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On September 28 2023 21:41 KwarK wrote: Why would you not want a huge national debt given the US status as the global reserve and settlement currency?
Let’s say the year is 0 and there’s a huge gold deposit on your lands. A bunch of other places tell you that even though they produce iron and grain and textiles or whatever they can’t trade with each other without your gold. And so they’d like to give you a bunch of real stuff that your people all need in exchange for that soft yellow metal you find on the ground. It’s the most obvious trade imaginable, iron is useful, you need it for ploughs etc. and they’re offering you lots of it for this stuff.
The situation is rather better for the US because it doesn’t need to even mine the gold, just issue promises. Third parties want to use US promises as a method of exchange with each other without ever cashing them in. You might be philosophically opposed to the idea of having a bunch of promises outstanding but they’re offering you an awful lot of stuff for them and that’s real stuff you can have today.
Dollar inflation remains low, despite massive monetary expansion, because the demand for the dollar by third parties has increased exponentially. The more trade, the more dollars everyone needs. Incidentally this is the old problem with the gold standard, it naturally becomes deflationary as the total economic activity that it is used for increases faster than the supply of currency. It constrains economic growth, people hoard currency. The dollar solves this, the exponential increase in global trade is met with an exponential demand for trade currency which is met by increasing nominal debt. And as far as exports go promises is a good one. They’re environmentally friendly to manufacture, they’ve got a low production cost, and they make the taxpayers happy.
The inverse would be a weird situation. Let’s say China and Brazil come to you and say that they want to trade manufactured goods for soybeans with each other but they don’t think they can make it work unless each of them also gives 10% of the goods to America. The balanced budget people are in favour of telling them to come up with some other plan because they’re not interested in taking 10%. It’d be like living on the gold deposit but refusing to pick up the gold.
People erroneously think of it like the US is buying on credit because they don’t distinguish national debt in a currency of your creation and household debt. They think dollars flowing out in exchange for goods makes a country poorer, not richer. The picture is clearer if we again imagine our land of gold. Despite being full of gold it is the poorest land in the area, it’s people don’t have metal tools, they wear crudely made clothes, they eat low quality rough milled grains etc. They can pass the soft yellow metal between each other but that doesn’t make their diet any better. It is only when every other land collectively decides that they really need gold and start giving the gold land real tangible goods in exchange for it that it becomes rich. Not because it has gold but because it has metal tools and finely woven textiles. The more gold it exports, the richer it gets. And it owes nothing, the other countries got something that they imagine has equal value on the trade.
This is not a sustainable way to run an economy, though. At some point, it will collapse, but we do not know when. It could take 10 years, it could take 100, but it is not a natural law that the US dollar has to be the go-to trading currency and the safe haven for capital.
Why is it not sustainable and why would it inevitably collapse? Don’t refer to any supposed natural laws in your answer please.
Because the US ensures this control through overwhelming military spending that isn't sustainable. It has already helped the US fall behind many other countries on many other fronts.
The first part of your answer is tautological and the second sounds irrelevant, though admittedly I’m not sure what your point is. That the US prioritizes its hegemony through military spending is one thing, asserting with any sort of rigor that it’s suffering opportunity costs relative to other nations is another.
On September 28 2023 21:41 KwarK wrote: Why would you not want a huge national debt given the US status as the global reserve and settlement currency?
Let’s say the year is 0 and there’s a huge gold deposit on your lands. A bunch of other places tell you that even though they produce iron and grain and textiles or whatever they can’t trade with each other without your gold. And so they’d like to give you a bunch of real stuff that your people all need in exchange for that soft yellow metal you find on the ground. It’s the most obvious trade imaginable, iron is useful, you need it for ploughs etc. and they’re offering you lots of it for this stuff.
The situation is rather better for the US because it doesn’t need to even mine the gold, just issue promises. Third parties want to use US promises as a method of exchange with each other without ever cashing them in. You might be philosophically opposed to the idea of having a bunch of promises outstanding but they’re offering you an awful lot of stuff for them and that’s real stuff you can have today.
Dollar inflation remains low, despite massive monetary expansion, because the demand for the dollar by third parties has increased exponentially. The more trade, the more dollars everyone needs. Incidentally this is the old problem with the gold standard, it naturally becomes deflationary as the total economic activity that it is used for increases faster than the supply of currency. It constrains economic growth, people hoard currency. The dollar solves this, the exponential increase in global trade is met with an exponential demand for trade currency which is met by increasing nominal debt. And as far as exports go promises is a good one. They’re environmentally friendly to manufacture, they’ve got a low production cost, and they make the taxpayers happy.
The inverse would be a weird situation. Let’s say China and Brazil come to you and say that they want to trade manufactured goods for soybeans with each other but they don’t think they can make it work unless each of them also gives 10% of the goods to America. The balanced budget people are in favour of telling them to come up with some other plan because they’re not interested in taking 10%. It’d be like living on the gold deposit but refusing to pick up the gold.
People erroneously think of it like the US is buying on credit because they don’t distinguish national debt in a currency of your creation and household debt. They think dollars flowing out in exchange for goods makes a country poorer, not richer. The picture is clearer if we again imagine our land of gold. Despite being full of gold it is the poorest land in the area, it’s people don’t have metal tools, they wear crudely made clothes, they eat low quality rough milled grains etc. They can pass the soft yellow metal between each other but that doesn’t make their diet any better. It is only when every other land collectively decides that they really need gold and start giving the gold land real tangible goods in exchange for it that it becomes rich. Not because it has gold but because it has metal tools and finely woven textiles. The more gold it exports, the richer it gets. And it owes nothing, the other countries got something that they imagine has equal value on the trade.
This is not a sustainable way to run an economy, though. At some point, it will collapse, but we do not know when. It could take 10 years, it could take 100, but it is not a natural law that the US dollar has to be the go-to trading currency and the safe haven for capital.
Why is it not sustainable and why would it inevitably collapse? Don’t refer to any supposed natural laws in your answer please.
Because the US ensures this control through overwhelming military spending that isn't sustainable. It has already helped the US fall behind many other countries on many other fronts.
The first part of your answer is tautological and the second sounds irrelevant, though admittedly I’m not sure what your point is. That the US prioritizes its hegemony through military spending is one thing, asserting with any sort of rigor that it’s suffering opportunity costs relative to other nations is another.
On September 28 2023 21:41 KwarK wrote: Why would you not want a huge national debt given the US status as the global reserve and settlement currency?
Let’s say the year is 0 and there’s a huge gold deposit on your lands. A bunch of other places tell you that even though they produce iron and grain and textiles or whatever they can’t trade with each other without your gold. And so they’d like to give you a bunch of real stuff that your people all need in exchange for that soft yellow metal you find on the ground. It’s the most obvious trade imaginable, iron is useful, you need it for ploughs etc. and they’re offering you lots of it for this stuff.
