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It always gives me an ominous feeling to see these headlines. It's like we're walking out further and further on a frozen lake. "Hey, it's OK, the ice hasn't

It always gives me an ominous feeling to see these headlines. It's like we're walking out further and further on a frozen lake. "Hey, it's OK, the ice hasn't cracked yet! Let's keep going!"

danesparza 2mo ago
I think that's a pretty solid (pun intended) metaphor. Past performance is not a predictor of future returns.
kingleopold 2mo ago
end is probably ww btw. so are you all ready? last time it did work and lost of war debt was paid
- sph 2mo ago
  That only works if you are on the winning side.
  - kingleopold 2mo ago
    does not matter, world would lose big in a new ww. Supply chains now make billions rely on food and others today.
pydry 2mo ago
Total debt / GDP is the wrong metric for that. There's no limit to the serviceability of debt in a currency you print. It makes more sense to conceptualise it as the total size of a giant savings account run by the government. We are walking further out on the ice but that is measured more in other ways - with harder metrics like inflation, access to cheap energy, resources, industrial density and capabilities and access to technology - not this headline number.
- somenameforme 2mo ago
  Even if we just ignore inflation and other issues, there's still a hard limit because governments don't literally just print money, but sells bonds at market rates. As confidence in the economic stability declines the interest rates the government is required to offer on those bonds trends upward. So right now even 10 year treasuries are selling with just under 5% interest. As a result we're now paying $1.4 trillion per year in interest alone, and that number is going up far faster than the economy is growing. This [1] graph looks quite disconcerting. And it's a vicious cycle. The less confidence there is in the stability of this game, the more the government will have to pay to sell that debt. And the more they have to pay, the more debt they end up needing. [1] - https://fred.stlouisfed.org/series/A180RC1A027NBEA https://fred.stlouisfed.org/series/A180RC1A027NBEA
  - pydry 2mo ago
    >governments don't literally just print money, but sells bonds at market rates no, sometimes they literally do exactly that. google for quantitative easing. that's what it is and it's a tool that can always be used by monetarily sovereign countries to bring bond interest rates down by as much as they want. insolvency thus isnt possible.
    - hvb2 2mo ago
      > insolvency thus isnt possible. You might want to look up Zimbabwe or Germany (after WW1). When your money becomes worth less than the paper it's printed on... So, it's possible, and has happened before.
      - raincom 2mo ago
        As long exporter nations want to swap their real assets with digits (US dollars), US is solvent.
        hvb2 2mo ago
        Yes, and that's a function of knowing what you can buy for that dollar. As soon as you start devaluing your currency to get out of debt, not so much. I believe Argentina is a fine example of that
petcat 2mo ago
I've always heard people say that the US debt doesn't matter when the debt itself is denominated in USD. It's the old saying, if you owe the bank $1,000 then you have a problem. But if you owe the bank a trillion dollars then the bank has a problem. Especially when that trillion dollars was spent on an insane fleet of aircraft carriers.
- cucumber3732842 2mo ago
  The quiet part you're not supposed to say out loud is the "if you don't use our currency to transact for energy and thereby let us tax it via inflation we'll regime change you" implication it comes with.
- xnx 2mo ago
  This used to be true, but less so after the US started alienating the rest of the world with tariffs and other erratic behavior. The US military has also been revealed to be incapable of controlling the strait of Hormuz.
- eigenspace 2mo ago
  This idea is based on the fantasy idea of "it's fine because the US can just inflate away its currency to reduce its debts". This is also often used as an argument for why countries shouldn't join the Euro because they'd be giving up an important tool. The reality is that purposefully inflating your currency to reduce your debt burden is going to upset your creditors just as much as if you just defaulted on your debts, but will have the added affect of crippling your economy with inflation. Look at how much Americans freaked out over a year or two of 6% yearly inflation. How do you think Americans would respond to 30% *monthly* inflation like in Argentina or Turkey? It's not like lenders won't notice if the USA tried to print its way out of debt.
  - chasd00 2mo ago
    currency manipulation seems to be working for China though. https://home.treasury.gov/news/press-releases/sm751 https://home.treasury.gov/news/press-releases/sm751

