I don't like just treating trust fund debt as if it doesn't exist. It's not so much that the government owes itself that money, it owes the American people that money via Social Security. So it's as much a public debt as any other. I especially don't like ignoring it like this because it implies the US government simply needs to ignore that obligation to the public, let millions retire with no safety net, and just default on trillions of debt. It's horrible from every financial perspective. What should be mentioned is that Social Security could easily be well in the black with even higher payments to retirees by simply raising the income limit on the social security tax. The biggest problem with funding Social Security is that income inequality has ballooned, so more and more income is exempt from the tax.
> What should be mentioned is that Social Security could easily be well in the black with even higher payments to retirees by simply raising the income limit on the social security tax.
Obviously. It could also be in the black if you raised the rate 2x...
> I especially don't like ignoring it like this because it implies the US government simply needs to ignore that obligation to the public, let millions retire with no safety net, and just default on trillions of debt.
The US government might technically default - i.e. miss payments - but the payments will likely be delayed (due to political BS) rather than not paid in full w/ accrued interest.
They've missed payments before. They'll probably miss them again. But they can literally print money. There's zero reason to truly default - and ENORMOUS consequences if they do.
AFAIK, The Treasury at least claimed to be able to pay SS benefits in full even if the US "defaulted" (delayed) Treasury payments.
It's hard for me to imagine a world in which the government just doesn't pay SS Treasuries. With enough political will, anything is possible. But even if political winds change dramatically - there's no way around how enormous the financial consequences would be to everyone in the country.
I guess you can never underestimate how much politicians are willing to destroy this country to get a very small soundbite on TV - but I'm skeptical this is worth worrying about.
Is it possible COLA for SS will be nerfed? That seems within the realm of possibility.
Is it possible the Federal Government just decides to stop paying Treasuries SPECIFICALLY to SS? Super-dooper highly unlikely.
The question is, is Social Security's Old Age, Survivors, and Disability Insurance program insurance, or is it a government welfare program.
If it's insurance, than removing the cap on income charges without removing the cap on benefits is fundamentally unfair.
If it's a social welfare program, having a trust fund doesn't make a whole lot of sense. As well as quite some other things like paying people more benefits when they've had a higher historic income; that's the opposite of what I'd expect from a welfare program.
IMHO, it's a social welfare program that pretends to be an insurance scheme with wacky rules. Maintaining the fiction of an insurance scheme is clearly important to acceptance. There's also lots of features to encourage behaviors... Be sure to stay married for at least ten years to qualify for spousal benefits. Be sure to save up so you can delay claiming, and wink take advantage of our outdated actuarial tables. Don't forget to earn more money now (and pay more taxes now) so you can get higher benefits later.
Isn't the trust fund a fake concept? Benefits are always going to be paid from current year tax or borrowing. You can't actually "invest" trillions for the future if you're a government. At least that's what my Economist mother told me.
The core problem with trust fund debt is that if the government maintained assets for the social security trust fund the way vanguard or fidelity did, the underlying assets would be so high that the government would start to own and control a large part of the American economy.
Do we really want all our company's to be majority owned by the government?
The practical answer from the government's perspective was to just the loan the money to itself. Except the problem now is that the government owes itself a lot of money.
Reality is that there is not trust fund and current payers simply have to pay the benefits for existing retirees. That's the way it has always been and that's the way it's always will be.
There will be economic problems no matter how the government handles such a large amount of money.
I believe that whenever there is a crisis or issue they will simply raise the income limits to correct it, and that's largely been happening as the income limit is going up and up and up every year. Way more than it did 20 years ago.
I don't understand the problem with Social Security. The Federal Reserve has already willed hundreds of billions into existence for COVID relief and wars in the last few years. What's another few hundred billion more for Social Security in a few years?
> the moonshot model combines mathematical advances with large-scale computing to solve the “curse of dimensionality” commonly found in quantum computing problems.
Had to stop reading at the point. The curse of dimensionality is, in fact, completely independent from any sense of "quantum" computing problems. Given that their understanding of the CoD is so poor, I can only assume the author has an equally poor understanding of everything else they are writing about.