The situation is rather better for the US because it doesn’t need to even mine the gold, just issue promises. Third parties want to use US promises as a method of exchange with each other without ever cashing them in. You might be philosophically opposed to the idea of having a bunch of promises outstanding but they’re offering you an awful lot of stuff for them and that’s real stuff you can have today.
Dollar inflation remains low, despite massive monetary expansion, because the demand for the dollar by third parties has increased exponentially. The more trade, the more dollars everyone needs. Incidentally this is the old problem with the gold standard, it naturally becomes deflationary as the total economic activity that it is used for increases faster than the supply of currency. It constrains economic growth, people hoard currency. The dollar solves this, the exponential increase in global trade is met with an exponential demand for trade currency which is met by increasing nominal debt. And as far as exports go promises is a good one. They’re environmentally friendly to manufacture, they’ve got a low production cost, and they make the taxpayers happy.
The inverse would be a weird situation. Let’s say China and Brazil come to you and say that they want to trade manufactured goods for soybeans with each other but they don’t think they can make it work unless each of them also gives 10% of the goods to America. The balanced budget people are in favour of telling them to come up with some other plan because they’re not interested in taking 10%. It’d be like living on the gold deposit but refusing to pick up the gold.
People erroneously think of it like the US is buying on credit because they don’t distinguish national debt in a currency of your creation and household debt. They think dollars flowing out in exchange for goods makes a country poorer, not richer. The picture is clearer if we again imagine our land of gold. Despite being full of gold it is the poorest land in the area, it’s people don’t have metal tools, they wear crudely made clothes, they eat low quality rough milled grains etc. They can pass the soft yellow metal between each other but that doesn’t make their diet any better. It is only when every other land collectively decides that they really need gold and start giving the gold land real tangible goods in exchange for it that it becomes rich. Not because it has gold but because it has metal tools and finely woven textiles. The more gold it exports, the richer it gets. And it owes nothing, the other countries got something that they imagine has equal value on the trade.
This is not a sustainable way to run an economy, though. At some point, it will collapse, but we do not know when. It could take 10 years, it could take 100, but it is not a natural law that the US dollar has to be the go-to trading currency and the safe haven for capital.
If everyone moves away from gold as a means of exchange and value storage then that’s a future problem for the gold miners because they can’t just leech off of everyone else’s economic activity but it’s not a current problem. The people with the current problem in that scenario is not the people with gold mines, it’s the people who traded away all the stuff with real value in exchange for gold. The people with gold mines have tools and textiles and food etc. that people gave them for gold. The people who make textiles etc. have their profits in gold and large amounts of currency in gold to facilitate trading. They’re the ones getting fucked.
The global economy needs tokens with stability and liquidity to work and they really want them to be dollars because dollars get you oil and oil is energy and energy is the basis for the human civilization. The US sells them tokens. If the US absolutely refused then I guess the Euro or whatever would take over but there’s no reason why the US would ever refuse to issue tokens.
It’s like going to Algeria and buying IOUs on sand and then putting those IOUs in a bank as a store of value. The Algerians wouldn’t worry about pledging you too much sand or ask questions like “what will we do when notes representing IOUs of sand stop being hoarded and people demand their sand”. It’s sand, they’ve got plenty. Same with the interest. If people started writing “you owe me 1 ton of sand plus 20kg for every year I hold this IOU” on the notes they’re not going to panic about the increasing balance of outstanding sand they owe. They’re going to laugh about the intrinsic absurdity of this entire economic system built on something they know to have no value while taking whatever tangible goods you were dumb enough to give them.
US debt is a token. It’s not even green bits of paper, they don’t use the dollars, they use the IOUs of dollars. The expanding global economy requires a constant influx of new tokens in order to prevent monetary issues. It’s absurd and it’s also necessary. Everyone needs to believe in US debt tokens because it’s better to play along and be able to trade with your neighbour than to declare that the emperor has no clothes and watch the entire economy fall apart.
On September 28 2023 21:41 KwarK wrote: Why would you not want a huge national debt given the US status as the global reserve and settlement currency?
Let’s say the year is 0 and there’s a huge gold deposit on your lands. A bunch of other places tell you that even though they produce iron and grain and textiles or whatever they can’t trade with each other without your gold. And so they’d like to give you a bunch of real stuff that your people all need in exchange for that soft yellow metal you find on the ground. It’s the most obvious trade imaginable, iron is useful, you need it for ploughs etc. and they’re offering you lots of it for this stuff.
The situation is rather better for the US because it doesn’t need to even mine the gold, just issue promises. Third parties want to use US promises as a method of exchange with each other without ever cashing them in. You might be philosophically opposed to the idea of having a bunch of promises outstanding but they’re offering you an awful lot of stuff for them and that’s real stuff you can have today.
Dollar inflation remains low, despite massive monetary expansion, because the demand for the dollar by third parties has increased exponentially. The more trade, the more dollars everyone needs. Incidentally this is the old problem with the gold standard, it naturally becomes deflationary as the total economic activity that it is used for increases faster than the supply of currency. It constrains economic growth, people hoard currency. The dollar solves this, the exponential increase in global trade is met with an exponential demand for trade currency which is met by increasing nominal debt. And as far as exports go promises is a good one. They’re environmentally friendly to manufacture, they’ve got a low production cost, and they make the taxpayers happy.
The inverse would be a weird situation. Let’s say China and Brazil come to you and say that they want to trade manufactured goods for soybeans with each other but they don’t think they can make it work unless each of them also gives 10% of the goods to America. The balanced budget people are in favour of telling them to come up with some other plan because they’re not interested in taking 10%. It’d be like living on the gold deposit but refusing to pick up the gold.
People erroneously think of it like the US is buying on credit because they don’t distinguish national debt in a currency of your creation and household debt. They think dollars flowing out in exchange for goods makes a country poorer, not richer. The picture is clearer if we again imagine our land of gold. Despite being full of gold it is the poorest land in the area, it’s people don’t have metal tools, they wear crudely made clothes, they eat low quality rough milled grains etc. They can pass the soft yellow metal between each other but that doesn’t make their diet any better. It is only when every other land collectively decides that they really need gold and start giving the gold land real tangible goods in exchange for it that it becomes rich. Not because it has gold but because it has metal tools and finely woven textiles. The more gold it exports, the richer it gets. And it owes nothing, the other countries got something that they imagine has equal value on the trade.
This is not a sustainable way to run an economy, though. At some point, it will collapse, but we do not know when. It could take 10 years, it could take 100, but it is not a natural law that the US dollar has to be the go-to trading currency and the safe haven for capital.
While that is true, what you say and Kwark say aren't mutually exclusive. Let's say China decides that the USD is worthless trash and doesn't want to use it anymore. The USD collapses overnight. But the US doesn't actually lose anything there. China loses everything as they are the one owed billions of USD.
