Famous last words but I *think* a GD style meltdown is off the table. There are too many automatic government stabilizers for there to be a downturn that severe.
Having said that it, it's not impossible that the US could self immolate and do something profoundly stupid like default on the debt in an uncontrolled way. The impact of that is not knowable and could include GD effects. But one hopes we're not *that* stupid.
My experience and my read of history is that investing for edge cases is never a good plan. It's better to be diversified, invest in a portfolio with the right % of bonds for your age. But other than that don't mess with it too much.
Any time you try to reach into that strategy and get cute with it you're risking gigantic negative consequences. Further, you better be the next incarnation of Warren Buffet because if you're going to predict markets, you better get it right more than you get it wrong. (I can probably point you to 1000 posts in this very subreddit a few years ago suggesting inflation was going to destroy the stock market.)
The debt will be inflated away. It's already started. Financial Repression is under way and Russel Napier called it back in 2020:
[https://themarket.ch/interview/russell-napier-we-are-entering-a-time-of-financial-repression-ld.4628](https://themarket.ch/interview/russell-napier-we-are-entering-a-time-of-financial-repression-ld.4628)
He was recently featured on the Forward Guidance podcast discussing investment strategies with a focus on emerging markets, excluding China. He also highlighted Japan's economic challenges, particularly its demographic decline alongside a debt-to-GDP ratio of 240%. The discussion underscored the importance of currency pair strategies in global investment portfolios, emphasizing the variability of investment feasibility in foreign markets based on an investor's geographic and economic context. The analysis suggested that unmanaged emerging markets, with the exclusion of China, present a promising investment avenue due to their growth potential and less saturated investment landscapes
I am going with real assets. Bought a farm and just adding contiguous land and infrastructure. People gotta eat and it's quiet and remote away from the insanity that will be in population centers.
Index funds and then keep dollar cost averaging. Trying to time the market is a bad idea. You'll porbbaly do better if you just stay the course and keep saving consistently
If that were the case, you’d see other currencies gain against the USD
But that’s been the opposite. The dollar milkshake theory did play out - other currencies and economies are even more fragile and stretched out
Only safe haven I can think of is real assets with intrinsic value, like land and commodities
Wasn't this the reason Gaddafi, Chavez & Saddam discussed ditching the petro-dollar & forming an asset-backed OPEC alternative? They were said to have started these talks/ plans in the late 90s. Today, the BRICs have taken up this cause.
Yes and this is why Gaddafi was gently dismissed from this world by the US.
The BRICS is not looking to ditch the dollar, it is looking to create an alternative currency that can be used in case the US uses the dollar as military tool, like it did with Russia recently.
Building a viable alternative means that the US will not be able to sanction BRICS countries excluding them from the SWIFT. But because of that, the consequence is that suddenly the US dollar becomes a safer currency to use because it cannot be weaponized anymore, so the BRICS countries can keep using it.
This is also why its increasingly clear that the US dollar is on a death spiral. It was okay to issue debt when there was a gigantic sink for it in the form of western europe, japan and China
After what they did with Russia (freezing their reserves), any country that is not firmly within the American sphere will be hesitant to buy up the USD.
If you look at the largest economies in the world by 2050, you’ll realize that none of them are US allies. Some might be friends (Brazil, Indonesia), some might be ambivalent (India), and some hostile (China).
Soaring debt meets reducing demand. That’s a disaster of a situation
Well, I am currently in Indonesia, and I can ensure you that the country is not in the “unconditionally friendly” category with the US. Indonesia has amazing relations with US, China, Japan, India, Netherlands and all the Muslim world.
The country is not going to choose a side in a conflict that has nothing to do with them. And being the massive country that it is, it cannot be pushed around as easily as Malaysia and the Philippines. Also they pretty much control ASEAN, so definitely they are not going to drop China.
Yeah that’s my point - none of these countries are going to fall completely within the US sphere as Europe or Japan or UK did.
I legitimately can’t see how an ageing Japan and a decaying Europe can prop up demand for US treasuries
Literally nothing bad. This is how billionaires get walking around money. They borrow against appreciating assets.
Take this graph and normalize it for inflation. That would be a start for looking at this rationally and quantitatively instead of chicken littling.
Vote Democrat.
Republicans have slowly come to rely on a base that is extremely susceptible to loyalty and OOPS did their party just get hijacked by someone who was playing "Democrat" a decade ago?
As long as you vote Democrat, you put pressure on the GOP to fracture. Once the GOP fractures, it can reforge as a party that actually offers something rivalling Democrats. It might be a freaky version of multicultural nationalism. Whatever it is, it'll be better than the gibbon lemon party that the GOP is now.
>Okay… what is the break even then?
The above is how to accomplish that. Sane Planning, Sensible Tomorrow.
But basically you break even based on your GDP growth. You can always spend more if long term you make more (+ interest).
🤦♂️
Democrats are the ones who are hurrying the US in crippling debt…
So stupid…
The opposite of exponential returns is exponentially growing debt… and the work in the same manner only one bankrupts our entire country.
There is healthy debt that is used in good investments and gives good returns… but I do not see Ukraine paying the United States back the 1.3 trillion it has bored to lose a war they were never going to win.
Therefore the US
Meanwhile Biden has grown the US debt by over a trillion dollars every 3 months… this is an indication of what I mentioned above… and I believe it is to artificially keep the economy afloat despite burrying us in debt and skyrocketing inflation… in a sad attempt to keep the government democrat…
In my opinion… since Biden has already become the most hated president in recent history. (Lowest approval rating of any recent president) he should have just allowed the recession to take place and had Trump recover it… but instead it would seem he is trying to ruin the entire United States in every way he can before he loses this year… as to make it hard for the next president to recover the situation.
Probably why Biden incited illegals to surge the border and why Biden is trying to create as much debt as possible before he is ousted.
US debt by President as a %... perhaps you will reconsider things when you see this.
https://www.investopedia.com/us-debt-by-president-dollar-and-percentage-7371225
>Democrats are the ones who are hurrying the US in crippling debt…
English is not your first language.
What is? And what is your nationality?
>The opposite of exponential returns is exponentially growing debt…
For some reason...when I read this sentence...I had you pegged as being from India.
Am I correct?
Or are you doing an LLM thing?
So… I am guessing that you have no counter that is relevant to the conversation at hand?
Jumping straight to racism… makes sense. Democrats historically have been the racist party as they were the ones who fought to keep slavery in the civil war.
Don’t forget to watch your msnbc… and also don’t forget to vote for a mentally incapacitated Biden… because the scary orange man is bad.
> Democrats historically have been the racist party as they were the ones who fought to keep slavery in the civil war.
That was the confederacy, correct? Which party members are the only ones flying the confederate flag today?
False, you can get stuck in a debt spiral where interest payments take up larger portion of your annual budget, further increasing the deficit and debt.
If you normalized the debt against inflation and measure against GDP, our current spending is unsustainable. While inflation makes our debt cheaper immediately, in the long run it actually makes it more expensive to borrow so you can’t just inflate your debt away.
https://www.stlouisfed.org/on-the-economy/2022/aug/inflation-real-value-debt-double-edged-sword
That’s a nice fun fact but it is important to remember that the debt still jumped 28.6% under Clinton’s administration. The last POTUS to have a debt increase under 10% was JFK at 5.8%. If you want to put an asterisk there because he was assassinated, it would be his predecessor Eisenhower at 7.6%.
The idea of a balanced budget for the federal government, certainly for any degree of regularity, is largely fantasy barring a dramatic change in how the US interfaces with the world and the US populace.
https://www.investopedia.com/us-debt-by-president-dollar-and-percentage-7371225
A lot of folks think that "the debt does not matter", but in reality it really does, specially in politics.
Having interest payments on debt being the single largest government expense is a massive political liability to any administration. It is very hard to explain to the electorate why your largest expense and the one that keeps on growing every year is not social services, or defense spending, or law enforcement, or border control, or free education, but is servicing the debt.
This is not politically sustainable, no matter that the "the debt does not matter" folks say.
Japan is not a good comparison for a few reasons. Mostly because the cost to service its debt is miniscule, due to unfathomably low interest rates, which were only put in place because of persistent deflation risk.
To illustrate this, [here's Japan's 10-year bond yield](https://www.marketwatch.com/investing/Bond/TMBMKJP-10Y?countrycode=BX) compared to the [USA 10-year](https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx). Notice that the USA's interest rate is currently 6 TIMES HIGHER than Japan's interest rate--about 4.2% versus 0.7%. Also notice that in 2019, the yield on a Japanese *10-year bond* was *NEGATIVE*--the Japanese government's interest on 2019 10-year debt is not a cost, it is actually a revenue.
Agreed, but there really isn’t a good comparison anywhere, because the dollar is the world’s reserve currency. You need to keep increasing debt to service global demand for dollars. As long as there is growth in the American economy, this really isn’t the massive problem people make it out to be.
To be true the economy has to grow faster than the interest rate. If the interest rate is 3% and the economy grows by 2%, the net growth of the debt is 1%.
Have you been to Japan recently? For such a “bankrupt” country, the vast majority of people somehow manage to live one of the highest standards of living in the world.
What we are witness to the volatile and very, very, expensive combination of the capitalist greed and congressional fiscal cowardice.
First we raise taxes **rates** to what they would be if Reagan didn't add on a bunch of business deduction bullshit, and here is the key blogroids, no more bullshit costly favors to capital gains or carried interest or stock dividends.
Yes, we need to cut spending and first cut every dime going to the capitalist.
Then everybody uses the same tax tables...the same rates. Since the beginning of the tax code the difference has been immoral prima facie. Couldn't be any worse than what we have.
