Economy The Looming Debt Crisis

[Chesten_Hesten]

What if we globally decide to forgive all debt and start over

This could be pitched in conjunction with all new central bank digital currencies as the replacement.

 

[Rational Poster]

I think I’ve made 10 threads since joining Sherdog and this is my first on the debt crisis.

I don’t like Trump. This is beyond parties. But, by all means, just keep on keeping on.

Sure it's beyond parties but only seems to be a concern when democrats have the presidency.

 

[Rob Battisti]

I keep the inflation is transitory thing but are people really arguing that it's not? It's going to increase, plateau, return to normal expectations. Short term effects will happen, long term effects will follow, market behaviors will return to pre-inflation behaviors once inflation expectations return to prior expectation levels.

I know I said I don't have answers right now but short term inflation actually reduces the real world value of our debt. Pair it with proper deficit and spending management policies and we have a net positive. Long term effects are less clear since the cost of borrowing might arise if inflation expectations remain high but with proper monetary policy that can be accounted.

What am I missing?

It’s circular.

You want inflation to debase the debt but then raise interest rates which increase the debt.

 

[Rob Battisti]

Sure it's beyond parties but only seems to be a concern when democrats have the presidency.

Not for me. It’s always a concern.

 

[Rational Poster]

Not for me. It’s always a concern.

 

[panamaican]

So money is real, but an infinitely growing debt isn’t a legitimate concern because we can just keep printing money.

Well, a driving factor here, imo, is the false belief that we can simply fund infinite growth if we cut tax revenue sufficiently for the upper income. I know you're not making a partisan thread and my response isn't meant to be partisan but that policy direction is a huge part of the problem.

We cut tax revenue hoping that it would spur the growth needed to pay the debts we were incurring and it never materialized. I've always been a fan of more fiscally responsible spending but we have to accept that we need more tax revenue.

I know that there are dueling opinions on this but I think the CBO's conclusions were that we had less money with the cuts than we would have had without them. Which often gets lost in arguments of "Look, more total dollars." $10 is better than $9 but not if you could have had $11. And that's meaningful when we're already in deficit spending.

 

[Rob Battisti]

Well, a driving factor here, imo, is the false belief that we can simply fund infinite growth if we cut tax revenue sufficiently for the upper income. I know you're not making a partisan thread and my response isn't meant to be partisan but that policy direction is a huge part of the problem.

We cut tax revenue hoping that it would spur the growth needed to pay the debts we were incurring and it never materialized. I've always been a fan of more fiscally responsible spending but we have to accept that we need more tax revenue.

I know that there are dueling opinions on this but I think the CBO's conclusions were that we had less money with the cuts than we would have had without them. Which often gets lost in arguments of "Look, more total dollars." $10 is better than $9 but not if you could have had $11. And that's meaningful when we're already in deficit spending.

I think the assumption that increasing taxes at this point would solve the issue. Increasing taxes may be necessary, but the cat is out of the bag. Even with increased taxes and reduced spending, the high interest rates and rate of spending is still too high to ever be addressed.

Jack says it’s not an issue. US debt to gdp ratio is 122% and rising. At what point does the debt to GDP ratio become an issue?

 

[Jack V Savage]

So money is real, but an infinitely growing debt isn’t a legitimate concern because we can just keep printing money.

No. First, we're not talking about it being a "legitimate concern." You were talking about a looming debt crisis. That's insane. Debt being a legitimate concern is reasonable. But also, debt isn't infinitely growing. The total debt burden in the U.S. has been falling since Q2 2020, for example (annual debt burden is way down from where it was in the '90s, but up since 2021). And the reason debt hasn't been a burden is that we can pay it. If the levels get higher, tradeoffs change to the point that it might make sense to prioritize paying it more.

I keep the inflation is transitory thing but are people really arguing that it's not?

I think people just don't really pay attention. It lasted a little longer than expected so people were celebrating (?) it not being transitory, and then it turned out to be.

It's going to increase, plateau, return to normal expectations. Short term effects will happen, long term effects will follow, market behaviors will return to pre-inflation behaviors once inflation expectations return to prior expectation levels.

Yeah. The non-transitory theory was that expectations of rising inflation would become embedded in the economy (as happened in the '70s), meaning that raises and price increases are made with that expectation. If that were true, it could last a very long time and would take a big recession to bring it down.

I know I said I don't have answers right now but short term inflation actually reduces the real world value of our debt. Pair it with proper deficit and spending management policies and we have a net positive. Long term effects are less clear since the cost of borrowing might arise if inflation expectations remain high but with proper monetary policy that can be accounted.

What am I missing?

Yeah, the short-term burst of inflation did reduce the debt burden. The strong economy is also helping, but since we're at capacity for the economy, increases in deficits would again be inflationary (as people wrongly feared when the economy was depressed). So we are in a situation where we don't have to worry about a debt crisis, but we should be focused on lowering deficits.

 

[Scerpi]

No offense but that's simply not a realistic take on the subject. At the simplest level, we'll still be able to borrow money (sell Treasuries and other other securities), just at less attractive rates than currently. But even that is too simplistic a response to the subject.