Of course, eventually your currency being worthless can become a problem. Ask Argentina. But that is the case regardless of whether you have 0 debt or a bajillion trillion debt.
The main problem with high debt is that your creditors will start to get uneasy. Because that bit is similar to the banks who hold your mortgage. The bank needs to believe you're good for the debt eventually. So does China. They don't want to be paid back, because they like having USD: people don't trust the Yuan except for the fact that the Chinese government guarantees it with USD. But if the US keeps recklessly borrowing and that causes people to question whether the USD is actually worth the trust people put in it, that might precipitate the very event above. It's still a lot worse for anybody holding US debt than the US itself.
Personally, in the more specific example of the US I don’t see of all the fundamentally unsustainable facets of our current society, that national debt is the one I’d worry about.
At least it’s a hypothetical doomsday scenario, versus numerous crises of capitalism of varying scales and degrees of which we’ve all lived through and experienced in varying ways.
Or how they feed into climate change which no amount of ignoring or wilful fudging can get around when it properly starts having devastating impacts
In a crude sense the endless expansion of national debt is really just the cherry on top of the perpetual growth cake to me. Worthy of consideration yes but hard to view in isolation IMO
On September 28 2023 21:41 KwarK wrote: Why would you not want a huge national debt given the US status as the global reserve and settlement currency?
Let’s say the year is 0 and there’s a huge gold deposit on your lands. A bunch of other places tell you that even though they produce iron and grain and textiles or whatever they can’t trade with each other without your gold. And so they’d like to give you a bunch of real stuff that your people all need in exchange for that soft yellow metal you find on the ground. It’s the most obvious trade imaginable, iron is useful, you need it for ploughs etc. and they’re offering you lots of it for this stuff.
The situation is rather better for the US because it doesn’t need to even mine the gold, just issue promises. Third parties want to use US promises as a method of exchange with each other without ever cashing them in. You might be philosophically opposed to the idea of having a bunch of promises outstanding but they’re offering you an awful lot of stuff for them and that’s real stuff you can have today.
Dollar inflation remains low, despite massive monetary expansion, because the demand for the dollar by third parties has increased exponentially. The more trade, the more dollars everyone needs. Incidentally this is the old problem with the gold standard, it naturally becomes deflationary as the total economic activity that it is used for increases faster than the supply of currency. It constrains economic growth, people hoard currency. The dollar solves this, the exponential increase in global trade is met with an exponential demand for trade currency which is met by increasing nominal debt. And as far as exports go promises is a good one. They’re environmentally friendly to manufacture, they’ve got a low production cost, and they make the taxpayers happy.
The inverse would be a weird situation. Let’s say China and Brazil come to you and say that they want to trade manufactured goods for soybeans with each other but they don’t think they can make it work unless each of them also gives 10% of the goods to America. The balanced budget people are in favour of telling them to come up with some other plan because they’re not interested in taking 10%. It’d be like living on the gold deposit but refusing to pick up the gold.
People erroneously think of it like the US is buying on credit because they don’t distinguish national debt in a currency of your creation and household debt. They think dollars flowing out in exchange for goods makes a country poorer, not richer. The picture is clearer if we again imagine our land of gold. Despite being full of gold it is the poorest land in the area, it’s people don’t have metal tools, they wear crudely made clothes, they eat low quality rough milled grains etc. They can pass the soft yellow metal between each other but that doesn’t make their diet any better. It is only when every other land collectively decides that they really need gold and start giving the gold land real tangible goods in exchange for it that it becomes rich. Not because it has gold but because it has metal tools and finely woven textiles. The more gold it exports, the richer it gets. And it owes nothing, the other countries got something that they imagine has equal value on the trade.
This is not a sustainable way to run an economy, though. At some point, it will collapse, but we do not know when. It could take 10 years, it could take 100, but it is not a natural law that the US dollar has to be the go-to trading currency and the safe haven for capital.
While that is true, what you say and Kwark say aren't mutually exclusive. Let's say China decides that the USD is worthless trash and doesn't want to use it anymore. The USD collapses overnight. But the US doesn't actually lose anything there. China loses everything as they are the one owed billions of USD.
Of course, eventually your currency being worthless can become a problem. Ask Argentina. But that is the case regardless of whether you have 0 debt or a bajillion trillion debt.
The main problem with high debt is that your creditors will start to get uneasy. Because that bit is similar to the banks who hold your mortgage. The bank needs to believe you're good for the debt eventually. So does China. They don't want to be paid back, because they like having USD: people don't trust the Yuan except for the fact that the Chinese government guarantees it with USD. But if the US keeps recklessly borrowing and that causes people to question whether the USD is actually worth the trust people put in it, that might precipitate the very event above. It's still a lot worse for anybody holding US debt than the US itself.
Sorry, but the analogy does not work. The US is NOT using its money to have a sustainable economy to fall back on. Outdated warships and planes they can't afford to maintain do not cut it, and the US is falling behind in infrastructure, education and know-how as we speak.
Controlling the supply of raw materials, like China intends to do, is not a priority either.
On September 28 2023 21:41 KwarK wrote: Why would you not want a huge national debt given the US status as the global reserve and settlement currency?
Let’s say the year is 0 and there’s a huge gold deposit on your lands. A bunch of other places tell you that even though they produce iron and grain and textiles or whatever they can’t trade with each other without your gold. And so they’d like to give you a bunch of real stuff that your people all need in exchange for that soft yellow metal you find on the ground. It’s the most obvious trade imaginable, iron is useful, you need it for ploughs etc. and they’re offering you lots of it for this stuff.
The situation is rather better for the US because it doesn’t need to even mine the gold, just issue promises. Third parties want to use US promises as a method of exchange with each other without ever cashing them in. You might be philosophically opposed to the idea of having a bunch of promises outstanding but they’re offering you an awful lot of stuff for them and that’s real stuff you can have today.
Dollar inflation remains low, despite massive monetary expansion, because the demand for the dollar by third parties has increased exponentially. The more trade, the more dollars everyone needs. Incidentally this is the old problem with the gold standard, it naturally becomes deflationary as the total economic activity that it is used for increases faster than the supply of currency. It constrains economic growth, people hoard currency. The dollar solves this, the exponential increase in global trade is met with an exponential demand for trade currency which is met by increasing nominal debt. And as far as exports go promises is a good one. They’re environmentally friendly to manufacture, they’ve got a low production cost, and they make the taxpayers happy.
The inverse would be a weird situation. Let’s say China and Brazil come to you and say that they want to trade manufactured goods for soybeans with each other but they don’t think they can make it work unless each of them also gives 10% of the goods to America. The balanced budget people are in favour of telling them to come up with some other plan because they’re not interested in taking 10%. It’d be like living on the gold deposit but refusing to pick up the gold.