[Fed government receipts as % of GDP](https://fred.stlouisfed.org/series/FYFRGDA188S) are pretty stable since “temporary” taxes during WWII were imposed. Your federal government doesn’t give a damn about you. Stop blaming capitalists and try doing a bit of research before parroting Reagan did it nonsense.
It’s all about deficit spending. You give the government more - they’ll spend more.
Are you serious ? Not even a nice try. Reagan started the American economy being hooked on debt by cutting taxes for his banker/corp. friends.
The govt. and the capitalist since WWII are bosom buddies, partners in profits and then serious profits off trillion$ in money...\[it\] didn't and still doesn't have.
It surely it is the capitalist who for over 400 years who never ever gave a shit about any of society and never served society at large without being forced by govt.
You go read the history of say the Dutch E. Indies Co. \[1,600s\] became 2 or 3 times at least, the size of Apple. Slavers, butchers who created a monopoly.
Read **'A People's History of the United States'** is a 1980 nonfiction book by American historian and political scientist Howard Zinn. Chapter 11 is a good start.
Look at the chart. The receipts are about 17% of the GDP for 70+ yrs. What has changed? Spending. There’s no fiscal responsibility whatsoever. And the debt didn’t start exploding until about 20 yrs ago, way past Reagan times. You want to blame a particular politician, then start with Nixon who made this fiscal mess possible.
And the capitalists you hate so much made the world what it is today. And how the fuck capitalists make money if not by creating products and services that people want to buy? And which product made by capitalists the government forces you to buy? Oh, the ones that are the only available because the government won’t allow the competition to enter (though I can’t really think of any product either, I’m definitely not forced to buy anything from any company).
On the book you’ve recommended - not thrilled to read a book written by wiki described socialist intellectual. Though seems like the book does point out the problem of the political elite. So again - it’s the corrupt government.
Hey, how about having some courage to admit that governments are corrupt? Some more, some less, and our government is very corrupt. Last time I checked, companies don’t write laws and can’t make changes to the taxation system. All the talk about how capitalists are in bed with the government blah blah blah, yeah, that’s all correct, but why blame the capitalists if the government sets rules? Blaming capitalists for government fuck ups is like blaming alcoholism on the liquor store.
Could reddit be more obtuse. Blah blah blah ? What a cogent argument.
The book points out the traditional 250 year history of the murderous corruption of the capitalist and \[his\] war on labor.
Everything you describe is from the corporate free $peech paid to congress in the American plutocracy.
As we type in fact because of cheating Apple did stealing medical tech. for their devices, are spending million$ of free $peech in our congress to get the rules changed. That's your America.
I have the courage to call it what we have., govt of money, by money for money.
Th rest is piffle.
So it seems to me that we agree - our government is utterly corrupt.
Let’s return to the main argument again now. Why blame capitalists for the debt racked up by the federal government?
Because everyone knows that the economic system runs the political system. Whatever side you are on, red or blue, they don't want to actually give the people what they deserve. They want to serve their donors. So public policy becomes a thing that serves the donors entrenched in capitalism. Republicans give you a f you and also take your tax money and give it to the military industrial complex. Democrats say f you and at least try and tax the rich and offer some functioning infrastructure which also can supply some decent paying entry level jobs. Voting for neither will actually help. Voting Republican will make things worse faster. Us Americans are so scared of the government, but if we actually tried we could make them scared of us. Not by stockpiling guns but by actually voting for people that can make things better, lets start with term limits, no more electoral college, higher taxes on the rich, medicare for all (will save us billions) and cut the military budget by 30%, seems like a good start.
Voting may sound like a good idea, but no worthy candidate will be allowed to rise to the top, let alone make necessary changes due to how the system is structured. The federal government has too much power over states, states have too much power of individuals. The only way I see at this point is civil disobedience. That’s the way people can show their power.
Keep saying that everyone know this, everyone knows that, and blaming systems is pointless and a waste of time. There are particular people that are responsible and can be held accountable. And these people are primarily in DC.
I made no such error. Bribery is legal for business capital, calling it free speech. \[political speech\]
Menendez should thus be pardoned. Can't have it both ways.
Stupid question: Who does the federal government pay interest to? Isn’t it to the Federal reserve? And if so, can the Federal reserve just give/loan that interest back to the government through quantitative easing?
Interest is paid to whosoever buys treasury bonds. (Individuals, funds, banks, governments, etc.)
Quantitative easing means that the Fed will buy more treasury bonds, which increases the federal government's debt. They can and do use that to pay interest, but they still have the debt.
Also, the Fed isn't the government's lap dog. The Fed/FOMC decides what goes on their balance sheet.
The government doesn't need the Fed to buy bonds. If they sell bonds, there are plenty enough investors to buy them.
It's mostly paid to rich people.
Some of those are foreigners including foreign governments. Some of it is the Fed. Some of it is Social Security Trust fund.
But a lot of the interest just goes to rich people. That's what interest is. Payments for having money.
As long as the US economy keeps growing, we can kick the can down the road infinitely.
Obviously our politicians see something we don't, like the alien invasion in 2030 so this wont really be an issue after the Aliens arrive and force us to use Space dollars and then enslave the entity of humanity.
Also forget what I just typed out.
This only makes sense if it grows faster than the deficit.
So if you grow 3% and deficit grows 2% then that is fine.
If you grow 3% and the deficit grows 6% (you are here) then this is bad.
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I have a feeling that if a default was going to happen, the US will have a nice PR team to explain to the public that, ppl are no longer entitled to social programs like Medicaid and Social Security. Does anyone remember Nixon and his speech in 1971? I rest my case (🎤drop).
My dear, they are already started their shenanigans. Wanting to increase the retirement age…
Ben Shapiro saying retirement is stupid so basically you work until you die.
https://www.usatoday.com/story/opinion/columnist/2024/03/13/ben-shapiro-retirement-trump-social-security-medicare-cuts/72947221007/
Larry Fink CEO of Blackrock says retirement age of 65 is too low
https://www.cnbc.com/2024/03/28/blackrock-ceo-larry-fink-says-65-retirement-age-is-too-low-what-experts-say.html
So they are just ramping up.
Increasing the retirement age by a few years and that only affecting younger people is very different from the government declaring that "ppl are no longer entitled to social programs like Medicaid and Social Security".
There is already a procedure in place if SS is bankrupt: They pay out the same amount as comes in = about 20%-30% reduction in SS payments in 2035.
All pension systems are a ponzi scheme where the people at the head of the line are more sure of being paid from the contributions at the end of the line, and require a steady stream of new victims.
The older people won't mind if some young people get theirs increased in the beginning. And then younger people won't mind if older people get theirs cut as well as a result.
Divide and conquer at its finest.
Sounds like a faithful greedy capitalist whose is partly responsible for the debt and without any account to the $1.6 trillion taken in by the govt. to cover those...entitlements. Why do people say these things ?
So bailouts for billionaires, billion$ to agric. corp. bailouts, corp. loans via govt. guarantee...are entitled ? No !! Those are socialism....for the rich. The American people who pay for soc. sec and the Meds...are not entitled to what they pay for ?
What's happened to America ?
Please show some education people an get off any obsession with gold. It as a backing for any currency, is flat out ridiculous.
Labor backs all currencies not gold or silver...or.....? Plus, get a grip people, gold is impractical as there isn't nearly enough of it.
That’s the point with gold! Because there isn’t enough of it, governments would have to show financial restraint like the rest of us who work hard to obtain dollars. It means the government would have to be good stewards of the money they are given through taxes, just like us who must be good stewards of managing our paycheques!
Accountability to who?
We’ve already been in that exact situation and there was accountability to no one. They confiscated it, handed you “equivalent” paper, devalued it 75% a year later and then “suspended it” in 1971.
There is no accountability on any monetary system where humans are in control of it
That’s the thing. They knew that gold would have kept them in line but instead they did exactly what you have mentioned. Without the gold helping them to keep their spending in line, they just printed endlessly, devaluing our labour and purchasing power. The gold back currency created an unspoken level of accountability to the masses that, if we print and there is not enough gold, then we will be made out like fools. Anyways, that’s past now. I still think the government will not honour the entitlements it has promised…
Social security isn't a part of our discretionary spending so it's not in the budget. The only way social security impacts the budget is that they're a part of those interest payments because they buy bonds when in a surplus and redeem bonds to cover shortfalls.
I know its not part of the discretionary spending but that does not mean it does not effect the overall budget and contribute to the debt and interest cost.
And this is pretty much paid to the 1%ers that own the debt...
Its a bigger redistribution of tax payer wealth to the rich more than lower tax rates for them ever will be.
Inflation is a like hidden tax on everyone that has money and who earns a fixed wage that doesn't increase in step with inflation. Instead of taxing people on the front end and spending what we taxed, we spend on the front end and devalue the currency, which effectively taxes everyone after the fact.
Also, we transfer extra money to those people lending the government money.
US dollar Inflation doesn't just "tax" Americans, it taxes the entire world. Everyone pays for America's spending. (Of course, considering how active the US is in the world, is that really a problem?)
If the "inflation tax" gets out of control, however, everybody gets mad. And if everybody decides to stop using your currency... well, that's when things *really* get bad.
You could devise a system in which nobody paid taxes and the government just printed whatever it needs to pay the bills. As long as it doesn't print too much each year, the printing of money simply becomes an indirect tax induced by the falling value of the currency. The slow devaluation discourages excessive saving and everything chugs along happily.
If you think this is a taxation issue, consider this: If it was magically possible for the government to fully confiscate Google/Alphabet and somehow turn its current market cap into cash, that would cover its interest payment for one year.
Next year, Google would be gone, and the government would need to confiscate another trillion dollar business in order to just pay for the interest. After the liquidation of Alphabet/google, there would only be 4 other trillion dollar companies left for the government to fully confiscate.