US debt to GDP ratio is greater than 120%. The IMF defines that as an economic death spiral. By 2028 the loan payments we make on all that debt/money we printed will only cover the interest, no longer the principal, and the death spiral becomes irreversible with US insolvency by 2042. Historically, we are at the point where there's a depression, war, and/or a new monetary system. That's how they reset and seize more power. We need not only a balanced budget amendment, but massive spending/entitlement cuts and austerity, as well as boost in GDP/exports because we can't service our own debt and have relied on other nations to buy our bonds. They are selling our bonds and not buying these days. Markets WERE looking at a lost decade, but the past week or so have been looking at 30 year treasuries, so 30 years.
> We need not only a balanced budget amendment, but massive spending/entitlement cuts and austerity, as well as boost in GDP/exports because we can't service our own debt and have relied on other nations to buy our bonds.
Massive spending/entitlement cuts aren't popular.
~40% of the country is on either Medicaid, SNAP, Medicare, or Social Security.
That's ~46% of Federal spending. Besides Republicans for SNAP - it's completely untouchable.
~12% of Federal spending is the military. With all the wars going on - good luck cutting that.
After interest - you only have ~16% of spending left to cut. And that's the stuff I think most people are in agreement we actually want!
You can't squeeze blood from a stone.
What's most likely to happen is that instead of ~40% of US adults not working - that number will decrease - and you'll have a larger, more productive tax base and less people on entitlements - strictly due to market forces.
This is false. The vast majority of US government debt is held domestically. Foreign holdings have been increasing, but as of 2022, still only represents 30% of debt.
> By 2028 the loan payments we make on all that debt/money we printed will only cover the interest, no longer the principal
Based on what? What is the "loan payments" here? Are you saying the US budget will be 100% dedicated to servicing the debt by 2028? This is certainly false, the cost to service debt will not go up ~10x in the next five years.
You mention austerity but not tax increases? First order of business is repeal of the Trump tax cuts, those are definitely unsustainable and a major contributor to current budget deficits.
> Historically, we are at the point where there's a depression, war, and/or a new monetary system.
Well, the talking heads on MSNBC, Bloomberg, et. all are saying a recession (if not a depression) in the near term is inevitable. A hot war in a really volatile part of the world kicked off the other day. Crypto isn't the new kid on the block anymore but it's definitely still hanging around.
Seems all your conditions are close to being met, if they aren't already. Yikes.
>We need not only a balanced budget amendment, but massive spending/entitlement cuts and austerity
So much this. Somehow I imagine that for example, the Pentagon, wouldn't really see its operational readiness hindered if we cut its budget by $100 billion a year or so.
In my estimation, there are two unsustainable end states, one economic, one social.
Economically, it seems things will fall apart when interest payments balloon to become by far the dominating expense of the US government. At this point, the runaway cost of interest will force even faster money printing, resulting in a positive hyperinflationary feedback loop. Eventually the printing will outpace economic growth, which means inflation will be cannibalizing the actual economic output of the people. People will either stop working or find other mediums to trade in.
The social endpoint can happen at any point along the way there. It's a fairly well-known historical reality that a failing elite faces the threat of replacement when new elites can obtain the blessing of the populace; otherwise the populace is hopeless. A campaign to permanently stamp down potential new leaders wherever they may arise is feasible for a limited time but eventually becomes too expensive or diverts all attention away from important material realities. Once there is a cycling of the elites, a drastic shift in policy would undoubtedly be the result. In this scenario, it's highly like that violence occurs.
I'd obviously much prefer the first scenario, where people find other ways to trade peacefully before they start a revolution.
> Debt service as a share of federal outlays peaked at more than 15% in the mid-1990s, but generally falling interest rates have helped hold down payments even as the dollar amount continues to grow.
Right near the top, the authors briefly mention their critical assumption:
> As we have discussed elsewhere, government debt reduces economic activity by crowding out private capital formation ...
