A bit odd for the back of a school busThe_Countess t1_iy84ra1 wrote
Government don't need to pay off debt (or write it off), they just need to service it, and wait for inflation and economic growth to make it basically irrelevant.
US world war 2 debt for example was never repaid, but at 285 billion, today, with the US economy reaching 23 trillion, it would represent just 1.2% of the economy.
Government debt isn't like household debt.
gumpythegreat t1_iy890nk wrote
And the largest holder of US debt is ... US citizens, investing their money in the single most stable and risk free investment to spend it in the future.
The only concern is when the cost of servicing the debt (ie interest payments) becomes too high that the government struggles to pay for services.
Jrapin t1_iy9wemx wrote
There is no struggle for the US gov to service the interest. The US gov is the issuer of all the US dollars, it's nothing more than key strokes to service the interest.
gumpythegreat t1_iya32m7 wrote
If it started to reach the point where the government was printing extra money to service the debt, we would be in trouble. But we're far off, partly because there is also tremendous global demand for US dollars as a reserve currency and de factor international currency across the world
ForgotTheBogusName t1_iyaz8pp wrote
That time may be closer than you think. There is some good research called “The Dollar Milkshake Endgame” that details hyperinflation and our path to it. It was written more than a year ago and we’re walking it now. I’ll see if I can find it and update this post.
Edit: check out the Dollar Milkshake Endgame here. This is part 4.2, but links to the previous research are in there too.
Concerned_Asuran t1_iya8976 wrote
No man. He means the US government literally can't owe dollars to anyone. Cities, and States, sure, but not the Fed. It's impossible because the US has monetary sovereignty. Like England, Canada, Japan, etc.
Spain, France and Greece can go completely broke from owing money, for example, because they don't have monetary sovereignty.
Read The Deficit Myth by Stephanie Kelton. It will change your life.
bmoredoc t1_iyab7fp wrote
Stephanie Kelton is a proponent of a theory called MMT that most economists think is false.
Most economists would agree with the commenter above you. Yes you can repay sovereign debt by printing money, but this has consequences for interest rates and debt that can negatively affect the economy and necessitate, for example, large tax increases.
In short, there's no free lunch.
Concerned_Asuran t1_iye87v0 wrote
>Yes you can repay sovereign debt by printing money
No. You literally don't need to repay sovereign debt because you never borrowed any in the first place. We use "debt" simply because economists got lazy and didn't come up with a different word. But it is completely different from your household transactions.
whatdowedo2022 t1_iyaa8q3 wrote
What? We borrow our currency from the fed, which is an external organization that doesn’t answer to the US unless it chooses to. They’re very similar to the national bank, which jackson eliminated in his term in office, which caused the nation to be thrown into a recession bc of the subsequent response by the national bank. What uh, what’re you talking about?
Concerned_Asuran t1_iye7gga wrote
>We borrow our currency from the fed
The fed is the US Federal government though. Just cause it's a different building in Washington doesn't mean it's China.
YoopedWhiskey t1_iy9z2vt wrote
That solves the payment, yes. To much of that will destroy your economy
Jrapin t1_iya345z wrote
There would have to be many other factors for that to be true. Impossible no, liley certainly not.
bitscavenger t1_iy8l7e9 wrote
There is also the fact that this debt is the genesis of our money supply. Paying off or writing off the debt would be the complete unwinding of the current monetary system which no one is in any hurry to do.
addiktion t1_iybkvps wrote
I always find those U.S debt clocks pretty funny. As if paying off all that debt would do anything but crash the economy.
Smile_Cool t1_iy895ad wrote
That assumes same level of productivity growth which is probably not happening. My guess is central banks are going to let inflation run.
codyish t1_iy9yox6 wrote
But my libertarian friends assure me that their metaphors about people using credit cards and global macroeconomics and government debt are perfectly reasonable and not at all childish oversimplifications.
BoomZhakaLaka t1_iy8taby wrote
You're making some assumptions about demographics there. Government debt could become a real catastrophe under a shrinking population, which is an imminent problem across the first world.
dee_berg t1_iy9eymh wrote
Immigration. Boom fixed the problem.
oh-propagandhi t1_iy9ktjh wrote
Yeah, with a fix that has been known by economists for 20+ years no less. None of it is rocket science. The only real struggle is to make sure that your immigration is varied so as not to create incoming voting blocs and increase stress of acculturalization.
Ok-disaster2022 t1_iyaatt2 wrote
The UK government when they freed the slaves in the UK paid for them all with a massive loan. They didn't make the final payment on that debt until 1991.
It's also worth pointing out, government debt can be seen as a positive economic tool. Governments issue bonds that are highly secure but low yield investments.
Xaqaree t1_iyc4wer wrote
Getting real tired of this clowncar argument that pretends economic reality does not matter because it is on the scale of government.
Government debt IS like household debt. This does not end well for you clowns.
existential_plastic t1_iydnga8 wrote
Okay, but it's really not. If I owe you a $100,000 unsecured debt, that's easily a source of friction between us, especially if I come to you for another $10,000. If a country owes you $100 billion, and (let's say) it gets hit by a hurricane that knocks out its electrical grid, you might actually give away $10 billion so they can fix it, because it's worth doing so in order to collect on the $100 billion debt.
After the Revolutionary War, generation and maintenance of sovereign debt to foreign nations was an explicit goal of the early U.S. government, because it presented parties who might otherwise be neutral (or who might even lean towards British sympathies) with a strong incentive to continue to recognize the new government, instead, lest their accumulated debt become worthless in the face of an American collapse. This played out to some degree in 1812, when there was every reason for other European powers to get involved in the war (especially Spain, who could have easily negotiated a southern front in return for e.g. Florida's return), but instead all of them sat on their hands and, in many cases, continued to buy American goods (to the extent that they could get past the blockades).
Sumthin-Sumthin44692 t1_iyd59vc wrote
It is more complex than household debt but it does ultimately operate the same. The rational for high government debt which you mention is the same rational for taking out student loans. It’s a lot of money upfront but over time inflation and increased earnings make it a smart investment, assuming (a) there is no hard cap to total economic growth and (b) society doesn’t totally collapse or fundamentally change.
Concerned_Asuran t1_iya7fg8 wrote
>Government debt isn't like household debt.
Correct.
>Government don't need to pay off debt (or write it off), they just need to service it, and wait for inflation and economic growth to make it basically irrelevant.
Incorrect.
>US world war 2 debt for example was never repaid, but at 285 billion, today, with the US economy reaching 23 trillion, it would represent just 1.2% of the economy.
Ambiguous.
The Deficit Myth by Stephanie Kelton should be required reading in middle and high school. Adults world-wide die of old age still believing in Santa Claus.
The_Countess t1_iyaf5c8 wrote
most of these competing economic theories, like MMT pushed by Kelton here, just look like people arguing over which part of the feedback loop is most important.
They are all important.
If you pick one and push on that too much, then before long it becomes more efficient to push on the other.
Concerned_Asuran t1_iye7ov7 wrote
No no. The book I mentioned just explains step by step what happens during a typical day in Washington. Don't be scared.
[deleted] t1_iya9lku wrote
[deleted]
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