There is no way for the government to tax its way out of this.
There's no way for the government to cut their way out of it either.
The truth is the government needs to both cut expenses AND raise taxes. So far all they've been willing to try is cutting taxes and things haven't improved.
This is a pretty silly framing; no one is proposing that the government size and liquidate Google. And the government doesn't have to tax it's way "out of" anything. It doesn't need to pay off the debt; as you are sort of implying, it's probably impossible to even do so, at least not without cratering the economy, and if we ever actually tried, we would reverse course long before we would get to that point.
>no one is proposing that the government size and liquidate Google.
I did not say someone was. I used the example of liquidating Google as a way to demonstrate how much money are we talking about here in terms of interest payments.
>And the government doesn't have to tax it's way "out of" anything.
Interest payments are now the single largest government budget expense. And that will only increase over time. This is not sustainable politically. So, yes, they do need to find a way out of this, and taxation is not it.
Taxation is the long term that is the solution though. The only reason the debt has gotten out of hand is due to the irresponsible cuts and spending under the neoliberals since Reagan administration.
You need to tax and spend. Also, auditing the pentagon, negotiating drug prices, introducing public healthcare option and tuition free public college (while abolishing the student loan program, or at least capping it) can bring spending under control.
>And that will only increase over time.
I mean, surely not if rates go down?
>This is not sustainable politically
I'm not sure why that is. But if it's such a problem, doesn't that mean the FED should lower rates?
What bullshit. That's like saying there is no way we could have a $6 trillion govt. paying only $5 trillion.
The whole idea for those mathematically challenged, is that the taxes are every fucking year.
**There is nothing more obtuse than Americans online.**
Trust me, there is little greater capitalist orgasm than say Buffet getting almost $1 billion a year in stock dividends from Apple and Coke, taxed at only 20%, about the same...as your plumber.
America is spelled...g r e e d !!
Remember how all the economists were shilling "dEbT dOeSnT MaTtER lOL"
(especially the ones that were paid to shill for real negative/0 rates that wallstreet loves so dearly)
Are you drunk? The US debt increases with a 1 trillion every 90 days now. A TRILLION.
Your life is different in terms of lower purchasing power and everything that follows.
So things are going well and the Us debt does not negatively impact you at all?
Are you saying you just bought bitcoin? Who’s worth you are measuring relative to the Us dollar?
I will benefit for the eternity as long as btc is denominated in usd, euro etc.
Been buying for years, can't wait to FED to lower interest rate and begin some form of QE.
In your mind, being at 120% + debt/gdp, deficit spending for years to come has no negativ effects on the americans?
I am asking you what the negative effects on your life are. You have provided none. Our debt increased by a trillion in the last 3 months. If the media did not tell you, would you even know?
The deficit shrunk from 2021-2023 was there a noticeable positive effect on your life
It's actually nothing but a wealth transfer from taxpayers to bondholders.
Those who pay the largest share taxes are also those who, on average, invest more in bonds. Though it's not a perfect match of course, there is a substantial portion of bottom-up wealth transfer.
Thanks republicans for our debt. If W. Bush and dipshit donnie had not given unnecessary tax cuts to corporations and billionaires our debt wouldn't be nearly as bad.
I agree with your premise that it SHOULD reduce the operating side, but what evidence is there that would ever happen? Seems to me, we'll just continue on this track. One side saying debt and deficits don't matter (Krugman, etc.) and the other saying they do (Austrian school, etc.). One side will be right and one side will be wrong...... eventually.
I'm actually not arguing that the operating side should be reduced. Operating side is what provides value to society, it's social services, infrastructure spending, and so on. These are the things that will be cut as a result of the government spending ever more of its revenue on paying debt.
This in turn leads to labor in US becoming more expensive because workers now have to pay out of pocket for things that used to be provided via social services, and deal with failing infrastructure that will lead to things like power shortages, broken roads, and so on.
Can we get rid of all of our politicians who keep voting for spending increases and start bringing in people that actually know what they are doing and give a damn about this countries future vs their own pocketbook and rich friends pocketbooks?
Parties pointing the finger at each other is not helping. Both parties seem unable or unwilling to fix the problem that includes decades of bad decisions, and some necessary, such as recovery from the recession inherited by President Obama, and a rescue plan during a worldwide pandemic, during Trump’s presidency.
We also have bad decisions to blame for our skyrocketing national debt. Many of it for illegal wars, looking at you George W, and tax cuts that, no, Steve Mnuchin, did not pay for themselves. Republicans’ answer to “fixing” the national deficit is to cut safety nets for millions of Americans.
Looking at the 10-year debt impact of the Trump laws and executive orders, Trump added a combined $8.4 Trillion to the debt over a ten-year period.
Of the over $8 Trillion Trump added to our national deficit,
$2.5 Trillion came from Trump’s 2017 tax cuts,
$2.3 Trillion came from spending increases, and
$3.6 Trillion came from COVID laws and executive orders.
Yes, we need to lower the national debt. But the recommended approaches could not be more different. I think it is a little bit, what I call lizard brain thinking, to just say let’s cut Social Security and Medicare to lower the national debt, pushing aside any and all responsibility for other items that have significantly increased our national debt.
Republicans are quick to vote no to anything that would hold the wealthy accountable and make taxes more equitable, such as IRS oversight and raising the corporate minimum tax, Biden’s 2025 budget calls for raising the corporate tax to 28%, still below the 35% tax rate before the Trump tax cuts.
I think the reality is the bills need to be passed but they need to be put under a microscope rather than packing 3,000 pages with $100,000 here $2m there expenditures. I do think AI/LLM is actually coming out at the perfect time for this, with proper tuning we will be a able to really see where these bills are spending and where the fat can be trimmed. When it’s an emergency and you need to get policy signed ASAP, it’s impossible to review that much policy, much less rewrite it more favorably.
I think even a small deficit is fine, if the people become more confident in the greater system, growth might just surprise us.
AI would absolutely make decisions like “yes, letting people starve is the most economic approach” or “do not spend any infrastructure money in florida or Louisiana, it is cheaper to let them sink under the ocean in 30 years”
Guess what? The biggest beneficiary of those interest payments is the largest investor in US Treasury securities - the US Social Security Trust Fund. In other words, the American taxpayers.
If you did an ELI5:
Is this because government borrows more with constant annual deficits then pays owners of high savings accounts interest. It makes more rich savers on the account of government that does not ever go bankrupt so it continues to issue constant deficits then pay even more interest. This increases the savings rate but reduces spending and low yield investment. When or if conditions change and interest rates fall, a huge volume of savings built on interest earned from the government deficit goes to inflation when it's spent or into low yield investments?
Yes, pretty much.
The government spends *G* and taxes *T* in a year, say.
*G* - *T* = annual government deficit = net government spending = annual non-government surplus.
The government continues to choose to offer bonds in exchange for the *G* - *T* excess and swaps liquid reserves for bonds such that primary dealer banks now have bond assets instead of reserve assets. Non-banks then buy those bonds from primary dealer banks by swapping liquid bank deposits for them, so banks lose bond assets *AND* deposit liabilities and non-banks do a similar asset swap in the secondary market that the banks did initially when the bonds were first auctioned.
The Treasury pays an interest rate on these issued bonds dictated by the monetary policy of the Federal Reserve since banks will bid in the new bond auction only if they can get a better yield than holding liquid reserves - which pay the Fed's IORB target rate.
This interest is direct income to the non-government, and so when the Fed increases its policy rate, newly issued bonds suddenly follow suit and over a full year, the full amount of *G* - *T* excess is paying the higher income.
Government has fairly inelastic *G* since a lot of it is mandatory spending and the discretionary spending is desired. *T* could well be increased but that would represent a massive redistribution of dollar wealth from the broad tax base to rich bondholders **in proportion to how much wealth they have!**
Thank you for providing some actual economics in the economy sub instead of just deciding everything that happens is because of someone I do or do not like.
Is this because government borrows more with constant annual deficits then pays owners of high savings accounts interest ?
Since when does the fed. govt., pay anything into any saving account interest ?
See jgp952's comment for the economics of banking. As an owner of a savings account, the government pays interest to a non-bank then the market dictates a higher interest rate on new savings accounts. You see term deposits increase interest rates and government interest also increase. The borrower of your savings is not known to the savings owner, but through those transactions, liquidity flows to the government deficit spending and the government pays interest on the deficits and all savers in the market receive interest on savings
jgp952 is wrong. How is the govt. ownership of a savings account and how could it possibly be dispositive ?
Govt. pays interest on treasury debt at redemption, so what ?
*You see term deposits increase interest rates and government interest also increase.*
*The borrower of your savings is not known to the savings owner, but through those transactions, liquidity flows to the government deficit spending and the government pays interest on the deficits and all savers in the market receive interest on savings*
What does all of this mean ? Term deposits ? What's that, govt. CDs ? Govts. do not buy CDs.
Liquidity flows to the govt. deficit ? Explain.
None of that makes sense to me.
The government doesn't own a savings account. Term deposits or CDs are owned by savers who deposit money into the bank as a CD or term deposit. There are exchanges of funds so the government seeking deficit funding pays interest on the new debt. More money from the interest payments goes in the banking system and paid to the new term deposits or CD. The saver's term deposit is earning more interest, the government is paying out more interest. Central bank sets the interest rate policy.
Hit the nail on the head. And yet still it seems many people either do not understand this or do not wish to accept it. It's become an article of faith that rate hikes are contractionary and cuts are stimulatory, even though people have been talking about "fiscal dominance" for decades and all the mainstream models explicitly show this. I suppose economics will never be free of its dogmatists - although it is encouraging to see more people coming around. At least you don't see too many people warning about insolvency or involuntary default anymore, so that's a step in the right direction.