People erroneously think of it like the US is buying on credit because they don’t distinguish national debt in a currency of your creation and household debt. They think dollars flowing out in exchange for goods makes a country poorer, not richer. The picture is clearer if we again imagine our land of gold. Despite being full of gold it is the poorest land in the area, it’s people don’t have metal tools, they wear crudely made clothes, they eat low quality rough milled grains etc. They can pass the soft yellow metal between each other but that doesn’t make their diet any better. It is only when every other land collectively decides that they really need gold and start giving the gold land real tangible goods in exchange for it that it becomes rich. Not because it has gold but because it has metal tools and finely woven textiles. The more gold it exports, the richer it gets. And it owes nothing, the other countries got something that they imagine has equal value on the trade.
This is not a sustainable way to run an economy, though. At some point, it will collapse, but we do not know when. It could take 10 years, it could take 100, but it is not a natural law that the US dollar has to be the go-to trading currency and the safe haven for capital.
Why is it not sustainable and why would it inevitably collapse? Don’t refer to any supposed natural laws in your answer please.
Because the US ensures this control through overwhelming military spending that isn't sustainable. It has already helped the US fall behind many other countries on many other fronts.
The first part of your answer is tautological and the second sounds irrelevant, though admittedly I’m not sure what your point is. That the US prioritizes its hegemony through military spending is one thing, asserting with any sort of rigor that it’s suffering opportunity costs relative to other nations is another.
I wasn't being tautological, just unambiguous. The overwhelming military spending is a necessity that is already too expensive to maintain as evidenced by the US falling behind many countries on many fronts despite being the wealthiest and most powerful country on the planet.
This also contributes to why the betting favorite to be president of the US is a fascist that tried to illegally hold onto power (one of the other aspects that makes this unsustainable).
It could all come crashing down in just a couple years or less under Trump, or maybe it lasts decades, but the unsustainability is clear to anyone that cares to look imo.
On September 28 2023 21:41 KwarK wrote: Why would you not want a huge national debt given the US status as the global reserve and settlement currency?
Let’s say the year is 0 and there’s a huge gold deposit on your lands. A bunch of other places tell you that even though they produce iron and grain and textiles or whatever they can’t trade with each other without your gold. And so they’d like to give you a bunch of real stuff that your people all need in exchange for that soft yellow metal you find on the ground. It’s the most obvious trade imaginable, iron is useful, you need it for ploughs etc. and they’re offering you lots of it for this stuff.
The situation is rather better for the US because it doesn’t need to even mine the gold, just issue promises. Third parties want to use US promises as a method of exchange with each other without ever cashing them in. You might be philosophically opposed to the idea of having a bunch of promises outstanding but they’re offering you an awful lot of stuff for them and that’s real stuff you can have today.
Dollar inflation remains low, despite massive monetary expansion, because the demand for the dollar by third parties has increased exponentially. The more trade, the more dollars everyone needs. Incidentally this is the old problem with the gold standard, it naturally becomes deflationary as the total economic activity that it is used for increases faster than the supply of currency. It constrains economic growth, people hoard currency. The dollar solves this, the exponential increase in global trade is met with an exponential demand for trade currency which is met by increasing nominal debt. And as far as exports go promises is a good one. They’re environmentally friendly to manufacture, they’ve got a low production cost, and they make the taxpayers happy.
The inverse would be a weird situation. Let’s say China and Brazil come to you and say that they want to trade manufactured goods for soybeans with each other but they don’t think they can make it work unless each of them also gives 10% of the goods to America. The balanced budget people are in favour of telling them to come up with some other plan because they’re not interested in taking 10%. It’d be like living on the gold deposit but refusing to pick up the gold.
People erroneously think of it like the US is buying on credit because they don’t distinguish national debt in a currency of your creation and household debt. They think dollars flowing out in exchange for goods makes a country poorer, not richer. The picture is clearer if we again imagine our land of gold. Despite being full of gold it is the poorest land in the area, it’s people don’t have metal tools, they wear crudely made clothes, they eat low quality rough milled grains etc. They can pass the soft yellow metal between each other but that doesn’t make their diet any better. It is only when every other land collectively decides that they really need gold and start giving the gold land real tangible goods in exchange for it that it becomes rich. Not because it has gold but because it has metal tools and finely woven textiles. The more gold it exports, the richer it gets. And it owes nothing, the other countries got something that they imagine has equal value on the trade.
This is not a sustainable way to run an economy, though. At some point, it will collapse, but we do not know when. It could take 10 years, it could take 100, but it is not a natural law that the US dollar has to be the go-to trading currency and the safe haven for capital.
Why is it not sustainable and why would it inevitably collapse? Don’t refer to any supposed natural laws in your answer please.
Because the US ensures this control through overwhelming military spending that isn't sustainable. It has already helped the US fall behind many other countries on many other fronts.
The first part of your answer is tautological and the second sounds irrelevant, though admittedly I’m not sure what your point is. That the US prioritizes its hegemony through military spending is one thing, asserting with any sort of rigor that it’s suffering opportunity costs relative to other nations is another.
I wasn't being tautological, just unambiguous. The overwhelming military spending is a necessity that is already too expensive to maintain as evidenced by the US falling behind many countries on many fronts despite being the wealthiest and most powerful country on the planet.
This also contributes to why the betting favorite to be president of the US is a fascist that tried to illegally hold onto power (one of the other aspects that makes this unsustainable).
It could all come crashing down in just a couple years or less under Trump, or maybe it lasts decades, but the unsustainability is clear to anyone that cares to look imo.
Trump is a completely separate problem to the national debt “problem”.
One part of this that gets easily overlooked is the very real problem of interest payments. Other arguments aside, we can't borrow to infinity because we can't pay infinity on interest, and inflating your way out is very painful and hurts future investment. Now, when the economy is supposedly in a good place, the federal gov is spending way beyond what it takes in. This is one of the things thr CBO and outside organizations are warning about. In a decade its possible we will be spending more on interest than defense, it's a serious amount of money.
On September 28 2023 21:41 KwarK wrote: Why would you not want a huge national debt given the US status as the global reserve and settlement currency?
Let’s say the year is 0 and there’s a huge gold deposit on your lands. A bunch of other places tell you that even though they produce iron and grain and textiles or whatever they can’t trade with each other without your gold. And so they’d like to give you a bunch of real stuff that your people all need in exchange for that soft yellow metal you find on the ground. It’s the most obvious trade imaginable, iron is useful, you need it for ploughs etc. and they’re offering you lots of it for this stuff.
The situation is rather better for the US because it doesn’t need to even mine the gold, just issue promises. Third parties want to use US promises as a method of exchange with each other without ever cashing them in. You might be philosophically opposed to the idea of having a bunch of promises outstanding but they’re offering you an awful lot of stuff for them and that’s real stuff you can have today.