I stopped reading at that point, because many economists disagree with that assumption. To understand why, consider:
* When the US government borrows to spend on things like, say, battleships, fighter jets, satellites, AI software, etc., every dollar it spends is a dollar of revenues to a private company like Lockheed Martin, Raytheon, Amazon, Microsoft, Palantir, etc., which invests in its business, inducing private capital formation.
* When the US government borrows to spend on healthcare, every dollar it spends is a dollar of revenues to a private hospital, vendor, practice, or doctor, all of whom invest in technology, facilities, training, etc., inducing private capital formation.
* When the US government borrows to spend on anything, every dollar it spends is a dollar of revenues to a private entity or citizen -- who else? What matters is whether that entity or citizen invests a portion of those revenues in endeavors that induce private capital formation in the US.
Things are not as simple and clear-cut as the authors would like them to be!
I don’t know the answer to this, but in the future, perhaps in 10 years, we will be able to look back with hindsight and better understand the wax and waning of yet another empire.
I am an old man, and one thing I have learned in a long life is that if something seems unclear, then wait a few years for more data.
The "comforting" thought here is that Rome took centuries to collapse. While the USSR collapse was much faster, it's still being milked to this day.
As another person, there is still the infrastructure (military and civilian), capital (trucks, heavy equipment, electric), domain knowledge, work & work best practices (read OSHA), culture, etc.
If one were to accept the premise that it will eventually reach some unsustainable level, then it makes sense to start wondering what course of action an individual person/household can take to best prepare for such an event.
Putting all of your money into Bitcoin/gold right now is a terrible idea for an event predicted to occur in 20 years. So what do you do now? Next year?
> The answer is: "when the world stops using the dollar".
The world uses EUR, JPY, CAD, etc much less than USD, and plenty of countries (CA, NL, FR, DE, Greece(!), Italy(!), Thailand(!)) have lower borrowing costs than the US:
I was waiting for the article to eventually get around to discussing the current distribution of $US in central banks around the world and the role that global trade plays in backing up US debt - they never got there, so I don't think the article has any explanatory value.
If the US was an IMF country it would be way off the reservation. The amount of outstanding debt is massive, and I don't think any of the older models would be able to handle it.
If anything, today's environment negates the reality of "crowding out."
That said, the debt will be at an "unsustainable level" when people stop buying it.
> That said, the debt will be at an "unsustainable level" when people stop buying it.
Treasury auctions can’t fail. I don’t mean failure is highly unlikely. I mean as the system is structured it’s operationally impossible for them to fail. There is no case where the primary dealers in aggregate can ever lack the reserves to make a market.
Of course, nothing lasts forever. The US government’s currency issuance (a much clearer way to think of it than “debt”) depends on demand for that currency. Sure, oil is a part of it, but a much larger part is tax burden. It’s not an accident that the USA claims and has the authority to tax its citizens worldwide. That and there is a large highly diversified economy that does business in dollars, so you can get pretty much anything from computer chips to F-35s with USD so they’re generally useful to have.
In fact, it would be operationally impossible for any other fiat currency to effectively replace the USD unless its issuer were willing to run sufficient deficits (“print money”/“issue debt”) in amounts sufficient to meet global demand for both payment clearing and holding financial reserves.
I find monetary alarmism so lazy and yet I always feel compelled to comment.
I’ve never heard a compelling argument to explain just how a monetary system in which all monetized debt becomes privately held wealth, can be framed as debt being a “scary, unsustainable thing” as if it’s household debt. At least this article frames it as a relationship with investors, but it still doesn’t cut to the meat of the issue, to me at least.
Writing debt in an out of existence seems way more conceptually scary than it is dangerous in reality, at least for an economy where households spend on average about 5,000 dollars a month.
It seems a much more important topic is monetary hegemony, than some certain debt to GDP ratio, but I never seem to see those concepts mentioned.
This is the wrong question. When does federal debt increase rate become unsustainable?
As common wisdom states, federal debt is public surplus. It's the set of things that the federal government has invested funding in that haven't been liquidated. This includes roads, streetlights, parks, power substations, etc.