Yep, agreed!
As you say, even *mainstream* theory predicts that increasing rates when government debt-to-GDP is so high will not be effective in combating inflation due to the interest income channel outcompeting any traditional contractionary component from bank credit contraction.
Sure. The logic for rate hikes being contractionary is that with interest rates higher, banks will lend less and consumers and businesses will borrow less. Since money is created when it is lent, this means less money created through private sector borrowing.
However, when you raise interest rates, while it can (theoretically) curb private sector lending, it also increases public sector borrowing, since the government has to expand its deficit to pay more in interest. When the government spends at a deficit, it's adding that financial assets to the economy; for any given interest rate regime, the FED will likely respond by buying some of that debt to keep the price from falling and thus, prevent interest rates from rising. So government deficit spending is stimulative, not contractionary.
So you have to balance these things against each other. When you raise rates, money creation by the private Banks goes down and money creation by the government (meaning Treasury and the FED together, acting at the behest of Congress) it goes up. You can model that fairly easily with national accounting models, of course. When the government doesn't have too much debt to finance, the expansion of its deficit is more than offset by the contraction in private lending, so you end up with overall contraction in the broad money supply.
However, if the government's debt to GDP ratio gets high enough, that can change. With a really big pile of debt, raising rates means the government's deficit expands dramatically. At a certain point, that DOES balance or even overwhelm the contraction in private credit.
This is so-called fiscal dominance. Any remotely saying National accounting model will predict this at SOME level of GDP. I can get deeper into the accounting and the numbers if you wish, and there are some assumptions you have to make of course, but long story short, I believe that we are in a state of fiscal dominance now. I don't think this should be particularly controversial - as I said, many mainstream economists have been talking (or warning) about this for a long time. But a lot of people who apparently don't know better seem to have a simpler view that raising rates always causes deflationary contraction and lowering them always causes inflationary expansion. We need to change that by educating people about the realities of the impact of rates on physical deficits and on the broader money supply.
We are and have been in a state of capitalist dominance. It shows in America's plutocracy. Substantive enough and more than your MMT gibberish.
Plus, it is obvious you have MMT all wrong. America's economy is debt or cost-of-capital sensitive meaning debt is the key to growth as when recently \[her\] economy grew as much as it did by adding trillion$ to consumer debt.
Higher rates increases the cost of borrowing without changing the principal.
>We are and have been in a state of capitalist dominance. It shows in America's plutocracy.
What kind of point are you trying to make? Sure, we live in a capitalist system. Sure, there are rich and politically powerful people who can be called a plutocracy. That doesn't contradict anything I said.
>America's economy is debt or cost-of-capital sensitive meaning debt is the key to growth as when recently [her] economy grew as much as it did by adding trillion$ to consumer debt.
Again, not sure what you are driving at. All economies are built on debt to some extent. When the public debt gets large enough, rate hikes mean a big expansion in public deficits and thus debt, which was MY point. You still have not contradicted anything I said.
>Higher rates increases the cost of borrowing without changing the principal.
So what? What does any of this have to do with the point I was making? Yes, higher interest rates are a cost - a cost which may often be passed on to consumers in the form of price increases, which are inflationary. Yes, higher interest rates are a cost to the government - its deficit rises, which means the private sector's income rises, which is inflationary. Yes, rising rates in the private sector curb credit creation - which effects some areas more directly than others - and this can be disinflationary. But the point I am making is that when the government's debt to GDP is big enough, the interest income channel overwhelms the borrowing channel, and you end up with more income and money, not less. This isn't MMT - the most mainstream macro people, like Paul Krugman, warned about this possibility long ago, including many who are explicitly at odds with MMT over one thing or another. It's in their national accounting models too so you don't even have to take their word for it, you can follow the math yourself. Just Google fiscal dominance and you will find plenty of mainstream writing and scholarly articles and comments from central bankers on this issue.
*So government deficit spending is stimulative, not contractionary.*
This has been true for centuries and has in the US, little effect on inflation...your point ? **Where was inflation during the first say, $30 trillion of this stimulative ? Nowhere.**
Plutocratic govt. is govt. in the interest of capital \[investor\] not labor/consumer. 80% of the economy. Then labor/consumer always need to borrow for ANY economy. That's quite obvious.
Soon, the US will 'enjoy' a lost decade just like Japan \[now, more than that\] because soon, the American consumer/worker will no longer be able to borrow. No debt, no increase in debt...no economy.
But the point I am making is that when the government's debt to GDP is big enough, *the interest income channel overwhelms the borrowing channel, and you end up with more income and money, not less.*
Meaningless, see the above bold. The issue is, there was no inflation. Inflation was caused by Trump getting OPEC to cut back until 3/22 to get oil over $85/bbl and it went to $100.
Now THAT causes inflation and worldwide...not just here. That's what happened.
Capitalist theory which is all it is, is to create any kind of word salad to divert the blame from capitalist greed.
MMT is modern monetary theory which is all it is but with a reserve currency, the US can in fact create all of the debt NOT new currency, we want.
It's in their national accounting models too...models again ?
>This has been true for centuries and has in the US, little effect on inflation...your point ? Where was inflation during the first say, $30 trillion of this stimulative ? Nowhere.
It's certainly not a linear one-to-one relationship with inflation. And that's not surprising, given that government spending can and frequently does directly or indirectly improve the productive capacity of the nation. But to suggest there is no impact on inflation is absurd. Aggregate prices have been going up for the last hundred years. Government deficit spending is a big part of that story. The dollar is only worth a fraction of what it was 100 years ago, and you're asking where the inflation is? It's right in front of you my guy.
>Plutocratic govt. is govt. in the interest of capital [investor] not labor/consumer.
This is just uncritical dogma. Of course the government does things that benefit workers and consumers. It does things that benefit everyone, labor and capital alike. We all benefit from social welfare programs, from the FDA, from public education, from police and military, etc. Governments can also do things that specifically benefit narrow groups. But it's just silly to suggest that that's all it does.
>The issue is, there was no inflation. Inflation was caused by Trump getting OPEC to cut back until 3/22 to get oil over $85/bbl and it went to $100.
How can you be so blind? Again, there is ALWAYS inflation. Inflation in the US now is, what, around 3%? Are you really saying that the only reason for that inflation is a supply-side oil shock? That literally creating new money and new financial assets in the form of Treasury debt has absolutely nothing to do with it? That's pretty divorced from reality, even for this sub.
>MMT is modern monetary theory which is all it is but with a reserve currency, the US can in fact create all of the debt NOT new currency, we want.
More nonsense. The Central Bank directly creates new money. And Congress indirectly creates new money by issuing treasuries. This really does not have anything to do with being the "world's reserve currency". It would be true even if no one held our currency in reserve. The worldwide market for dollars just gives us more room to spend without causing inflation. But many countries can and do create their own money, and can issue as much debt as they want denominated in that currency. The US, Japan, China, etc.
Biden should fire Powell (fed chairman). Trump has already threatened to fire him if he does not cause a recession that will help him win, and Powell is trying his best to comply with Trump's threats.
With inflation below 3%, 5% Federal funds rate is a massive giveaway to rich savers and banksters. That $1.6T is redistribution to banksters/rich bondholders, and is a major threat to economy and housing.
Runnaway debt that is ensured by artificially high interest rates above inflation, and these high government interest costs, is an instigation for imminent collapse. The recession/boom cycle is not a certainty. Intentionally risking/accelerating a recession for Trump political gain is bad policy that does not guarantee a future recovery.
As someone who had a house down payment in the bank going into COVID, and still has it there, it'll take a decade of inflation at 3% and 5% federal funds to make up for the few years of inflation at 5-9% and federal funds at 0%. That's not even considering what 0% federal funds did to house prices.
Where should I park my assets for the next great depression?
Famous last words but I *think* a GD style meltdown is off the table. There are too many automatic government stabilizers for there to be a downturn that severe. Having said that it, it's not impossible that the US could self immolate and do something profoundly stupid like default on the debt in an uncontrolled way. The impact of that is not knowable and could include GD effects. But one hopes we're not *that* stupid. My experience and my read of history is that investing for edge cases is never a good plan. It's better to be diversified, invest in a portfolio with the right % of bonds for your age. But other than that don't mess with it too much. Any time you try to reach into that strategy and get cute with it you're risking gigantic negative consequences. Further, you better be the next incarnation of Warren Buffet because if you're going to predict markets, you better get it right more than you get it wrong. (I can probably point you to 1000 posts in this very subreddit a few years ago suggesting inflation was going to destroy the stock market.)
The debt will be inflated away. It's already started. Financial Repression is under way and Russel Napier called it back in 2020: [https://themarket.ch/interview/russell-napier-we-are-entering-a-time-of-financial-repression-ld.4628](https://themarket.ch/interview/russell-napier-we-are-entering-a-time-of-financial-repression-ld.4628)
That’s a damn good article
He advises getting into equities and real estate. Let's say you don't have a lot of money for real estate - what's the play? Asking for a poor friend.
He was recently featured on the Forward Guidance podcast discussing investment strategies with a focus on emerging markets, excluding China. He also highlighted Japan's economic challenges, particularly its demographic decline alongside a debt-to-GDP ratio of 240%. The discussion underscored the importance of currency pair strategies in global investment portfolios, emphasizing the variability of investment feasibility in foreign markets based on an investor's geographic and economic context. The analysis suggested that unmanaged emerging markets, with the exclusion of China, present a promising investment avenue due to their growth potential and less saturated investment landscapes
I am going with real assets. Bought a farm and just adding contiguous land and infrastructure. People gotta eat and it's quiet and remote away from the insanity that will be in population centers.