Dollar inflation remains low, despite massive monetary expansion, because the demand for the dollar by third parties has increased exponentially. The more trade, the more dollars everyone needs. Incidentally this is the old problem with the gold standard, it naturally becomes deflationary as the total economic activity that it is used for increases faster than the supply of currency. It constrains economic growth, people hoard currency. The dollar solves this, the exponential increase in global trade is met with an exponential demand for trade currency which is met by increasing nominal debt. And as far as exports go promises is a good one. They’re environmentally friendly to manufacture, they’ve got a low production cost, and they make the taxpayers happy.
The inverse would be a weird situation. Let’s say China and Brazil come to you and say that they want to trade manufactured goods for soybeans with each other but they don’t think they can make it work unless each of them also gives 10% of the goods to America. The balanced budget people are in favour of telling them to come up with some other plan because they’re not interested in taking 10%. It’d be like living on the gold deposit but refusing to pick up the gold.
People erroneously think of it like the US is buying on credit because they don’t distinguish national debt in a currency of your creation and household debt. They think dollars flowing out in exchange for goods makes a country poorer, not richer. The picture is clearer if we again imagine our land of gold. Despite being full of gold it is the poorest land in the area, it’s people don’t have metal tools, they wear crudely made clothes, they eat low quality rough milled grains etc. They can pass the soft yellow metal between each other but that doesn’t make their diet any better. It is only when every other land collectively decides that they really need gold and start giving the gold land real tangible goods in exchange for it that it becomes rich. Not because it has gold but because it has metal tools and finely woven textiles. The more gold it exports, the richer it gets. And it owes nothing, the other countries got something that they imagine has equal value on the trade.
This is not a sustainable way to run an economy, though. At some point, it will collapse, but we do not know when. It could take 10 years, it could take 100, but it is not a natural law that the US dollar has to be the go-to trading currency and the safe haven for capital.
Why is it not sustainable and why would it inevitably collapse? Don’t refer to any supposed natural laws in your answer please.
Because the US ensures this control through overwhelming military spending that isn't sustainable. It has already helped the US fall behind many other countries on many other fronts.
The first part of your answer is tautological and the second sounds irrelevant, though admittedly I’m not sure what your point is. That the US prioritizes its hegemony through military spending is one thing, asserting with any sort of rigor that it’s suffering opportunity costs relative to other nations is another.
I wasn't being tautological, just unambiguous. The overwhelming military spending is a necessity that is already too expensive to maintain as evidenced by the US falling behind many countries on many fronts despite being the wealthiest and most powerful country on the planet.
This also contributes to why the betting favorite to be president of the US is a fascist that tried to illegally hold onto power (one of the other aspects that makes this unsustainable).
It could all come crashing down in just a couple years or less under Trump, or maybe it lasts decades, but the unsustainability is clear to anyone that cares to look imo.
Trump is a completely separate problem to the national debt “problem”.
Perhaps in your understanding, but not mine. Trump is exploiting the clear contradiction of having the wealthiest and most powerful country on the planet not being able to care for its citizens. Which is connected to the unsustainable military spending and propaganda about the national debt.
On September 28 2023 21:41 KwarK wrote: Why would you not want a huge national debt given the US status as the global reserve and settlement currency?
Let’s say the year is 0 and there’s a huge gold deposit on your lands. A bunch of other places tell you that even though they produce iron and grain and textiles or whatever they can’t trade with each other without your gold. And so they’d like to give you a bunch of real stuff that your people all need in exchange for that soft yellow metal you find on the ground. It’s the most obvious trade imaginable, iron is useful, you need it for ploughs etc. and they’re offering you lots of it for this stuff.
The situation is rather better for the US because it doesn’t need to even mine the gold, just issue promises. Third parties want to use US promises as a method of exchange with each other without ever cashing them in. You might be philosophically opposed to the idea of having a bunch of promises outstanding but they’re offering you an awful lot of stuff for them and that’s real stuff you can have today.
Dollar inflation remains low, despite massive monetary expansion, because the demand for the dollar by third parties has increased exponentially. The more trade, the more dollars everyone needs. Incidentally this is the old problem with the gold standard, it naturally becomes deflationary as the total economic activity that it is used for increases faster than the supply of currency. It constrains economic growth, people hoard currency. The dollar solves this, the exponential increase in global trade is met with an exponential demand for trade currency which is met by increasing nominal debt. And as far as exports go promises is a good one. They’re environmentally friendly to manufacture, they’ve got a low production cost, and they make the taxpayers happy.
The inverse would be a weird situation. Let’s say China and Brazil come to you and say that they want to trade manufactured goods for soybeans with each other but they don’t think they can make it work unless each of them also gives 10% of the goods to America. The balanced budget people are in favour of telling them to come up with some other plan because they’re not interested in taking 10%. It’d be like living on the gold deposit but refusing to pick up the gold.
People erroneously think of it like the US is buying on credit because they don’t distinguish national debt in a currency of your creation and household debt. They think dollars flowing out in exchange for goods makes a country poorer, not richer. The picture is clearer if we again imagine our land of gold. Despite being full of gold it is the poorest land in the area, it’s people don’t have metal tools, they wear crudely made clothes, they eat low quality rough milled grains etc. They can pass the soft yellow metal between each other but that doesn’t make their diet any better. It is only when every other land collectively decides that they really need gold and start giving the gold land real tangible goods in exchange for it that it becomes rich. Not because it has gold but because it has metal tools and finely woven textiles. The more gold it exports, the richer it gets. And it owes nothing, the other countries got something that they imagine has equal value on the trade.
This is not a sustainable way to run an economy, though. At some point, it will collapse, but we do not know when. It could take 10 years, it could take 100, but it is not a natural law that the US dollar has to be the go-to trading currency and the safe haven for capital.
Why is it not sustainable and why would it inevitably collapse? Don’t refer to any supposed natural laws in your answer please.
Because the US ensures this control through overwhelming military spending that isn't sustainable. It has already helped the US fall behind many other countries on many other fronts.
The first part of your answer is tautological and the second sounds irrelevant, though admittedly I’m not sure what your point is. That the US prioritizes its hegemony through military spending is one thing, asserting with any sort of rigor that it’s suffering opportunity costs relative to other nations is another.
I wasn't being tautological, just unambiguous. The overwhelming military spending is a necessity that is already too expensive to maintain as evidenced by the US falling behind many countries on many fronts despite being the wealthiest and most powerful country on the planet.
This also contributes to why the betting favorite to be president of the US is a fascist that tried to illegally hold onto power (one of the other aspects that makes this unsustainable).
It could all come crashing down in just a couple years or less under Trump, or maybe it lasts decades, but the unsustainability is clear to anyone that cares to look imo.
Trump is a completely separate problem to the national debt “problem”.
