3 ms·

I've always heard people say that the US debt doesn't matter when the debt itself is denominated in USD. It's the old saying, if you owe the bank $1,000 then y

by petcat 2mo ago

I've always heard people say that the US debt doesn't matter when the debt itself is denominated in USD. It's the old saying, if you owe the bank $1,000 then you have a problem. But if you owe the bank a trillion dollars then the bank has a problem. Especially when that trillion dollars was spent on an insane fleet of aircraft carriers.

bcjdjsndon 2mo ago
Except it's not a bank, it's a country with a few hundred million people that need to work and eat. Once the lenders have a problem, it would already be the end for Americans.
cucumber3732842 2mo ago
The quiet part you're not supposed to say out loud is the "if you don't use our currency to transact for energy and thereby let us tax it via inflation we'll regime change you" implication it comes with.
xnx 2mo ago
This used to be true, but less so after the US started alienating the rest of the world with tariffs and other erratic behavior. The US military has also been revealed to be incapable of controlling the strait of Hormuz.
eigenspace 2mo ago
This idea is based on the fantasy idea of "it's fine because the US can just inflate away its currency to reduce its debts". This is also often used as an argument for why countries shouldn't join the Euro because they'd be giving up an important tool. The reality is that purposefully inflating your currency to reduce your debt burden is going to upset your creditors just as much as if you just defaulted on your debts, but will have the added affect of crippling your economy with inflation. Look at how much Americans freaked out over a year or two of 6% yearly inflation. How do you think Americans would respond to 30% *monthly* inflation like in Argentina or Turkey? It's not like lenders won't notice if the USA tried to print its way out of debt.
- chasd00 2mo ago
  currency manipulation seems to be working for China though. https://home.treasury.gov/news/press-releases/sm751 https://home.treasury.gov/news/press-releases/sm751
  - eigenspace 2mo ago
    1. Markets are aware of that and lend to China accordingly (the ones who are free to choose who to lend to). 2. Do you think Americans would tolerate having a government that purposefully suppresses their purchasing power through structurally low wages, and buying up foreign assets to supress the value of their own currency? 3. The part where China spends all their cash to buy US Treasuries to supress the value of their currency wouldn't really work as well for the USA when international trade is dollar denominated anyways, and the bulk of their GDP comes from domestic consumption. 4. The USA has a deficit. It'd need to borrow even more in order to finance the suppression of their currency, whereas China just redirects the money they earn from export surpluses.
- theappsecguy 2mo ago
  To be fair, it wasn't 6%. The consumer basket gets manipulated in all sorts of ways, but in general it's just not an accurate representation of day to day impact. Food and housing went up much much higher than 6%.
  - eigenspace 2mo ago
    Whatever the number is, we know for a fact that it was 1. Extremely painful to Americans, and became one of the main pillars of their election. 2. Nowhere near high enough to cause any reduction in the USA's debt burden. I think modern Americans are way too soft to even imagine the sort of inflation that'd be required to erase their debts. Things have been too good and too stable for too long to understand what country-wide economic hardship would be like, and even if they somehow decided to choose that path, they'd panic quit it long before it was done long enough to have any effect.
- ghastmaster 2mo ago

by petcat 2mo ago

bcjdjsndon 2mo ago

Except it's not a bank, it's a country with a few hundred million people that need to work and eat. Once the lenders have a problem, it would already be the end for Americans.

cucumber3732842 2mo ago

The quiet part you're not supposed to say out loud is the "if you don't use our currency to transact for energy and thereby let us tax it via inflation we'll regime change you" implication it comes with.

xnx 2mo ago

This used to be true, but less so after the US started alienating the rest of the world with tariffs and other erratic behavior. The US military has also been revealed to be incapable of controlling the strait of Hormuz.

eigenspace 2mo ago

This idea is based on the fantasy idea of "it's fine because the US can just inflate away its currency to reduce its debts". This is also often used as an argument for why countries shouldn't join the Euro because they'd be giving up an important tool. The reality is that purposefully inflating your currency to reduce your debt burden is going to upset your creditors just as much as if you just defaulted on your debts, but will have the added affect of crippling your economy with inflation. Look at how much Americans freaked out over a year or two of 6% yearly inflation. How do you think Americans would respond to 30% *monthly* inflation like in Argentina or Turkey? It's not like lenders won't notice if the USA tried to print its way out of debt.

chasd00 2mo ago
currency manipulation seems to be working for China though. https://home.treasury.gov/news/press-releases/sm751 https://home.treasury.gov/news/press-releases/sm751
- eigenspace 2mo ago
  1. Markets are aware of that and lend to China accordingly (the ones who are free to choose who to lend to). 2. Do you think Americans would tolerate having a government that purposefully suppresses their purchasing power through structurally low wages, and buying up foreign assets to supress the value of their own currency? 3. The part where China spends all their cash to buy US Treasuries to supress the value of their currency wouldn't really work as well for the USA when international trade is dollar denominated anyways, and the bulk of their GDP comes from domestic consumption. 4. The USA has a deficit. It'd need to borrow even more in order to finance the suppression of their currency, whereas China just redirects the money they earn from export surpluses.
theappsecguy 2mo ago
To be fair, it wasn't 6%. The consumer basket gets manipulated in all sorts of ways, but in general it's just not an accurate representation of day to day impact. Food and housing went up much much higher than 6%.
- eigenspace 2mo ago
  Whatever the number is, we know for a fact that it was 1. Extremely painful to Americans, and became one of the main pillars of their election. 2. Nowhere near high enough to cause any reduction in the USA's debt burden. I think modern Americans are way too soft to even imagine the sort of inflation that'd be required to erase their debts. Things have been too good and too stable for too long to understand what country-wide economic hardship would be like, and even if they somehow decided to choose that path, they'd panic quit it long before it was done long enough to have any effect.
ghastmaster 2mo ago