It always gives me an ominous feeling to see these headlines. It's like we're walking out further and further on a frozen lake. "Hey, it's OK, the ice hasn't cracked yet! Let's keep going!"

danesparza 2mo ago

I think that's a pretty solid (pun intended) metaphor. Past performance is not a predictor of future returns.

kingleopold 2mo ago

end is probably ww btw. so are you all ready? last time it did work and lost of war debt was paid

sph 2mo ago
That only works if you are on the winning side.
- kingleopold 2mo ago
  does not matter, world would lose big in a new ww. Supply chains now make billions rely on food and others today.

pydry 2mo ago

Total debt / GDP is the wrong metric for that. There's no limit to the serviceability of debt in a currency you print. It makes more sense to conceptualise it as the total size of a giant savings account run by the government. We are walking further out on the ice but that is measured more in other ways - with harder metrics like inflation, access to cheap energy, resources, industrial density and capabilities and access to technology - not this headline number.

somenameforme 2mo ago
Even if we just ignore inflation and other issues, there's still a hard limit because governments don't literally just print money, but sells bonds at market rates. As confidence in the economic stability declines the interest rates the government is required to offer on those bonds trends upward. So right now even 10 year treasuries are selling with just under 5% interest. As a result we're now paying $1.4 trillion per year in interest alone, and that number is going up far faster than the economy is growing. This [1] graph looks quite disconcerting. And it's a vicious cycle. The less confidence there is in the stability of this game, the more the government will have to pay to sell that debt. And the more they have to pay, the more debt they end up needing. [1] - https://fred.stlouisfed.org/series/A180RC1A027NBEA https://fred.stlouisfed.org/series/A180RC1A027NBEA
- pydry 2mo ago
  >governments don't literally just print money, but sells bonds at market rates no, sometimes they literally do exactly that. google for quantitative easing. that's what it is and it's a tool that can always be used by monetarily sovereign countries to bring bond interest rates down by as much as they want. insolvency thus isnt possible.
  - hvb2 2mo ago
    > insolvency thus isnt possible. You might want to look up Zimbabwe or Germany (after WW1). When your money becomes worth less than the paper it's printed on... So, it's possible, and has happened before.
    - raincom 2mo ago
      As long exporter nations want to swap their real assets with digits (US dollars), US is solvent.
      - hvb2 2mo ago
        Yes, and that's a function of knowing what you can buy for that dollar. As soon as you start devaluing your currency to get out of debt, not so much. I believe Argentina is a fine example of that

petcat 2mo ago

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

cucumber3732842 2mo ago
The quiet part you're not supposed to say out loud is the "if you don't use our currency to transact for energy and thereby let us tax it via inflation we'll regime change you" implication it comes with.
xnx 2mo ago
This used to be true, but less so after the US started alienating the rest of the world with tariffs and other erratic behavior. The US military has also been revealed to be incapable of controlling the strait of Hormuz.
eigenspace 2mo ago
This idea is based on the fantasy idea of "it's fine because the US can just inflate away its currency to reduce its debts". This is also often used as an argument for why countries shouldn't join the Euro because they'd be giving up an important tool. The reality is that purposefully inflating your currency to reduce your debt burden is going to upset your creditors just as much as if you just defaulted on your debts, but will have the added affect of crippling your economy with inflation. Look at how much Americans freaked out over a year or two of 6% yearly inflation. How do you think Americans would respond to 30% *monthly* inflation like in Argentina or Turkey? It's not like lenders won't notice if the USA tried to print its way out of debt.
- chasd00 2mo ago
  currency manipulation seems to be working for China though. https://home.treasury.gov/news/press-releases/sm751 https://home.treasury.gov/news/press-releases/sm751