Perhaps in your understanding, but not mine. Trump is exploiting the clear contradiction of having the wealthiest and most powerful country on the planet not being able to care for its citizens. Which is connected to the unsustainable military spending and propaganda about the national debt.
The US military spending isn’t especially high and certainly isn’t unsustainable. The problem of paying for things isn’t a lack of wealth, it’s a wealth divide between haves and have nots.
But that’s beside the point. Trump is exploiting a culture war created by the declining power of the white man in US society. The resentment over no longer getting unearned promotions. Of no longer being able to exert economic and physical coercion over your spouse. Of no longer having the wider social and political framework cater exclusively to you. The sense that equality is robbing them of privilege.
That would be completely unchanged were the US still on the gold standard. The US is far from the only nation experiencing a culture war and a rise of populist demagoguery. If you’re going to draw a causal line between an exclusively US precondition and a global trend then you’ll need to reconcile the two.
On September 29 2023 03:32 Introvert wrote: One part of this that gets easily overlooked is the very real problem of interest payments. Other arguments aside, we can't borrow to infinity because we can't pay infinity on interest, and inflating your way out is very painful and hurts future investment. Now, when the economy is supposedly in a good place, the federal gov is spending way beyond what it takes in. This is one of the things thr CBO and outside organizations are warning about. In a decade its possible we will be spending more on interest than defense, it's a serious amount of money.
We can’t borrow to infinity because infinity is not a number. Nobody is proposing borrowing to infinity because, and I want to be clear on this, it’s not a number. Nobody serious is concerned about paying interest on infinity because, as previously mentioned, not a number. If you were concerned about how we would possibly pay interest on infinity dollars then I invite you to share that concern with other things that are also not a number. Perhaps you could argue that we can’t pay interest on a debt of purple and therefore we shouldn’t let our national debt exceed purple. The main problem with borrowing infinity dollars wouldn’t be servicing the interest, it would be that it’s literally not possible.
You absolutely can service a debt denominated in large real numbers of your own fiat currency.
Furthermore you’re still not understanding what the debt is, we’re not consuming value servicing the debt. The debt is a token, a monkey picture, an idea. Other countries want to use our monkey pictures to assist them in bartering with each other. When interest is due we tell them that their tribe of digital monkey pictures had some babies and now they have even more monkeys and they say “great, my economy is growing, the need for monkey pictures has never been higher”. It’s not like household debt, you can’t think of it in those terms.
I just watched the second Republican primary debate, so that you don't have to. Please don't waste your time. I thought the first debate was pretty meh with a few interesting highlights (like Haley vs. Ramaswamy), but this second debate was an absolute disaster. For the first half of last night's debate, candidates were talking over each other for sometimes 15-30 seconds straight. Moderators had no control over anyone. Almost zero questions were directly answered. Each person had somewhere between 1-3 reasonable crowd applauses, Pence did okay saying Pence things, DeSantis did a little better saying DeSantis things, Christie made a few good anti-Trump points (despite most Republicans still preferring Trump over everyone else combined), Ramaswamy got shut down by pretty much every other candidate, Haley made some good points and impressively didn't let herself be shouted over by the men on stage, and absolutely none of this is going to make any difference at all. These candidates each might see their poll numbers increase or decrease by a few percentage points, but Trump is the clear winner by not even showing up.
The last question of the night perfectly epitomized just how stupid of an event this was: The moderators turned the end of the debate into a reality show. Not joking. "Which one of you, on stage tonight, should be voted off the island? Please use your marker to write your choice on the notepad in front of you. You have 15 seconds, starting now." Everyone refused to answer that question except for Chris Christie, who chose Donald Trump. The final question is at 2:38:05 below, and the entire debate (again, please don't waste your time) starts at 43:40.
Question for Kwark. Suppose the number of monkey pictures that the USG gives to Foreignland to service the debt to Foreignland grows so astronomically that Foreignlanders are swimming in monkey pictures. The Foreignlanders who are most loaded with monkey pictures then spend a few million of them at a time buying houses in the neighborhood where I live. I’m a renter. Housing prices go up where I live. My rent goes up and I won’t be able to buy a house. (USG can print monkey pictures, but I can’t.)
Is it really of no consequence to me if the number of monkey pictures being sent to Foreignland grows, if there are any markets in which both I and Foreignlanders wish to participate simultaneously?
On September 29 2023 06:07 Djabanete wrote: Question for Kwark. Suppose the number of monkey pictures that the USG gives to Foreignland to service the debt to Foreignland grows so astronomically that Foreignlanders are swimming in monkey pictures. The Foreignlanders who are most loaded with monkey pictures then spend a few million of them at a time buying houses in the neighborhood where I live. I’m a renter. Housing prices go up where I live. My rent goes up and I won’t be able to buy a house. (USG can print monkey pictures, but I can’t.)
Is it really of no consequence to me if the number of monkey pictures being sent to Foreignland grows, if there are any markets in which both I and Foreignlanders wish to participate simultaneously?
Why is rent not constrained by what the market will bear in this scenario? If rent can go up without any impact on supply then why is it not already at the hypothetical higher level?
I guess I don’t see the difference between a foreign landlord and a domestic one here. Renting is renting.
As for the return of the previously out of circulation tokens back into the US economy, you’re not wrong that it’ll cause nominal increases. The amount of economic activity will be unchanged but all the tokens that were previously essentially frozen out will be in use and so the nominal prices for a given amount of labour will increase. But I don’t see how that’s a problem for you, a worker.
A house still represents the product of the same quantity of American labour. If the same new build house nominally costs $100k or $1000k, it’s the same amount of wood, the same amount of construction, the same contractors. The ratio of the value of your labour to the value of the labour that is embedded in the house is unchanged. If you can’t afford a home in this example it is because you’re underpaid, not because there’s too much currency in circulation.
The scenario in which there is an attempt to use dollars to purchase American labour is self correcting. The act of returning these dollars to active circulation, as opposed to frozen out or used for settlement between third parties, devalues them. They’re representing the same finite pool.
On September 29 2023 03:32 Introvert wrote: One part of this that gets easily overlooked is the very real problem of interest payments. Other arguments aside, we can't borrow to infinity because we can't pay infinity on interest, and inflating your way out is very painful and hurts future investment. Now, when the economy is supposedly in a good place, the federal gov is spending way beyond what it takes in. This is one of the things thr CBO and outside organizations are warning about. In a decade its possible we will be spending more on interest than defense, it's a serious amount of money.
We can’t borrow to infinity because infinity is not a number. Nobody is proposing borrowing to infinity because, and I want to be clear on this, it’s not a number. Nobody serious is concerned about paying interest on infinity because, as previously mentioned, not a number. If you were concerned about how we would possibly pay interest on infinity dollars then I invite you to share that concern with other things that are also not a number. Perhaps you could argue that we can’t pay interest on a debt of purple and therefore we shouldn’t let our national debt exceed purple. The main problem with borrowing infinity dollars wouldn’t be servicing the interest, it would be that it’s literally not possible.