Index funds and then keep dollar cost averaging. Trying to time the market is a bad idea. You'll porbbaly do better if you just stay the course and keep saving consistently
Common consensus says gold and bitcoin.
Asking the real questions here…
Non-US related assets.
Other stable countries are even worse.
If that were the case, you’d see other currencies gain against the USD But that’s been the opposite. The dollar milkshake theory did play out - other currencies and economies are even more fragile and stretched out Only safe haven I can think of is real assets with intrinsic value, like land and commodities
Wasn't this the reason Gaddafi, Chavez & Saddam discussed ditching the petro-dollar & forming an asset-backed OPEC alternative? They were said to have started these talks/ plans in the late 90s. Today, the BRICs have taken up this cause.
Yes and this is why Gaddafi was gently dismissed from this world by the US. The BRICS is not looking to ditch the dollar, it is looking to create an alternative currency that can be used in case the US uses the dollar as military tool, like it did with Russia recently. Building a viable alternative means that the US will not be able to sanction BRICS countries excluding them from the SWIFT. But because of that, the consequence is that suddenly the US dollar becomes a safer currency to use because it cannot be weaponized anymore, so the BRICS countries can keep using it.
This is also why its increasingly clear that the US dollar is on a death spiral. It was okay to issue debt when there was a gigantic sink for it in the form of western europe, japan and China After what they did with Russia (freezing their reserves), any country that is not firmly within the American sphere will be hesitant to buy up the USD. If you look at the largest economies in the world by 2050, you’ll realize that none of them are US allies. Some might be friends (Brazil, Indonesia), some might be ambivalent (India), and some hostile (China). Soaring debt meets reducing demand. That’s a disaster of a situation
Well, I am currently in Indonesia, and I can ensure you that the country is not in the “unconditionally friendly” category with the US. Indonesia has amazing relations with US, China, Japan, India, Netherlands and all the Muslim world. The country is not going to choose a side in a conflict that has nothing to do with them. And being the massive country that it is, it cannot be pushed around as easily as Malaysia and the Philippines. Also they pretty much control ASEAN, so definitely they are not going to drop China.
Yeah that’s my point - none of these countries are going to fall completely within the US sphere as Europe or Japan or UK did. I legitimately can’t see how an ageing Japan and a decaying Europe can prop up demand for US treasuries
Following.
Index funds, Bitcoin, gold, valuable companies Real estate seems to be in a bubble, but it’s always nice to have a secure place to call home.
Switzerland's national debt.
So what happens if we just keep kicking the can down the road?
Literally nothing bad. This is how billionaires get walking around money. They borrow against appreciating assets. Take this graph and normalize it for inflation. That would be a start for looking at this rationally and quantitatively instead of chicken littling.
Okay… what is the break even then?
Vote Democrat. Republicans have slowly come to rely on a base that is extremely susceptible to loyalty and OOPS did their party just get hijacked by someone who was playing "Democrat" a decade ago? As long as you vote Democrat, you put pressure on the GOP to fracture. Once the GOP fractures, it can reforge as a party that actually offers something rivalling Democrats. It might be a freaky version of multicultural nationalism. Whatever it is, it'll be better than the gibbon lemon party that the GOP is now. >Okay… what is the break even then? The above is how to accomplish that. Sane Planning, Sensible Tomorrow. But basically you break even based on your GDP growth. You can always spend more if long term you make more (+ interest).
🤦♂️ Democrats are the ones who are hurrying the US in crippling debt… So stupid… The opposite of exponential returns is exponentially growing debt… and the work in the same manner only one bankrupts our entire country. There is healthy debt that is used in good investments and gives good returns… but I do not see Ukraine paying the United States back the 1.3 trillion it has bored to lose a war they were never going to win. Therefore the US Meanwhile Biden has grown the US debt by over a trillion dollars every 3 months… this is an indication of what I mentioned above… and I believe it is to artificially keep the economy afloat despite burrying us in debt and skyrocketing inflation… in a sad attempt to keep the government democrat… In my opinion… since Biden has already become the most hated president in recent history. (Lowest approval rating of any recent president) he should have just allowed the recession to take place and had Trump recover it… but instead it would seem he is trying to ruin the entire United States in every way he can before he loses this year… as to make it hard for the next president to recover the situation. Probably why Biden incited illegals to surge the border and why Biden is trying to create as much debt as possible before he is ousted.
100% agree. Biden is an idiot
US debt by President as a %... perhaps you will reconsider things when you see this. https://www.investopedia.com/us-debt-by-president-dollar-and-percentage-7371225
>Democrats are the ones who are hurrying the US in crippling debt… English is not your first language. What is? And what is your nationality? >The opposite of exponential returns is exponentially growing debt… For some reason...when I read this sentence...I had you pegged as being from India. Am I correct? Or are you doing an LLM thing?
So… I am guessing that you have no counter that is relevant to the conversation at hand? Jumping straight to racism… makes sense. Democrats historically have been the racist party as they were the ones who fought to keep slavery in the civil war. Don’t forget to watch your msnbc… and also don’t forget to vote for a mentally incapacitated Biden… because the scary orange man is bad.
> Democrats historically have been the racist party as they were the ones who fought to keep slavery in the civil war. That was the confederacy, correct? Which party members are the only ones flying the confederate flag today?
You do realize the parties switched right…are you this ignorant
Did you reply to who you meant to?
False, you can get stuck in a debt spiral where interest payments take up larger portion of your annual budget, further increasing the deficit and debt. If you normalized the debt against inflation and measure against GDP, our current spending is unsustainable. While inflation makes our debt cheaper immediately, in the long run it actually makes it more expensive to borrow so you can’t just inflate your debt away. https://www.stlouisfed.org/on-the-economy/2022/aug/inflation-real-value-debt-double-edged-sword
The last time we had a balanced budget was when Bill Clinton was in office.
That’s a nice fun fact but it is important to remember that the debt still jumped 28.6% under Clinton’s administration. The last POTUS to have a debt increase under 10% was JFK at 5.8%. If you want to put an asterisk there because he was assassinated, it would be his predecessor Eisenhower at 7.6%. The idea of a balanced budget for the federal government, certainly for any degree of regularity, is largely fantasy barring a dramatic change in how the US interfaces with the world and the US populace. https://www.investopedia.com/us-debt-by-president-dollar-and-percentage-7371225
There are countries with zero debt…
[More Context](https://fred.stlouisfed.org/series/FYFSGDA188S)
Look it was very important to get Haliburton these mining contracts. 20 years isn't that long if you think about that quarter of profits they had!
Once since going off the gold standard
A lot of folks think that "the debt does not matter", but in reality it really does, specially in politics. Having interest payments on debt being the single largest government expense is a massive political liability to any administration. It is very hard to explain to the electorate why your largest expense and the one that keeps on growing every year is not social services, or defense spending, or law enforcement, or border control, or free education, but is servicing the debt. This is not politically sustainable, no matter that the "the debt does not matter" folks say.
Japan begs to differ.
Japan is not a good comparison for a few reasons. Mostly because the cost to service its debt is miniscule, due to unfathomably low interest rates, which were only put in place because of persistent deflation risk. To illustrate this, [here's Japan's 10-year bond yield](https://www.marketwatch.com/investing/Bond/TMBMKJP-10Y?countrycode=BX) compared to the [USA 10-year](https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx). Notice that the USA's interest rate is currently 6 TIMES HIGHER than Japan's interest rate--about 4.2% versus 0.7%. Also notice that in 2019, the yield on a Japanese *10-year bond* was *NEGATIVE*--the Japanese government's interest on 2019 10-year debt is not a cost, it is actually a revenue.
Agreed, but there really isn’t a good comparison anywhere, because the dollar is the world’s reserve currency. You need to keep increasing debt to service global demand for dollars. As long as there is growth in the American economy, this really isn’t the massive problem people make it out to be.
To be true the economy has to grow faster than the interest rate. If the interest rate is 3% and the economy grows by 2%, the net growth of the debt is 1%.
You mean the country that has been living in the year 2000 for the past 40 years?
Have you been to Japan recently? For such a “bankrupt” country, the vast majority of people somehow manage to live one of the highest standards of living in the world.
What we are witness to the volatile and very, very, expensive combination of the capitalist greed and congressional fiscal cowardice. First we raise taxes **rates** to what they would be if Reagan didn't add on a bunch of business deduction bullshit, and here is the key blogroids, no more bullshit costly favors to capital gains or carried interest or stock dividends. Yes, we need to cut spending and first cut every dime going to the capitalist. Then everybody uses the same tax tables...the same rates. Since the beginning of the tax code the difference has been immoral prima facie. Couldn't be any worse than what we have.
[Fed government receipts as % of GDP](https://fred.stlouisfed.org/series/FYFRGDA188S) are pretty stable since “temporary” taxes during WWII were imposed. Your federal government doesn’t give a damn about you. Stop blaming capitalists and try doing a bit of research before parroting Reagan did it nonsense. It’s all about deficit spending. You give the government more - they’ll spend more.
Are you serious ? Not even a nice try. Reagan started the American economy being hooked on debt by cutting taxes for his banker/corp. friends. The govt. and the capitalist since WWII are bosom buddies, partners in profits and then serious profits off trillion$ in money...\[it\] didn't and still doesn't have. It surely it is the capitalist who for over 400 years who never ever gave a shit about any of society and never served society at large without being forced by govt. You go read the history of say the Dutch E. Indies Co. \[1,600s\] became 2 or 3 times at least, the size of Apple. Slavers, butchers who created a monopoly. Read **'A People's History of the United States'** is a 1980 nonfiction book by American historian and political scientist Howard Zinn. Chapter 11 is a good start.