The relevant question for our economy is how quickly is the federal government spending, and what is the value created from that spending?
For some background on the authors' thinking, two of them previously published:
Jagadeesh Gokhale and Kent Smetters, Fiscal and Generational Imbalances: New Budget Measures for New Budget Priorities, American Enterprise Institute, AEI Press: 2003.
By definition the debt exists because people want to save. If they didn't want to save they'd spend and if they spend it is taxed which closes the deficit.
It's a simple geometric series.
Japan has debt to GDP ratios of 268% with both interest rates and inflation near the floor.
The mental model people are using is simply wrong.
According to Modern Monetary Theory, debt levels do not matter. Japan has sustained a 200% debt-to-GDP level for decades. I don't think the US has very much to worry about for a while, despite all the fearmongering.
It was literally unsustainable then as it was in 1933. Unsustainability, now that it is pure fiat, has to be defined in order to answer the title question. The definition of such, may differ from person to person or entity to entity. In my opinion it is unsustainable when the inflation from printing to pay the interest or rate hike recession causes social unrest. We are arguably in the midst of that right now, though very few people realize how their lives are being impacted by the printing of money. Stable means of exchange is the single most important factor in preventing revolution.
The fed is in a bind. Print and inflate or QT/rate hike and recession. They've been putting a thread through the eye of the needle. The eye is getting smaller and the thread bigger everyday. One day they won't be able to sew.
yup, people on online communities think Reagan screwed America up but IMO the real underlying cause was abandonment of gold standard. It basically provided a decoupling of monetary policy from underlying physical inputs like energy (gold traditionally used to be a proxy for that). once money was 'freed' the politicians & elites were empowered to do whatever as they can always print more. is it any wonder all the pro-corporate/anti worker policies & prison population exploded since the 80s.
Now something more controversial, in my fairytale ending I'd have expected proof-of-work type crypto currencies to have provided at least some counter balance to the fed money printer but in really bitcoin/crypto because more correlated with liquidity. I doubt that going to change ever.
For having hit unsustainable levels in 1971, it has sure held up well for the last 52 years. I would expect something unsustainable to do less sustaining.
(Now, true, the federal debt was unsustainable under the Bretton Woods arrangement.)
When the resource that backs it, aka imperial security provided vs economic value extracedrreaches zero. So the answer is.. Global war, global collapse..
[+] [-] _uhtu|2 years ago|reply
[+] [-] onlyrealcuzzo|2 years ago|reply
Obviously. It could also be in the black if you raised the rate 2x...
> I especially don't like ignoring it like this because it implies the US government simply needs to ignore that obligation to the public, let millions retire with no safety net, and just default on trillions of debt.
The US government might technically default - i.e. miss payments - but the payments will likely be delayed (due to political BS) rather than not paid in full w/ accrued interest.
They've missed payments before. They'll probably miss them again. But they can literally print money. There's zero reason to truly default - and ENORMOUS consequences if they do.
AFAIK, The Treasury at least claimed to be able to pay SS benefits in full even if the US "defaulted" (delayed) Treasury payments.
It's hard for me to imagine a world in which the government just doesn't pay SS Treasuries. With enough political will, anything is possible. But even if political winds change dramatically - there's no way around how enormous the financial consequences would be to everyone in the country.
I guess you can never underestimate how much politicians are willing to destroy this country to get a very small soundbite on TV - but I'm skeptical this is worth worrying about.
Is it possible COLA for SS will be nerfed? That seems within the realm of possibility.
Is it possible the Federal Government just decides to stop paying Treasuries SPECIFICALLY to SS? Super-dooper highly unlikely.
[+] [-] toast0|2 years ago|reply
If it's insurance, than removing the cap on income charges without removing the cap on benefits is fundamentally unfair.
If it's a social welfare program, having a trust fund doesn't make a whole lot of sense. As well as quite some other things like paying people more benefits when they've had a higher historic income; that's the opposite of what I'd expect from a welfare program.