You absolutely can service a debt denominated in large real numbers of your own fiat currency.
Furthermore you’re still not understanding what the debt is, we’re not consuming value servicing the debt. The debt is a token, a monkey picture, an idea. Other countries want to use our monkey pictures to assist them in bartering with each other. When interest is due we tell them that their tribe of digital monkey pictures had some babies and now they have even more monkeys and they say “great, my economy is growing, the need for monkey pictures has never been higher”. It’s not like household debt, you can’t think of it in those terms.
Is the paragraph about infinity to make way for the silliness of the follow up posts?
I should really stop saying it, but I'm surprised to see this post. To see you post something so MMT adjacent was not expected. It's a position rejected by the vast majority of econmists for good reason. Besides, servicing the debt does cost value, paying for something later costs more if inflation is low enough, and if it's not, then obviously dealing with inflation has its own problems. Yes, literally we could alway avoid default by simply printing thr difference but surely I don't have give the standard reasons why thats bad. The list of things that have to perfectly or never change for debt and deficits to be irrelevant are worrisome, to put it mildly. Nevermind that things aren't perfectly elastic there ia a lot of pain even in "self correction" because everything has a time lag.
Yes, theoretically if all foreigners did is trade in dollars then I suppose the exact number of them in circulation wouldn't matter as much, but it would still matter and it would have a devastating effect on Americans who have to purchase actual THINGS with dollars.
On September 28 2023 21:41 KwarK wrote: Why would you not want a huge national debt given the US status as the global reserve and settlement currency?
Let’s say the year is 0 and there’s a huge gold deposit on your lands. A bunch of other places tell you that even though they produce iron and grain and textiles or whatever they can’t trade with each other without your gold. And so they’d like to give you a bunch of real stuff that your people all need in exchange for that soft yellow metal you find on the ground. It’s the most obvious trade imaginable, iron is useful, you need it for ploughs etc. and they’re offering you lots of it for this stuff.
The situation is rather better for the US because it doesn’t need to even mine the gold, just issue promises. Third parties want to use US promises as a method of exchange with each other without ever cashing them in. You might be philosophically opposed to the idea of having a bunch of promises outstanding but they’re offering you an awful lot of stuff for them and that’s real stuff you can have today.
Dollar inflation remains low, despite massive monetary expansion, because the demand for the dollar by third parties has increased exponentially. The more trade, the more dollars everyone needs. Incidentally this is the old problem with the gold standard, it naturally becomes deflationary as the total economic activity that it is used for increases faster than the supply of currency. It constrains economic growth, people hoard currency. The dollar solves this, the exponential increase in global trade is met with an exponential demand for trade currency which is met by increasing nominal debt. And as far as exports go promises is a good one. They’re environmentally friendly to manufacture, they’ve got a low production cost, and they make the taxpayers happy.
The inverse would be a weird situation. Let’s say China and Brazil come to you and say that they want to trade manufactured goods for soybeans with each other but they don’t think they can make it work unless each of them also gives 10% of the goods to America. The balanced budget people are in favour of telling them to come up with some other plan because they’re not interested in taking 10%. It’d be like living on the gold deposit but refusing to pick up the gold.
People erroneously think of it like the US is buying on credit because they don’t distinguish national debt in a currency of your creation and household debt. They think dollars flowing out in exchange for goods makes a country poorer, not richer. The picture is clearer if we again imagine our land of gold. Despite being full of gold it is the poorest land in the area, it’s people don’t have metal tools, they wear crudely made clothes, they eat low quality rough milled grains etc. They can pass the soft yellow metal between each other but that doesn’t make their diet any better. It is only when every other land collectively decides that they really need gold and start giving the gold land real tangible goods in exchange for it that it becomes rich. Not because it has gold but because it has metal tools and finely woven textiles. The more gold it exports, the richer it gets. And it owes nothing, the other countries got something that they imagine has equal value on the trade.
This is not a sustainable way to run an economy, though. At some point, it will collapse, but we do not know when. It could take 10 years, it could take 100, but it is not a natural law that the US dollar has to be the go-to trading currency and the safe haven for capital.
While that is true, what you say and Kwark say aren't mutually exclusive. Let's say China decides that the USD is worthless trash and doesn't want to use it anymore. The USD collapses overnight. But the US doesn't actually lose anything there. China loses everything as they are the one owed billions of USD.
Of course, eventually your currency being worthless can become a problem. Ask Argentina. But that is the case regardless of whether you have 0 debt or a bajillion trillion debt.
The main problem with high debt is that your creditors will start to get uneasy. Because that bit is similar to the banks who hold your mortgage. The bank needs to believe you're good for the debt eventually. So does China. They don't want to be paid back, because they like having USD: people don't trust the Yuan except for the fact that the Chinese government guarantees it with USD. But if the US keeps recklessly borrowing and that causes people to question whether the USD is actually worth the trust people put in it, that might precipitate the very event above. It's still a lot worse for anybody holding US debt than the US itself.
Sorry, but the analogy does not work. The US is NOT using its money to have a sustainable economy to fall back on. Outdated warships and planes they can't afford to maintain do not cut it, and the US is falling behind in infrastructure, education and know-how as we speak.
Controlling the supply of raw materials, like China intends to do, is not a priority either.
You're moving the goalpost. The question wasn't whether the US spent their money wisely. The question was whether borrowing money was a problem. Obviously I agree the US could spend their money a lot better than on tax breaks for Elon Musk, building a wall on the Mexican border or whatever iteration of the Star Wars vaporware we've reached now. However, so far how the US has spent money, hasn't scared off any international lenders from continuing to invest. And while I'm happy to agree the US is falling behind in a bunch of areas, it's not the debt that is causing that, it's a choice about what to prioritize their spending on. Some (small part) military spending is indeed necessary to maintain their hegemony, but there's plenty left they could spend on infrastructure, public education or healthcare, but instead they spend more of it on private public healthcare and school vouchers.
On September 29 2023 03:32 Introvert wrote: One part of this that gets easily overlooked is the very real problem of interest payments. Other arguments aside, we can't borrow to infinity because we can't pay infinity on interest, and inflating your way out is very painful and hurts future investment. Now, when the economy is supposedly in a good place, the federal gov is spending way beyond what it takes in. This is one of the things thr CBO and outside organizations are warning about. In a decade its possible we will be spending more on interest than defense, it's a serious amount of money.
