4 ms·

It's not a problem so long as borrowing costs are low. Now if USD loses reserve status, that could be very problematic, since the US basically spreads its borr

It's not a problem so long as borrowing costs are low. Now if USD loses reserve status, that could be very problematic, since the US basically spreads its borrowing costs to the entire world.

nyeah 5mo ago
Agreed. And driving 95mph is not a problem as long as there aren't any tricky situations hidden a few miles down the road.
- ndsipa_pomu 5mo ago
  There's seldom any problem when you're still driving at 95mph - it's slowing down (the sudden slowdowns are the worst) that's problematic
  - nyeah 5mo ago
    Great point. Almost by definition, as long as we're going 95mph in a straight line, we're still ok. But some alarmist passenger might get emotional anyway. (Sigh. People are people.)
sunir 5mo ago
No, it's still a problem. The reserve currency just raises the headroom by something like 20 points by making cost of borrowing lower than it would be otherwise. There is no free lunch, just subsidized lunch.
mrweasel 5mo ago
Italy and Greece have been running at over 100% for ~30 years. It's not great, but it's also not the end of the world. It's even less bad for the US, as long as lenders still trust that the US government will pay them back. 30% of GDP would be better, but 100% isn't going to collapse the US economy on it's own.
- TheCoelacanth 5mo ago
  The ratio itself is less worrying than how fast the ratio is increasing. It was under 80% in 2019 and under 40% in 2009[1]. (This is excluding debt the government owes itself, which I believe WSJ is also doing). [1] https://www.pgpf.org/article/how-much-is-the-national-debt-what-are-the-different-measures-used/ https://www.pgpf.org/article/how-much-is-the-national-debt-w...
  - jjk166 5mo ago
    The selection of those data points is rather misleading. Debt to GDP ratio tends to spike during recession recovery. There were spikes in 2009 and 2020 due to the Great Recession and Pandemic respectively. The level was pretty flat from 2001 to 2008, from 2013 to 2019, and 2021 to now. The current growth rate for the past 3 years is pretty in line with what it was from 1982 to 1994.
    - rolph 5mo ago
      yah it needs a regression or other trend analysis
- insane_dreamer 5mo ago
  The Greek economy has collapsed at least once in the past 30 years (maybe more, that's just off the top of my head), and had to be rescued by the EU. So I wouldn't use that as an example.
derektank 5mo ago
Borrowing costs have already gone up. The 10 year treasury yield is already double from where it was during the 2010s. There are other factors contributing but it’s worth mentioning as a partial factor
AnimalMuppet 5mo ago
It is not just reserve status that keeps borrowing costs low. It helps, but it's not the whole story. The US dollar was the reserve currency in 1979. That didn't keep borrowing costs down.
- cestith 5mo ago
  The US dollar is now also the oil exchange currency, and the US is a major oil producer so harder to squeeze. Remember what else happened in 1973 and 1979?

It's not a problem so long as borrowing costs are low. Now if USD loses reserve status, that could be very problematic, since the US basically spreads its borrowing costs to the entire world.

nyeah 5mo ago

Agreed. And driving 95mph is not a problem as long as there aren't any tricky situations hidden a few miles down the road.

ndsipa_pomu 5mo ago
There's seldom any problem when you're still driving at 95mph - it's slowing down (the sudden slowdowns are the worst) that's problematic
- nyeah 5mo ago
  Great point. Almost by definition, as long as we're going 95mph in a straight line, we're still ok. But some alarmist passenger might get emotional anyway. (Sigh. People are people.)

sunir 5mo ago

No, it's still a problem. The reserve currency just raises the headroom by something like 20 points by making cost of borrowing lower than it would be otherwise. There is no free lunch, just subsidized lunch.

mrweasel 5mo ago

Italy and Greece have been running at over 100% for ~30 years. It's not great, but it's also not the end of the world. It's even less bad for the US, as long as lenders still trust that the US government will pay them back. 30% of GDP would be better, but 100% isn't going to collapse the US economy on it's own.

TheCoelacanth 5mo ago
The ratio itself is less worrying than how fast the ratio is increasing. It was under 80% in 2019 and under 40% in 2009[1]. (This is excluding debt the government owes itself, which I believe WSJ is also doing). [1] https://www.pgpf.org/article/how-much-is-the-national-debt-what-are-the-different-measures-used/ https://www.pgpf.org/article/how-much-is-the-national-debt-w...
- jjk166 5mo ago
  The selection of those data points is rather misleading. Debt to GDP ratio tends to spike during recession recovery. There were spikes in 2009 and 2020 due to the Great Recession and Pandemic respectively. The level was pretty flat from 2001 to 2008, from 2013 to 2019, and 2021 to now. The current growth rate for the past 3 years is pretty in line with what it was from 1982 to 1994.
  - rolph 5mo ago
    yah it needs a regression or other trend analysis
insane_dreamer 5mo ago
The Greek economy has collapsed at least once in the past 30 years (maybe more, that's just off the top of my head), and had to be rescued by the EU. So I wouldn't use that as an example.

derektank 5mo ago

Borrowing costs have already gone up. The 10 year treasury yield is already double from where it was during the 2010s. There are other factors contributing but it’s worth mentioning as a partial factor

AnimalMuppet 5mo ago

It is not just reserve status that keeps borrowing costs low. It helps, but it's not the whole story. The US dollar was the reserve currency in 1979. That didn't keep borrowing costs down.

cestith 5mo ago
The US dollar is now also the oil exchange currency, and the US is a major oil producer so harder to squeeze. Remember what else happened in 1973 and 1979?