IMHO, it's a social welfare program that pretends to be an insurance scheme with wacky rules. Maintaining the fiction of an insurance scheme is clearly important to acceptance. There's also lots of features to encourage behaviors... Be sure to stay married for at least ten years to qualify for spousal benefits. Be sure to save up so you can delay claiming, and wink take advantage of our outdated actuarial tables. Don't forget to earn more money now (and pay more taxes now) so you can get higher benefits later.
[+] [-] dboreham|2 years ago|reply
[+] [-] daft_pink|2 years ago|reply
Do we really want all our company's to be majority owned by the government?
The practical answer from the government's perspective was to just the loan the money to itself. Except the problem now is that the government owes itself a lot of money.
Reality is that there is not trust fund and current payers simply have to pay the benefits for existing retirees. That's the way it has always been and that's the way it's always will be.
There will be economic problems no matter how the government handles such a large amount of money.
I believe that whenever there is a crisis or issue they will simply raise the income limits to correct it, and that's largely been happening as the income limit is going up and up and up every year. Way more than it did 20 years ago.
[+] [-] linuxftw|2 years ago|reply
[+] [-] orangepurple|2 years ago|reply
[+] [-] kelseyfrog|2 years ago|reply
Had to stop reading at the point. The curse of dimensionality is, in fact, completely independent from any sense of "quantum" computing problems. Given that their understanding of the CoD is so poor, I can only assume the author has an equally poor understanding of everything else they are writing about.
[+] [-] JakeAl|2 years ago|reply
[+] [-] onlyrealcuzzo|2 years ago|reply
Massive spending/entitlement cuts aren't popular.
~40% of the country is on either Medicaid, SNAP, Medicare, or Social Security.
That's ~46% of Federal spending. Besides Republicans for SNAP - it's completely untouchable.
~12% of Federal spending is the military. With all the wars going on - good luck cutting that.
After interest - you only have ~16% of spending left to cut. And that's the stuff I think most people are in agreement we actually want!
You can't squeeze blood from a stone.
What's most likely to happen is that instead of ~40% of US adults not working - that number will decrease - and you'll have a larger, more productive tax base and less people on entitlements - strictly due to market forces.
[+] [-] jmcqk6|2 years ago|reply
> have relied on other nations to buy our bonds.
This is false. The vast majority of US government debt is held domestically. Foreign holdings have been increasing, but as of 2022, still only represents 30% of debt.
[+] [-] BurningFrog|2 years ago|reply
This unit of measure is really unfortunate. It makes it seem like 100% is some maximum limit.
When I become Unit Emperor, it will be "US debt is over 14 months of GDP".
[+] [-] pif|2 years ago|reply
> They are selling our bonds and not buying these days.
Who is "they"?
[+] [-] throw1234651234|2 years ago|reply
[+] [-] roflyear|2 years ago|reply
Based on what? What is the "loan payments" here? Are you saying the US budget will be 100% dedicated to servicing the debt by 2028? This is certainly false, the cost to service debt will not go up ~10x in the next five years.
[+] [-] unknown|2 years ago|reply
[deleted]
[+] [-] while_true_|2 years ago|reply
[+] [-] unknown|2 years ago|reply
[deleted]
[+] [-] NickC25|2 years ago|reply
Well, the talking heads on MSNBC, Bloomberg, et. all are saying a recession (if not a depression) in the near term is inevitable. A hot war in a really volatile part of the world kicked off the other day. Crypto isn't the new kid on the block anymore but it's definitely still hanging around.
Seems all your conditions are close to being met, if they aren't already. Yikes.
>We need not only a balanced budget amendment, but massive spending/entitlement cuts and austerity
So much this. Somehow I imagine that for example, the Pentagon, wouldn't really see its operational readiness hindered if we cut its budget by $100 billion a year or so.
[+] [-] netbioserror|2 years ago|reply
Economically, it seems things will fall apart when interest payments balloon to become by far the dominating expense of the US government. At this point, the runaway cost of interest will force even faster money printing, resulting in a positive hyperinflationary feedback loop. Eventually the printing will outpace economic growth, which means inflation will be cannibalizing the actual economic output of the people. People will either stop working or find other mediums to trade in.