Soo... at even worse interest rates than currently.

Eventually will be getting financing at the 30% from the sketchy used car lots.

 

[panamaican]

It’s circular.

You want inflation to debase the debt but then raise interest rates which increase the debt.

It's not automatically circular. Which is why I said, pair it with smart revenue and spending decisions and it can be a net positive. The 2nd half is hard to do but it's not impossible.

But "transitory" isn't wrong. Interest rate increases are themselves transitory. When I was a kid my parents taught us to assume that the mortgage on a new home was going to be ~6%. When I opened my title company, everyone treated 3-4% rates like they were the norm and 6% was crazy. Now, we're back up into the 6+% range and 3% is crazy lucky. The rates are transitory, the inflationary effects are transitory. Not that they can be ignored but none of this is permanent.

 

[Jack V Savage]

I think the assumption that increasing taxes at this point would solve the issue. Increasing taxes may be necessary, but the cat is out of the bag. Even with increased taxes and reduced spending, the high interest rates and rate of spending is still too high to ever be addressed.

Jack says it’s not an issue. US debt to gdp ratio is 122% and rising. At what point does the debt to GDP ratio become an issue?

Is it honest to describe this chart as "rising"?:

And I said it's an issue, but it's crazy to say that there's a looming crisis. The higher it goes (and we really want to focus more on annual payments relative to our ability to pay), the more we want to reduce it. It's a conceptual mistake to think there's some magic number when it crosses a threshold and becomes a disaster.

 

[panamaican]

I think the assumption that increasing taxes at this point would solve the issue. Increasing taxes may be necessary, but the cat is out of the bag. Even with increased taxes and reduced spending, the high interest rates and rate of spending is still too high to ever be addressed.

Jack says it’s not an issue. US debt to gdp ratio is 122% and rising. At what point does the debt to GDP ratio become an issue?

I don't think taxes and spending cuts will solve it either but I don't think it's the issue that people think it is. I laid out the outline of my thoughts why earlier in the thread.

 

[panamaican]

Soo... at even worse interest rates than currently.

Eventually will be getting financing at the 30% from the sketchy used car lots.

Thank goodness you're not the only person in this thread.

 

[Siver!]

Anyone ever just gone 'money isn't real, stuff the consequences' and just gone balls deep in spending as much as humanly possible?

 

[Jack V Savage]

Anyone ever just gone 'money isn't real, stuff the consequences' and just gone balls deep in spending as much as humanly possible?

Western gov'ts have generally been counterproductively debt phobic. Gov'ts should have done something like that after the GFC until we got to full employment, but they saw the big numbers and backed off (other things going on, of course, like a desire to hurt the economy when the opposition is in the WH, and more). But austerity is the right move in the U.S. now, ideally on the tax side.

 

[Jack V Savage]

Thanks, Edgelord. Despite me saying it’s both parties issue you must default to your only tired move.

I think the reason you come off as a hack ITT is that you dismiss the only realistic solution proposed (revenue increases) and you bring up the GOP's idiotic debt-ceiling argument, which I don't think any serious person would fail to see through.

 

[sickc0d3r]

raise the age of social security

Or, you know, just raise taxes a little bit on rich people and corps, instead of making grandma wait tables until she’s old enough to be president.

 

[emefer]

I think I’ve made 10 threads since joining Sherdog and this is my first on the debt crisis.

I don’t like Trump. This is beyond parties. But, by all means, just keep on keeping on.

So no blowback at the guy blaming bidenflation?

 

[RoastBeast]

I feel like you could hide everyone's usernames in this thread and be able to pretty accurately predict who posted what.

The normal level headed guys stayed level headed. The super partisan guys spazzed out. The guys who have been the least accurate about the economy wrote the most about the economy.

 

[I Am Legion]

Republicans talk about debt, but all their proposals increase it. Here's what the front-runner is talking about:

https://www.washingtonpost.com/business/2023/09/11/trump-tax-cuts-2024/



So raising taxes on the poor, but then offsetting the gains with another cut for corporations and rich individuals. No one who actually cares about debt is going to support that. And remember when Democrats pushed for a revenue increase without tax hikes by just doing a better job of catching rich tax cheats? The GOP and amoral hacks like the TS were screaming bloody murder.

What you just posted said a 10% tariff on IMPORTED goods, with tax cuts offsetting the cost of goods. I am not a Trumper, but he also said he would close the border. That alone would save billions. He also would impose a tariff on non US citizens buying property and businesses. So even though he is orange and a scum bag, that sounds better than what Bidens team has done. You have to admit that the border is a financial disaster, as is his foreign business acumen (except personally for him and Hunter).

Trump and his advisers have discussed deeper cuts to both individual and corporate tax rates that would build on his controversial 2017 tax law, which they see as a major accomplishment worth expanding, according to interviews with a half-dozen people close to the former president, some of whom spoke on the condition of anonymity to describe private conversations. The cuts could be paid for, at least in theory, with a new 10 percent tariff on all imports to the United States that Trump has called for, which could raise hundreds of billions in revenue. The sharp new tax cuts would help offset higher consumer costs caused by the tariffs