adjusted for inflation?
- hilsdev 1y ago
  Why is the default to tax more and not spend less? Is there really no limit to the amount of spending the government should do? You see no possible use of resources that would be wasteful?
SadErn 1y ago
You forget the imperialism option
DrScientist 1y ago
> The US will be forced, it will not decide, but be forced, to inflate away its debt. Which means that people who cannot bury their wealth in (non-treasury!) assets will pay off the debt. There is also the chance of capital flight - and hyper inflation. The debt holders could also lose out remember - if the dollar becomes less valuable then any holdings in the dollar ( including debt ) become less valuable.
greyface- 1y ago
> (non-treasury!) assets What about TIPS and I bonds?
- ksherlock 1y ago
  Those are based on what the government says the inflation rate is, not on what the inflation rate is. The CPI is published by the BLS. Did you know that? Erika McEntarfer probably knew that.

lotsofpulp 1y ago

>Which means that people who cannot bury their wealth in (non-treasury!) assets will pay off the debt. I.e. people who need to work, which means it disproportionately affects the young. This is what has to happen in a democratic society with a flattened and eventual top heavy population pyramid that will not vote to reduce old people benefits.

hdgvhicv 1y ago
Workers will see higher wages as there is more work and fewer people to do the work Everyone will see higher prices as the costs of work increase Interest rates will be low as there’s no other option
- toomuchtodo 1y ago
  Indeed, demographics are destiny. https://www.suerf.org/wp-content/uploads/2023/12/f_fa99ccdbea597263a88f27075bd6eb49_17385_suerf.pdf https://www.suerf.org/wp-content/uploads/2023/12/f_fa99ccdbe... https://link.springer.com/book/10.1007/978-3-030-42657-6 https://link.springer.com/book/10.1007/978-3-030-42657-6
- lotsofpulp 1y ago
  The relative rate of change is important, not the absolute change. Politically, asset prices will be inflated quicker than labor prices. You can use SP500 as an easy guage. This is not sustainable forever, of course, but I would bet there are a few more decades it will work.
  - hdgvhicv 1y ago
    Over the last 40 years the S&P has consistently increased around 7% a year more than wages regardless of “money printing” or interest rates
    - lotsofpulp 1y ago
      It’s not regardless of government intervention. There have been numerous bailouts and interest rates deductions specifically to backstop SP500. It is a stealth tax that targets the young (or those too poor to be beneficiaries), because leaders need to maintain purchasing power for their voters’ benefits (the vast majority going to the old) and the solvency of taxpayer funded defined benefit pensions.
- betaby 1y ago
  > Workers will see higher wages as there is more work and fewer people to do the work Canada effectively has removed immigration cap. So no, not going to happen.
AnthonyMouse 1y ago
> I.e. people who need to work, which means it disproportionately affects the young. In general currency devaluation causes nominal wages to increase along with the price of everything else. The people who get screwed are creditors, especially creditors who issued debt at a fixed interest rate. Which is kind of not that bad, except that creditors tend to have a lot of political power and then use it to either get bailed out by the taxpayer or get policies put in place to prevent inflation from eroding existing debts even if those policies have harsh consequences for other people.

sciencesama 1y ago

But how ??

nostromo 1y ago

The issue is that all governments are in roughly the same situation, so there is no alternative other than maybe gold. The US doesn't need to be great or even good, it just needs to be better than the alternatives. The issues facing China and the EU make America's spending problem look mild. (And I agree by the way: America has a massive spending problem.)

pavlov 1y ago
EU government debt to GDP ratio is 81.8% with a deficit of 2.9%. US current debt to GDP is 124%, and Trump’s big beautiful bill is projected to increase the deficit to 7% next year. America has long benefited from a more dynamic and attractive labor market than Europe, but the current administration is actively trying destroy that advantage by driving out the immigrants that were fueling it.
- nostromo 1y ago
  Now look at economic growth rates. To be clear, I think US spending is too high. But I would take a bit more debt and thriving economic growth vs a bit less debt and zero economic growth every time.
  - lossolo 1y ago
    Real GDP growth in 2024 was approximately 2.8%. The federal budget deficit for fiscal year 2024 totaled around 6.4% of GDP. It's unsustainable long term.
- peterfirefly 1y ago
  Your last line ruined a good post.
nostrademons 1y ago
That's not necessarily true - it's possible for all governments to fail. The winner might be something that doesn't even register as a government today, maybe something like privatized micro-nations out of Snow Crash, city-states, or a crypto-economy. There are times in history when a government fails, and then there are times when all governments fail, and the world re-organizes (usually after a long and bloody period of multiple wars) into a new system of social organization. The idea of a modern nation-state is only about 150 years old, dating from a series of wars (the U.S. Civil War, the German and Italian wars of unification, the Franco-Prussian War, the Meiji Restoration) in the 1860s-1880s. Before then, the early nation states and concept of nationalism arose out of European Wars of Religion in the early 1600s. Someone who lived under high-Medieval feudalism c. 1300, when the divine right of Kings was a given, would've found the world of the late 1600s quite alien.

phkahler 1y ago

Agree. But debt to GDP will continue to rise, and that eventually leads to something very bad.

TheOtherHobbes 1y ago

There is no "overspending." There is only undertaxing. The debt is literally just the accumulated difference between spending and taxation. If extreme wealth was taxed, the debt would be zero. The point isn't even to "pay for spending" but to enforce a functional social contract, and to limit the political and democratic distortions created by extreme inequality. "Markets" should not have a veto on policy in a democracy. Making it non-zero is a policy choice. Inflating away this debt is also a policy choice. There is nothing accidental about this. What will not be inflated away is personal debt. That will remain linked to inflation even after the currency is revalued, and will be captured from personal assets wherever possible.

tobias3 1y ago
Yeah, but for taxation you need state capacity to enforce it which was chainsawed/DOGED away.
- nostromo 1y ago
  This isn't true. US tax revenue in 2025 is on track to be the highest ever.
  - const_cast 1y ago
    Perfect, just in time to put a teeny tiny dent in our new 2 Trillion dollar raised deficit! Thanks "party of fiscal responsibility"!
  - dcherman 1y ago
    Adjusted for inflation?
hilsdev 1y ago
Why is the default to tax more and not spend less? Is there really no limit to the amount of spending the government should do? You see no possible use of resources that would be wasteful?

SadErn 1y ago

You forget the imperialism option

DrScientist 1y ago

> The US will be forced, it will not decide, but be forced, to inflate away its debt. Which means that people who cannot bury their wealth in (non-treasury!) assets will pay off the debt. There is also the chance of capital flight - and hyper inflation. The debt holders could also lose out remember - if the dollar becomes less valuable then any holdings in the dollar ( including debt ) become less valuable.

greyface- 1y ago

> (non-treasury!) assets What about TIPS and I bonds?

ksherlock 1y ago
Those are based on what the government says the inflation rate is, not on what the inflation rate is. The CPI is published by the BLS. Did you know that? Erika McEntarfer probably knew that.