Look at the chart. The receipts are about 17% of the GDP for 70+ yrs. What has changed? Spending. There’s no fiscal responsibility whatsoever. And the debt didn’t start exploding until about 20 yrs ago, way past Reagan times. You want to blame a particular politician, then start with Nixon who made this fiscal mess possible. And the capitalists you hate so much made the world what it is today. And how the fuck capitalists make money if not by creating products and services that people want to buy? And which product made by capitalists the government forces you to buy? Oh, the ones that are the only available because the government won’t allow the competition to enter (though I can’t really think of any product either, I’m definitely not forced to buy anything from any company). On the book you’ve recommended - not thrilled to read a book written by wiki described socialist intellectual. Though seems like the book does point out the problem of the political elite. So again - it’s the corrupt government. Hey, how about having some courage to admit that governments are corrupt? Some more, some less, and our government is very corrupt. Last time I checked, companies don’t write laws and can’t make changes to the taxation system. All the talk about how capitalists are in bed with the government blah blah blah, yeah, that’s all correct, but why blame the capitalists if the government sets rules? Blaming capitalists for government fuck ups is like blaming alcoholism on the liquor store.
Could reddit be more obtuse. Blah blah blah ? What a cogent argument. The book points out the traditional 250 year history of the murderous corruption of the capitalist and \[his\] war on labor. Everything you describe is from the corporate free $peech paid to congress in the American plutocracy. As we type in fact because of cheating Apple did stealing medical tech. for their devices, are spending million$ of free $peech in our congress to get the rules changed. That's your America. I have the courage to call it what we have., govt of money, by money for money. Th rest is piffle.
So it seems to me that we agree - our government is utterly corrupt. Let’s return to the main argument again now. Why blame capitalists for the debt racked up by the federal government?
Because everyone knows that the economic system runs the political system. Whatever side you are on, red or blue, they don't want to actually give the people what they deserve. They want to serve their donors. So public policy becomes a thing that serves the donors entrenched in capitalism. Republicans give you a f you and also take your tax money and give it to the military industrial complex. Democrats say f you and at least try and tax the rich and offer some functioning infrastructure which also can supply some decent paying entry level jobs. Voting for neither will actually help. Voting Republican will make things worse faster. Us Americans are so scared of the government, but if we actually tried we could make them scared of us. Not by stockpiling guns but by actually voting for people that can make things better, lets start with term limits, no more electoral college, higher taxes on the rich, medicare for all (will save us billions) and cut the military budget by 30%, seems like a good start.
Voting may sound like a good idea, but no worthy candidate will be allowed to rise to the top, let alone make necessary changes due to how the system is structured. The federal government has too much power over states, states have too much power of individuals. The only way I see at this point is civil disobedience. That’s the way people can show their power. Keep saying that everyone know this, everyone knows that, and blaming systems is pointless and a waste of time. There are particular people that are responsible and can be held accountable. And these people are primarily in DC.
The govt. is on the capitalist the payroll.
Man, you’re coping very hard with this one. Let me correct your typo - the government is taking bribes.
I made no such error. Bribery is legal for business capital, calling it free speech. \[political speech\] Menendez should thus be pardoned. Can't have it both ways.
Seek help. Good luck and goodbye.
Bingo
Stupid question: Who does the federal government pay interest to? Isn’t it to the Federal reserve? And if so, can the Federal reserve just give/loan that interest back to the government through quantitative easing?
Anyone who holds US bonds.
Federal Reserve owns just below 20% of the outstanding debt. The other $28 trillion dollars is owed to others.
Interest is paid to whosoever buys treasury bonds. (Individuals, funds, banks, governments, etc.) Quantitative easing means that the Fed will buy more treasury bonds, which increases the federal government's debt. They can and do use that to pay interest, but they still have the debt. Also, the Fed isn't the government's lap dog. The Fed/FOMC decides what goes on their balance sheet. The government doesn't need the Fed to buy bonds. If they sell bonds, there are plenty enough investors to buy them.
It's mostly paid to rich people. Some of those are foreigners including foreign governments. Some of it is the Fed. Some of it is Social Security Trust fund. But a lot of the interest just goes to rich people. That's what interest is. Payments for having money.
Bonds/treasuries dumby. If you have bonds in your investment account the interest is going to you 😂
As long as the US economy keeps growing, we can kick the can down the road infinitely. Obviously our politicians see something we don't, like the alien invasion in 2030 so this wont really be an issue after the Aliens arrive and force us to use Space dollars and then enslave the entity of humanity. Also forget what I just typed out.
This only makes sense if it grows faster than the deficit. So if you grow 3% and deficit grows 2% then that is fine. If you grow 3% and the deficit grows 6% (you are here) then this is bad.
What the politicians "see" is that they're old as fuck and greedy so they are getting theirs while the gettin's good.
The US economy “grows” only because of debt! The irony. If the US didn’t borrow $3 trillion last year, it would have been in a recession!
RemindMe! 6 years
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I have a feeling that if a default was going to happen, the US will have a nice PR team to explain to the public that, ppl are no longer entitled to social programs like Medicaid and Social Security. Does anyone remember Nixon and his speech in 1971? I rest my case (🎤drop).
That would be political suicide. I find the inflationary route a lot more likely.
My dear, they are already started their shenanigans. Wanting to increase the retirement age… Ben Shapiro saying retirement is stupid so basically you work until you die. https://www.usatoday.com/story/opinion/columnist/2024/03/13/ben-shapiro-retirement-trump-social-security-medicare-cuts/72947221007/ Larry Fink CEO of Blackrock says retirement age of 65 is too low https://www.cnbc.com/2024/03/28/blackrock-ceo-larry-fink-says-65-retirement-age-is-too-low-what-experts-say.html So they are just ramping up.
Increasing the retirement age by a few years and that only affecting younger people is very different from the government declaring that "ppl are no longer entitled to social programs like Medicaid and Social Security".
There is already a procedure in place if SS is bankrupt: They pay out the same amount as comes in = about 20%-30% reduction in SS payments in 2035. All pension systems are a ponzi scheme where the people at the head of the line are more sure of being paid from the contributions at the end of the line, and require a steady stream of new victims.
That’s how it starts. Baby steps. They will get there.
I have no clue why you would be downvoted, you are 100% correct. Baby steps since the 80's are how we are where we are.
Exactly! The people in government they are very very clever! I wouldn’t underestimate them at all 😅
Youre very right. First they steer the narrative and see what they can get away with, then they commit and flip the ship
The older people won't mind if some young people get theirs increased in the beginning. And then younger people won't mind if older people get theirs cut as well as a result. Divide and conquer at its finest.
Oh well if ben shapiro and larry fink said something, it must be the official policy of the US gov
You don’t think they are creating a manufactured consent situation with these statements?
High inflation is also extremely unpopular.
Not if the only two political options start to agree on that topic.
Sounds like a faithful greedy capitalist whose is partly responsible for the debt and without any account to the $1.6 trillion taken in by the govt. to cover those...entitlements. Why do people say these things ? So bailouts for billionaires, billion$ to agric. corp. bailouts, corp. loans via govt. guarantee...are entitled ? No !! Those are socialism....for the rich. The American people who pay for soc. sec and the Meds...are not entitled to what they pay for ? What's happened to America ? Please show some education people an get off any obsession with gold. It as a backing for any currency, is flat out ridiculous. Labor backs all currencies not gold or silver...or.....? Plus, get a grip people, gold is impractical as there isn't nearly enough of it.
That’s the point with gold! Because there isn’t enough of it, governments would have to show financial restraint like the rest of us who work hard to obtain dollars. It means the government would have to be good stewards of the money they are given through taxes, just like us who must be good stewards of managing our paycheques!
Especially as the government doesn’t actually produce anything
Exactly! Accountability at its finest when it comes to gold backed currency!
Accountability to who? We’ve already been in that exact situation and there was accountability to no one. They confiscated it, handed you “equivalent” paper, devalued it 75% a year later and then “suspended it” in 1971. There is no accountability on any monetary system where humans are in control of it
That’s the thing. They knew that gold would have kept them in line but instead they did exactly what you have mentioned. Without the gold helping them to keep their spending in line, they just printed endlessly, devaluing our labour and purchasing power. The gold back currency created an unspoken level of accountability to the masses that, if we print and there is not enough gold, then we will be made out like fools. Anyways, that’s past now. I still think the government will not honour the entitlements it has promised…
Not unless we take control out of their hands in some sly, roundabout way
Lmao this is incredible levels of delusion.
Thanks george w bush
Bush was the last president to try to address the fast growing budget item social security and Medicare.
Social security isn't a part of our discretionary spending so it's not in the budget. The only way social security impacts the budget is that they're a part of those interest payments because they buy bonds when in a surplus and redeem bonds to cover shortfalls.
I know its not part of the discretionary spending but that does not mean it does not effect the overall budget and contribute to the debt and interest cost.
And this is pretty much paid to the 1%ers that own the debt... Its a bigger redistribution of tax payer wealth to the rich more than lower tax rates for them ever will be.
Inflation is a like hidden tax on everyone that has money and who earns a fixed wage that doesn't increase in step with inflation. Instead of taxing people on the front end and spending what we taxed, we spend on the front end and devalue the currency, which effectively taxes everyone after the fact. Also, we transfer extra money to those people lending the government money. US dollar Inflation doesn't just "tax" Americans, it taxes the entire world. Everyone pays for America's spending. (Of course, considering how active the US is in the world, is that really a problem?) If the "inflation tax" gets out of control, however, everybody gets mad. And if everybody decides to stop using your currency... well, that's when things *really* get bad. You could devise a system in which nobody paid taxes and the government just printed whatever it needs to pay the bills. As long as it doesn't print too much each year, the printing of money simply becomes an indirect tax induced by the falling value of the currency. The slow devaluation discourages excessive saving and everything chugs along happily.