We can’t borrow to infinity because infinity is not a number. Nobody is proposing borrowing to infinity because, and I want to be clear on this, it’s not a number. Nobody serious is concerned about paying interest on infinity because, as previously mentioned, not a number. If you were concerned about how we would possibly pay interest on infinity dollars then I invite you to share that concern with other things that are also not a number. Perhaps you could argue that we can’t pay interest on a debt of purple and therefore we shouldn’t let our national debt exceed purple. The main problem with borrowing infinity dollars wouldn’t be servicing the interest, it would be that it’s literally not possible.
You absolutely can service a debt denominated in large real numbers of your own fiat currency.
Furthermore you’re still not understanding what the debt is, we’re not consuming value servicing the debt. The debt is a token, a monkey picture, an idea. Other countries want to use our monkey pictures to assist them in bartering with each other. When interest is due we tell them that their tribe of digital monkey pictures had some babies and now they have even more monkeys and they say “great, my economy is growing, the need for monkey pictures has never been higher”. It’s not like household debt, you can’t think of it in those terms.
Is the paragraph about infinity to make way for the silliness of the follow up posts?
I should really stop saying it, but I'm surprised to see this post. To see you post something so MMT adjacent was not expected. It's a position rejected by the vast majority of econmists for good reason. Besides, servicing the debt does cost value, paying for something later costs more if inflation is low enough, and if it's not, then obviously dealing with inflation has its own problems. Yes, literally we could alway avoid default by simply printing thr difference but surely I don't have give the standard reasons why thats bad. The list of things that have to perfectly or never change for debt and deficits to be irrelevant are worrisome, to put it mildly. Nevermind that things aren't perfectly elastic there ia a lot of pain even in "self correction" because everything has a time lag.
Yes, theoretically if all foreigners did is trade in dollars then I suppose the exact number of them in circulation wouldn't matter as much, but it would still matter and it would have a devastating effect on Americans who have to purchase actual THINGS with dollars.
You made an argument from infinity as an attempt to disprove something finite. If you don’t want your bad math skills held against you then get better math skills or don’t try to make arguments using math.
You’re still not getting the fundamentals of how this works. We’re not paying for it later, the token that we give them is the thing that they wanted, they’ve been paid. Just like if the US owned all the gold mines and we gave people gold tokens in exchange for goods. Until you can understand this fundamental premise of the role of the dollar I don’t think you’re really able to meaningfully engage with the subject.
This isn’t “China gives the US Chinese manufactured goods and the US promises to give China more US manufactured goods later in return as payment plus interest”. This is “China gives the US goods and the US gives China special US manufactured tokens that can be used to successfully barter with Argentina or store value between trades”. The exchange is complete. Both sides produced something that had value to the other and then exchanged it so that both sides got what they wanted.
The boogeyman of intrest payments overtaking all other government spending is only legitimate if you have some crazy people who think it wouldn't be a problem if we defaulted on our debt and wanted to explode it at the same time through tax cuts and increased spending. Incredibly the national debt is a really effective tool with dealing with inflation by lowering it at home and exporting a significant chunk of it abroad.
I think we can all agree that reducing the deficit and reducing inflation are both good things and something we should support yes?
On September 29 2023 03:32 Introvert wrote: One part of this that gets easily overlooked is the very real problem of interest payments. Other arguments aside, we can't borrow to infinity because we can't pay infinity on interest, and inflating your way out is very painful and hurts future investment. Now, when the economy is supposedly in a good place, the federal gov is spending way beyond what it takes in. This is one of the things thr CBO and outside organizations are warning about. In a decade its possible we will be spending more on interest than defense, it's a serious amount of money.
We can’t borrow to infinity because infinity is not a number. Nobody is proposing borrowing to infinity because, and I want to be clear on this, it’s not a number. Nobody serious is concerned about paying interest on infinity because, as previously mentioned, not a number. If you were concerned about how we would possibly pay interest on infinity dollars then I invite you to share that concern with other things that are also not a number. Perhaps you could argue that we can’t pay interest on a debt of purple and therefore we shouldn’t let our national debt exceed purple. The main problem with borrowing infinity dollars wouldn’t be servicing the interest, it would be that it’s literally not possible.
You absolutely can service a debt denominated in large real numbers of your own fiat currency.
Furthermore you’re still not understanding what the debt is, we’re not consuming value servicing the debt. The debt is a token, a monkey picture, an idea. Other countries want to use our monkey pictures to assist them in bartering with each other. When interest is due we tell them that their tribe of digital monkey pictures had some babies and now they have even more monkeys and they say “great, my economy is growing, the need for monkey pictures has never been higher”. It’s not like household debt, you can’t think of it in those terms.
Is the paragraph about infinity to make way for the silliness of the follow up posts?
I should really stop saying it, but I'm surprised to see this post. To see you post something so MMT adjacent was not expected. It's a position rejected by the vast majority of econmists for good reason. Besides, servicing the debt does cost value, paying for something later costs more if inflation is low enough, and if it's not, then obviously dealing with inflation has its own problems. Yes, literally we could alway avoid default by simply printing thr difference but surely I don't have give the standard reasons why thats bad. The list of things that have to perfectly or never change for debt and deficits to be irrelevant are worrisome, to put it mildly. Nevermind that things aren't perfectly elastic there ia a lot of pain even in "self correction" because everything has a time lag.
Yes, theoretically if all foreigners did is trade in dollars then I suppose the exact number of them in circulation wouldn't matter as much, but it would still matter and it would have a devastating effect on Americans who have to purchase actual THINGS with dollars.
You made an argument from infinity as an attempt to disprove something finite. If you don’t want your bad math skills held against you then get better math skills or don’t try to make arguments using math.
You’re still not getting the fundamentals of how this works. We’re not paying for it later, the token that we give them is the thing that they wanted, they’ve been paid. Just like if the US owned all the gold mines and we gave people gold tokens in exchange for goods. Until you can understand this fundamental premise of the role of the dollar I don’t think you’re really able to meaningfully engage with the subject.
This isn’t “China gives the US Chinese manufactured goods and the US promises to give China more US manufactured goods later in return as payment plus interest”. This is “China gives the US goods and the US gives China special US manufactured tokens that can be used to successfully barter with Argentina or store value between trades”. The exchange is complete. Both sides produced something that had value to the other and then exchanged it so that both sides got what they wanted.
Those tokens have value because people think they have value. If people ever stop believing they have value, it's massively devastating for the world economy and also the Americans who use those tokens to buy everything they buy.
The US has more room to work with than probably any other civilization in human history. However, it's not infinite. If the US keeps running up more and more debt, there will be a point where people finally let the emperor know that he has no clothes. It won't necessarily happen overnight. It will instead be more of a slow drip into the Euro or bitcoin or something backed by a tangible good (like if OPEC created their own currency pegged to a barrel of oil).
If the US takes its stewardship of the world economy seriously, it could maintain its hegemony for generations. However, if it acts like MMT is correct and goes further and further into a debt it has no ability to pay back (except by printing more money), people are going to stop playing that game.
EPT