The social endpoint can happen at any point along the way there. It's a fairly well-known historical reality that a failing elite faces the threat of replacement when new elites can obtain the blessing of the populace; otherwise the populace is hopeless. A campaign to permanently stamp down potential new leaders wherever they may arise is feasible for a limited time but eventually becomes too expensive or diverts all attention away from important material realities. Once there is a cycling of the elites, a drastic shift in policy would undoubtedly be the result. In this scenario, it's highly like that violence occurs.
I'd obviously much prefer the first scenario, where people find other ways to trade peacefully before they start a revolution.
[+] [-] throw0101a|2 years ago|reply
* https://en.wikipedia.org/wiki/National_debt_of_Japan
The UK has been over 150% a number of times, as well as over 200% (nearly 250%):
* https://en.wikipedia.org/wiki/File:UK_debt_as_GDP_percent.pn...
With interst-as-GDP getting close to 10%:
* https://en.wikipedia.org/wiki/United_Kingdom_national_debt#/...
* https://en.wikipedia.org/wiki/United_Kingdom_national_debt
For the US (#5, towards bottom):
> Debt service as a share of federal outlays peaked at more than 15% in the mid-1990s, but generally falling interest rates have helped hold down payments even as the dollar amount continues to grow.
* https://www.pewresearch.org/short-reads/2023/02/14/facts-abo...
[+] [-] cs702|2 years ago|reply
> As we have discussed elsewhere, government debt reduces economic activity by crowding out private capital formation ...
I stopped reading at that point, because many economists disagree with that assumption. To understand why, consider:
* When the US government borrows to spend on things like, say, battleships, fighter jets, satellites, AI software, etc., every dollar it spends is a dollar of revenues to a private company like Lockheed Martin, Raytheon, Amazon, Microsoft, Palantir, etc., which invests in its business, inducing private capital formation.
* When the US government borrows to spend on healthcare, every dollar it spends is a dollar of revenues to a private hospital, vendor, practice, or doctor, all of whom invest in technology, facilities, training, etc., inducing private capital formation.
* When the US government borrows to spend on anything, every dollar it spends is a dollar of revenues to a private entity or citizen -- who else? What matters is whether that entity or citizen invests a portion of those revenues in endeavors that induce private capital formation in the US.
Things are not as simple and clear-cut as the authors would like them to be!
[+] [-] mark_l_watson|2 years ago|reply
I am an old man, and one thing I have learned in a long life is that if something seems unclear, then wait a few years for more data.
[+] [-] throw1234651234|2 years ago|reply
As another person, there is still the infrastructure (military and civilian), capital (trucks, heavy equipment, electric), domain knowledge, work & work best practices (read OSHA), culture, etc.
[+] [-] Kon-Peki|2 years ago|reply
Putting all of your money into Bitcoin/gold right now is a terrible idea for an event predicted to occur in 20 years. So what do you do now? Next year?
[+] [-] mcone|2 years ago|reply
How is it a worse idea than, say, putting all of your money into your 401k fund for 20 years?
[+] [-] bullen|2 years ago|reply
There is no spoon.
[+] [-] throw0101a|2 years ago|reply
The world uses EUR, JPY, CAD, etc much less than USD, and plenty of countries (CA, NL, FR, DE, Greece(!), Italy(!), Thailand(!)) have lower borrowing costs than the US:
* https://www.investing.com/rates-bonds/world-government-bonds
[+] [-] echelon|2 years ago|reply
It isn't a free money printing game forever.
[+] [-] photochemsyn|2 years ago|reply
[+] [-] zby|2 years ago|reply
[+] [-] killjoywashere|2 years ago|reply
Reference is to the Matrix, the young monk in the waiting room who is bending a spoon with his intent.
https://screenrant.com/matrix-movie-no-spoon-phrase-meaning-...
edit: why the downvotes? I saw the original movie in theaters, I still didn't get the reference. Some of us are old.