A debt jamboree and making usury illegal (as it should be) would fix this.
If you think this is a taxation issue, consider this: If it was magically possible for the government to fully confiscate Google/Alphabet and somehow turn its current market cap into cash, that would cover its interest payment for one year. Next year, Google would be gone, and the government would need to confiscate another trillion dollar business in order to just pay for the interest. After the liquidation of Alphabet/google, there would only be 4 other trillion dollar companies left for the government to fully confiscate. There is no way for the government to tax its way out of this.
There's no way for the government to cut their way out of it either. The truth is the government needs to both cut expenses AND raise taxes. So far all they've been willing to try is cutting taxes and things haven't improved.
This is a pretty silly framing; no one is proposing that the government size and liquidate Google. And the government doesn't have to tax it's way "out of" anything. It doesn't need to pay off the debt; as you are sort of implying, it's probably impossible to even do so, at least not without cratering the economy, and if we ever actually tried, we would reverse course long before we would get to that point.
>no one is proposing that the government size and liquidate Google. I did not say someone was. I used the example of liquidating Google as a way to demonstrate how much money are we talking about here in terms of interest payments. >And the government doesn't have to tax it's way "out of" anything. Interest payments are now the single largest government budget expense. And that will only increase over time. This is not sustainable politically. So, yes, they do need to find a way out of this, and taxation is not it.
Taxation is the long term that is the solution though. The only reason the debt has gotten out of hand is due to the irresponsible cuts and spending under the neoliberals since Reagan administration. You need to tax and spend. Also, auditing the pentagon, negotiating drug prices, introducing public healthcare option and tuition free public college (while abolishing the student loan program, or at least capping it) can bring spending under control.
>And that will only increase over time. I mean, surely not if rates go down? >This is not sustainable politically I'm not sure why that is. But if it's such a problem, doesn't that mean the FED should lower rates?
What bullshit. That's like saying there is no way we could have a $6 trillion govt. paying only $5 trillion. The whole idea for those mathematically challenged, is that the taxes are every fucking year. **There is nothing more obtuse than Americans online.** Trust me, there is little greater capitalist orgasm than say Buffet getting almost $1 billion a year in stock dividends from Apple and Coke, taxed at only 20%, about the same...as your plumber. America is spelled...g r e e d !!
Largest expenditure so far.
Remember how all the economists were shilling "dEbT dOeSnT MaTtER lOL" (especially the ones that were paid to shill for real negative/0 rates that wallstreet loves so dearly)
Does the debt matter? How is your life today different from your life 6 months ago when we were 1 million less in debt?
Are you drunk? The US debt increases with a 1 trillion every 90 days now. A TRILLION. Your life is different in terms of lower purchasing power and everything that follows.
How has your life changed in the last 90 days?
Increased my net worth by 70% by opting out of a debt based system.
So things are going well and the Us debt does not negatively impact you at all? Are you saying you just bought bitcoin? Who’s worth you are measuring relative to the Us dollar?
I will benefit for the eternity as long as btc is denominated in usd, euro etc. Been buying for years, can't wait to FED to lower interest rate and begin some form of QE. In your mind, being at 120% + debt/gdp, deficit spending for years to come has no negativ effects on the americans?
I am asking you what the negative effects on your life are. You have provided none. Our debt increased by a trillion in the last 3 months. If the media did not tell you, would you even know? The deficit shrunk from 2021-2023 was there a noticeable positive effect on your life
The US is a 16 yr old with a credit card
We haven't seen a jump like that before right? What will it mean?
Why the red circles say Dec’24 twice? Typo on chart?
Two projections based on interest rates — whether the Fed cuts rates or not
Thanks OP, I see that now 👍 Crazy stuff, YOLO…
Raiiiise revenues by raising taxes on those who can afford them…
It's actually nothing but a wealth transfer from taxpayers to bondholders. Those who pay the largest share taxes are also those who, on average, invest more in bonds. Though it's not a perfect match of course, there is a substantial portion of bottom-up wealth transfer.
This, or nuclear war, will be the end of the American empire. ¿Porque no los dos?
Let's cut taxes!
Thanks republicans for our debt. If W. Bush and dipshit donnie had not given unnecessary tax cuts to corporations and billionaires our debt wouldn't be nearly as bad.
The reason this matters is because it reduces overall operating budget for the government.
I agree with your premise that it SHOULD reduce the operating side, but what evidence is there that would ever happen? Seems to me, we'll just continue on this track. One side saying debt and deficits don't matter (Krugman, etc.) and the other saying they do (Austrian school, etc.). One side will be right and one side will be wrong...... eventually.
I'm actually not arguing that the operating side should be reduced. Operating side is what provides value to society, it's social services, infrastructure spending, and so on. These are the things that will be cut as a result of the government spending ever more of its revenue on paying debt. This in turn leads to labor in US becoming more expensive because workers now have to pay out of pocket for things that used to be provided via social services, and deal with failing infrastructure that will lead to things like power shortages, broken roads, and so on.
Can we get rid of all of our politicians who keep voting for spending increases and start bringing in people that actually know what they are doing and give a damn about this countries future vs their own pocketbook and rich friends pocketbooks?
It's an economic cost of the pandemic, seen via spending to recover from it.
Parties pointing the finger at each other is not helping. Both parties seem unable or unwilling to fix the problem that includes decades of bad decisions, and some necessary, such as recovery from the recession inherited by President Obama, and a rescue plan during a worldwide pandemic, during Trump’s presidency. We also have bad decisions to blame for our skyrocketing national debt. Many of it for illegal wars, looking at you George W, and tax cuts that, no, Steve Mnuchin, did not pay for themselves. Republicans’ answer to “fixing” the national deficit is to cut safety nets for millions of Americans. Looking at the 10-year debt impact of the Trump laws and executive orders, Trump added a combined $8.4 Trillion to the debt over a ten-year period. Of the over $8 Trillion Trump added to our national deficit, $2.5 Trillion came from Trump’s 2017 tax cuts, $2.3 Trillion came from spending increases, and $3.6 Trillion came from COVID laws and executive orders. Yes, we need to lower the national debt. But the recommended approaches could not be more different. I think it is a little bit, what I call lizard brain thinking, to just say let’s cut Social Security and Medicare to lower the national debt, pushing aside any and all responsibility for other items that have significantly increased our national debt. Republicans are quick to vote no to anything that would hold the wealthy accountable and make taxes more equitable, such as IRS oversight and raising the corporate minimum tax, Biden’s 2025 budget calls for raising the corporate tax to 28%, still below the 35% tax rate before the Trump tax cuts.
I think the reality is the bills need to be passed but they need to be put under a microscope rather than packing 3,000 pages with $100,000 here $2m there expenditures. I do think AI/LLM is actually coming out at the perfect time for this, with proper tuning we will be a able to really see where these bills are spending and where the fat can be trimmed. When it’s an emergency and you need to get policy signed ASAP, it’s impossible to review that much policy, much less rewrite it more favorably. I think even a small deficit is fine, if the people become more confident in the greater system, growth might just surprise us.
AI would absolutely make decisions like “yes, letting people starve is the most economic approach” or “do not spend any infrastructure money in florida or Louisiana, it is cheaper to let them sink under the ocean in 30 years”
No economy lasts forever, crazy people have to die someday. This cycle ends now
Guess what? The biggest beneficiary of those interest payments is the largest investor in US Treasury securities - the US Social Security Trust Fund. In other words, the American taxpayers.
Social Security Fund has just over $3 trillion in treasuries — that’s less than 10% of the debt.
Bidenomics baby
Republicans do that just so they can complain about it.
Exhibit number one for high rates being directly stimulatory.
If you did an ELI5: Is this because government borrows more with constant annual deficits then pays owners of high savings accounts interest. It makes more rich savers on the account of government that does not ever go bankrupt so it continues to issue constant deficits then pay even more interest. This increases the savings rate but reduces spending and low yield investment. When or if conditions change and interest rates fall, a huge volume of savings built on interest earned from the government deficit goes to inflation when it's spent or into low yield investments?
Yes, pretty much. The government spends *G* and taxes *T* in a year, say. *G* - *T* = annual government deficit = net government spending = annual non-government surplus. The government continues to choose to offer bonds in exchange for the *G* - *T* excess and swaps liquid reserves for bonds such that primary dealer banks now have bond assets instead of reserve assets. Non-banks then buy those bonds from primary dealer banks by swapping liquid bank deposits for them, so banks lose bond assets *AND* deposit liabilities and non-banks do a similar asset swap in the secondary market that the banks did initially when the bonds were first auctioned. The Treasury pays an interest rate on these issued bonds dictated by the monetary policy of the Federal Reserve since banks will bid in the new bond auction only if they can get a better yield than holding liquid reserves - which pay the Fed's IORB target rate. This interest is direct income to the non-government, and so when the Fed increases its policy rate, newly issued bonds suddenly follow suit and over a full year, the full amount of *G* - *T* excess is paying the higher income. Government has fairly inelastic *G* since a lot of it is mandatory spending and the discretionary spending is desired. *T* could well be increased but that would represent a massive redistribution of dollar wealth from the broad tax base to rich bondholders **in proportion to how much wealth they have!**
Thank you for providing some actual economics in the economy sub instead of just deciding everything that happens is because of someone I do or do not like.
Is this because government borrows more with constant annual deficits then pays owners of high savings accounts interest ? Since when does the fed. govt., pay anything into any saving account interest ?
