3 ms·
> Taking in more debt to pay for old debt is not sustainable. Of course it is. Rolling over debt securities is everyday practice for both governments and priva
by slurry 14y ago
> Taking in more debt to pay for old debt is not sustainable.
Of course it is. Rolling over debt securities is everyday practice for both governments and private companies.
> In no way can western states sustain the entirety of their assumed obligations (to bond holders, social beneficiaries and special interest).
That depends on what kind of economic growth we have going forward. Your statement is certainly true if countries keep auteritizing themselves into deflationary death spirals. It is probably true if countries keep relying on upper-income tax breaks and labor market "liberalization" for growth - arguably worked 30 years ago, but returns on that strategy seem to be diminishing. It is not necessarily true under all circumstances.
> People are getting stiffed on old debt, it's only a matter of who, how much and how soon.
It's generally been the case that inflation + economic growth have made old debts shrink as % of GDP. When both of those are negative, debt-holders make a lot of real money, but risk of default goes way up.
- iwwr 14y agoThe trick is growing the debt slower or at the same rate than the economy. But political incentives accelerate debt acquisition when the consequences are not going to hit for a couple of mandates. It's surprising that governments have not been more profligate than they were. But eventually, someone's going to be in charge when the bills come due. As for the austerity 'death spiral', we can have some sympathy for those social beneficiaries being promised payments. Bond contracts weigh heavier than political commitments (once defaulted, people stop buying debt titles, but once lied to people keep voting).