[+] [-] mannyv|2 years ago|reply
If anything, today's environment negates the reality of "crowding out."
That said, the debt will be at an "unsustainable level" when people stop buying it.
[+] [-] wing-_-nuts|2 years ago|reply
And that won't happen until the rest of the world gets their house in order.
[+] [-] User23|2 years ago|reply
Treasury auctions can’t fail. I don’t mean failure is highly unlikely. I mean as the system is structured it’s operationally impossible for them to fail. There is no case where the primary dealers in aggregate can ever lack the reserves to make a market.
Of course, nothing lasts forever. The US government’s currency issuance (a much clearer way to think of it than “debt”) depends on demand for that currency. Sure, oil is a part of it, but a much larger part is tax burden. It’s not an accident that the USA claims and has the authority to tax its citizens worldwide. That and there is a large highly diversified economy that does business in dollars, so you can get pretty much anything from computer chips to F-35s with USD so they’re generally useful to have.
In fact, it would be operationally impossible for any other fiat currency to effectively replace the USD unless its issuer were willing to run sufficient deficits (“print money”/“issue debt”) in amounts sufficient to meet global demand for both payment clearing and holding financial reserves.
[+] [-] Gabriel_Martin|2 years ago|reply
I’ve never heard a compelling argument to explain just how a monetary system in which all monetized debt becomes privately held wealth, can be framed as debt being a “scary, unsustainable thing” as if it’s household debt. At least this article frames it as a relationship with investors, but it still doesn’t cut to the meat of the issue, to me at least.
Writing debt in an out of existence seems way more conceptually scary than it is dangerous in reality, at least for an economy where households spend on average about 5,000 dollars a month.
It seems a much more important topic is monetary hegemony, than some certain debt to GDP ratio, but I never seem to see those concepts mentioned.
[+] [-] uoaei|2 years ago|reply
As common wisdom states, federal debt is public surplus. It's the set of things that the federal government has invested funding in that haven't been liquidated. This includes roads, streetlights, parks, power substations, etc.
The relevant question for our economy is how quickly is the federal government spending, and what is the value created from that spending?
[+] [-] matwood|2 years ago|reply
[+] [-] elforce002|2 years ago|reply
[+] [-] throw0101a|2 years ago|reply
Jagadeesh Gokhale and Kent Smetters, Fiscal and Generational Imbalances: New Budget Measures for New Budget Priorities, American Enterprise Institute, AEI Press: 2003.
* https://www.aei.org/research-products/book/fiscal-and-genera...
Also from 2005, on Social Security:
* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=649204
Smetters previously (1999) on models to privatize Social Security:
* https://www.sciencedirect.com/science/article/pii/S109420259...
[+] [-] neilwilson|2 years ago|reply
By definition the debt exists because people want to save. If they didn't want to save they'd spend and if they spend it is taxed which closes the deficit.
It's a simple geometric series.
Japan has debt to GDP ratios of 268% with both interest rates and inflation near the floor.
The mental model people are using is simply wrong.
[+] [-] bilekas|2 years ago|reply
[+] [-] purpleblue|2 years ago|reply
[+] [-] applied_heat|2 years ago|reply
[+] [-] 23B1|2 years ago|reply
[+] [-] ghastmaster|2 years ago|reply
The fed is in a bind. Print and inflate or QT/rate hike and recession. They've been putting a thread through the eye of the needle. The eye is getting smaller and the thread bigger everyday. One day they won't be able to sew.
[+] [-] DesiLurker|2 years ago|reply
Now something more controversial, in my fairytale ending I'd have expected proof-of-work type crypto currencies to have provided at least some counter balance to the fed money printer but in really bitcoin/crypto because more correlated with liquidity. I doubt that going to change ever.
[+] [-] AnimalMuppet|2 years ago|reply
(Now, true, the federal debt was unsustainable under the Bretton Woods arrangement.)
[+] [-] brightball|2 years ago|reply
[+] [-] 3seashells|2 years ago|reply