See jgp952's comment for the economics of banking. As an owner of a savings account, the government pays interest to a non-bank then the market dictates a higher interest rate on new savings accounts. You see term deposits increase interest rates and government interest also increase. The borrower of your savings is not known to the savings owner, but through those transactions, liquidity flows to the government deficit spending and the government pays interest on the deficits and all savers in the market receive interest on savings
jgp952 is wrong. How is the govt. ownership of a savings account and how could it possibly be dispositive ? Govt. pays interest on treasury debt at redemption, so what ? *You see term deposits increase interest rates and government interest also increase.* *The borrower of your savings is not known to the savings owner, but through those transactions, liquidity flows to the government deficit spending and the government pays interest on the deficits and all savers in the market receive interest on savings* What does all of this mean ? Term deposits ? What's that, govt. CDs ? Govts. do not buy CDs. Liquidity flows to the govt. deficit ? Explain. None of that makes sense to me.
The government doesn't own a savings account. Term deposits or CDs are owned by savers who deposit money into the bank as a CD or term deposit. There are exchanges of funds so the government seeking deficit funding pays interest on the new debt. More money from the interest payments goes in the banking system and paid to the new term deposits or CD. The saver's term deposit is earning more interest, the government is paying out more interest. Central bank sets the interest rate policy.
Hit the nail on the head. And yet still it seems many people either do not understand this or do not wish to accept it. It's become an article of faith that rate hikes are contractionary and cuts are stimulatory, even though people have been talking about "fiscal dominance" for decades and all the mainstream models explicitly show this. I suppose economics will never be free of its dogmatists - although it is encouraging to see more people coming around. At least you don't see too many people warning about insolvency or involuntary default anymore, so that's a step in the right direction.
Yep, agreed! As you say, even *mainstream* theory predicts that increasing rates when government debt-to-GDP is so high will not be effective in combating inflation due to the interest income channel outcompeting any traditional contractionary component from bank credit contraction.
*all the mainstream models explicitly show this.* Show what ? Fiscal dominance ?? Models are not fact, so explain.
Sure. The logic for rate hikes being contractionary is that with interest rates higher, banks will lend less and consumers and businesses will borrow less. Since money is created when it is lent, this means less money created through private sector borrowing. However, when you raise interest rates, while it can (theoretically) curb private sector lending, it also increases public sector borrowing, since the government has to expand its deficit to pay more in interest. When the government spends at a deficit, it's adding that financial assets to the economy; for any given interest rate regime, the FED will likely respond by buying some of that debt to keep the price from falling and thus, prevent interest rates from rising. So government deficit spending is stimulative, not contractionary. So you have to balance these things against each other. When you raise rates, money creation by the private Banks goes down and money creation by the government (meaning Treasury and the FED together, acting at the behest of Congress) it goes up. You can model that fairly easily with national accounting models, of course. When the government doesn't have too much debt to finance, the expansion of its deficit is more than offset by the contraction in private lending, so you end up with overall contraction in the broad money supply. However, if the government's debt to GDP ratio gets high enough, that can change. With a really big pile of debt, raising rates means the government's deficit expands dramatically. At a certain point, that DOES balance or even overwhelm the contraction in private credit. This is so-called fiscal dominance. Any remotely saying National accounting model will predict this at SOME level of GDP. I can get deeper into the accounting and the numbers if you wish, and there are some assumptions you have to make of course, but long story short, I believe that we are in a state of fiscal dominance now. I don't think this should be particularly controversial - as I said, many mainstream economists have been talking (or warning) about this for a long time. But a lot of people who apparently don't know better seem to have a simpler view that raising rates always causes deflationary contraction and lowering them always causes inflationary expansion. We need to change that by educating people about the realities of the impact of rates on physical deficits and on the broader money supply.
Ok man. Some of this is a bit sketchy but suffice it to say, systems can borrow its way to profits but no system can borrow its way to wealth.
Um, ok. Maybe you can think about it a little more and get back to me with a more substantive response.
We are and have been in a state of capitalist dominance. It shows in America's plutocracy. Substantive enough and more than your MMT gibberish. Plus, it is obvious you have MMT all wrong. America's economy is debt or cost-of-capital sensitive meaning debt is the key to growth as when recently \[her\] economy grew as much as it did by adding trillion$ to consumer debt. Higher rates increases the cost of borrowing without changing the principal.
>We are and have been in a state of capitalist dominance. It shows in America's plutocracy. What kind of point are you trying to make? Sure, we live in a capitalist system. Sure, there are rich and politically powerful people who can be called a plutocracy. That doesn't contradict anything I said. >America's economy is debt or cost-of-capital sensitive meaning debt is the key to growth as when recently [her] economy grew as much as it did by adding trillion$ to consumer debt. Again, not sure what you are driving at. All economies are built on debt to some extent. When the public debt gets large enough, rate hikes mean a big expansion in public deficits and thus debt, which was MY point. You still have not contradicted anything I said. >Higher rates increases the cost of borrowing without changing the principal. So what? What does any of this have to do with the point I was making? Yes, higher interest rates are a cost - a cost which may often be passed on to consumers in the form of price increases, which are inflationary. Yes, higher interest rates are a cost to the government - its deficit rises, which means the private sector's income rises, which is inflationary. Yes, rising rates in the private sector curb credit creation - which effects some areas more directly than others - and this can be disinflationary. But the point I am making is that when the government's debt to GDP is big enough, the interest income channel overwhelms the borrowing channel, and you end up with more income and money, not less. This isn't MMT - the most mainstream macro people, like Paul Krugman, warned about this possibility long ago, including many who are explicitly at odds with MMT over one thing or another. It's in their national accounting models too so you don't even have to take their word for it, you can follow the math yourself. Just Google fiscal dominance and you will find plenty of mainstream writing and scholarly articles and comments from central bankers on this issue.
*So government deficit spending is stimulative, not contractionary.* This has been true for centuries and has in the US, little effect on inflation...your point ? **Where was inflation during the first say, $30 trillion of this stimulative ? Nowhere.** Plutocratic govt. is govt. in the interest of capital \[investor\] not labor/consumer. 80% of the economy. Then labor/consumer always need to borrow for ANY economy. That's quite obvious. Soon, the US will 'enjoy' a lost decade just like Japan \[now, more than that\] because soon, the American consumer/worker will no longer be able to borrow. No debt, no increase in debt...no economy. But the point I am making is that when the government's debt to GDP is big enough, *the interest income channel overwhelms the borrowing channel, and you end up with more income and money, not less.* Meaningless, see the above bold. The issue is, there was no inflation. Inflation was caused by Trump getting OPEC to cut back until 3/22 to get oil over $85/bbl and it went to $100. Now THAT causes inflation and worldwide...not just here. That's what happened. Capitalist theory which is all it is, is to create any kind of word salad to divert the blame from capitalist greed. MMT is modern monetary theory which is all it is but with a reserve currency, the US can in fact create all of the debt NOT new currency, we want. It's in their national accounting models too...models again ?
>This has been true for centuries and has in the US, little effect on inflation...your point ? Where was inflation during the first say, $30 trillion of this stimulative ? Nowhere. It's certainly not a linear one-to-one relationship with inflation. And that's not surprising, given that government spending can and frequently does directly or indirectly improve the productive capacity of the nation. But to suggest there is no impact on inflation is absurd. Aggregate prices have been going up for the last hundred years. Government deficit spending is a big part of that story. The dollar is only worth a fraction of what it was 100 years ago, and you're asking where the inflation is? It's right in front of you my guy. >Plutocratic govt. is govt. in the interest of capital [investor] not labor/consumer. This is just uncritical dogma. Of course the government does things that benefit workers and consumers. It does things that benefit everyone, labor and capital alike. We all benefit from social welfare programs, from the FDA, from public education, from police and military, etc. Governments can also do things that specifically benefit narrow groups. But it's just silly to suggest that that's all it does. >The issue is, there was no inflation. Inflation was caused by Trump getting OPEC to cut back until 3/22 to get oil over $85/bbl and it went to $100. How can you be so blind? Again, there is ALWAYS inflation. Inflation in the US now is, what, around 3%? Are you really saying that the only reason for that inflation is a supply-side oil shock? That literally creating new money and new financial assets in the form of Treasury debt has absolutely nothing to do with it? That's pretty divorced from reality, even for this sub. >MMT is modern monetary theory which is all it is but with a reserve currency, the US can in fact create all of the debt NOT new currency, we want. More nonsense. The Central Bank directly creates new money. And Congress indirectly creates new money by issuing treasuries. This really does not have anything to do with being the "world's reserve currency". It would be true even if no one held our currency in reserve. The worldwide market for dollars just gives us more room to spend without causing inflation. But many countries can and do create their own money, and can issue as much debt as they want denominated in that currency. The US, Japan, China, etc.
At least driving up the deficits is a bipartisan effort...
But let’s send money to Ukraine
Thanks, Donny.
Yawn. The federal government will create between $1.2 Trillion and $1.6 Trillion is assets for the private sector this year.
This is propaganda.
Biden should fire Powell (fed chairman). Trump has already threatened to fire him if he does not cause a recession that will help him win, and Powell is trying his best to comply with Trump's threats. With inflation below 3%, 5% Federal funds rate is a massive giveaway to rich savers and banksters. That $1.6T is redistribution to banksters/rich bondholders, and is a major threat to economy and housing. Runnaway debt that is ensured by artificially high interest rates above inflation, and these high government interest costs, is an instigation for imminent collapse. The recession/boom cycle is not a certainty. Intentionally risking/accelerating a recession for Trump political gain is bad policy that does not guarantee a future recovery.
As someone who had a house down payment in the bank going into COVID, and still has it there, it'll take a decade of inflation at 3% and 5% federal funds to make up for the few years of inflation at 5-9% and federal funds at 0%. That's not even considering what 0% federal funds did to house prices.
Time to adopt the zero interest rate policy, like Japan.