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- Hacker News
- Can't they just print more money and incur more debt?by zombot
- Well reasoned throughoutby hn9zmdcaou
- I am sure this is a nice article, but I'm always surprised when something with a hard paywall makes it this high up on HN. Does everybody but me have a Financial Times subscription?by OneManHorde
- I guess most promote the title by sentiment.by chicken-stew
- Others know how to use https://news.ycombinator.com/item?id=49329360.by layer8
- No one serious is worried about American solvency. The paper says 50% over the next 10 years, but even most economists misunderstand how the monetary system works.
There are so many other issues to worry about at the moment more immediate than solvency.
by epsteingpt - The US ticked all the boxes that are credited with the break up of the USSR last year aiui.
Anyone not taking that seriously is in for the most hilarious of surprises.
by DarkmSparks - Tell that to the Romans.by danesparza
- When enough non-"serious" people believe it, they still sell the bonds, and shit can hit the fan pretty quickly.by d--b
- > but even most economists misunderstand how the monetary system works.
It seems to be more of a subjective topic to me. Otherwise we would all have a perfect plan and never any monetary concerns. Highlighting weak links in the system is I believe a perfectly healthy thing to do. A sanity check would go a long way these days.
by bilekas - Our creditors will be reliable because of American soft power. Do you think we could lose that in single presidential term, much less a year?
Wait...
by Zigurd - The word in the headline “solvency” versus the phrase in the article “debt crisis” is a major difference.
To your point, I don’t think anyone has to be worried about American solvency, but a looming debt crisis doesn’t seem like a stretch of imagination at all.
by Grombobulous - >> There are so many other issues to worry about at the moment more immediate than solvency.
The U.S. government spends about one-third! (roughly 33% to 39%) of individual income tax revenue strictly to pay the interest on the national debt and that is not even paying off the principal balance itself:
https://budget.house.gov/imo/media/doc/cbo_baseline_february...
A raise in interest rates for treasuries, can bring this into 50% to 60% within days.
Yeah...worry about other things...
by root-parent - Here are the numbers for the US, as a percentage of GDP:
- Government Debt: 123.0%
- Tax Receipts: 17.2%
- Spending: 23.1%
- Deficit: 5.9%
- Interest on Debt: 4.2%
So yeah, 1/4 of taxes go to paying interest. To allay the debt concern crowd a bit: gdp numbers are real numbers, so inflation of 3% and growth of 1% = 4% nominal, so that deficit number actually means that next years govt debt as percent of gdp won’t be materially higher.
This is the government playbook: create actual inflation of 6% per year, with reported statistic inflation of 3% per year. This means real growth looks like +3% before you need to talk about contractions/recession.
All this means that the sovereign crisis is not near and the government steals your savings at 6% per year.
by m101 - The US emits two types of scrapes of paper, one of which (bonds) promises the other (the us dollar) and the "experts" somehow think america can actually go bankrupt. That's hilarious.by mono442
- You will not go bankrupt, its just that a BigMac will cost you $10,000.by root-parent
- The US is not going to go bankrupt, but the purchasing power of the dollar will continue to go down and down and down.by ahnick
- Interesting part is the gap between beliefs and prices => if the investors expect a US debt crisis we expect it to show up somewhere in the term premium real yields dollar or inflation expectations ; those signals can remain muted for a long timeby latentframe
- US government solvency is backed by the power to tax and tap into the massive US economy.
Considering the US has one of the lower overall tax rates of developed economies, I’m not sure we’ve reached any sort of crisis level
by refurb - This is the truest and most impactful point so far on this thread. Rescinding the Trump I tax cut (IIRC technically the permanent extension of a temporary tax cut) would fix a lot of problems. That and not being belligerent to our creditors gets you pretty close to a complete solution.by Zigurd
- What happens if US becomes insolvent? Is USD going to be inflated? hyperinflated? Will other currencies appreciate or just devalue their own currency by the same percentage to keep up the exports and continue to earn USD for oil?
- America will move to Trump Coin of course!
/s
by alfiedotwtf - The US can’t become insolvent. Those who say it can are just hard of accounting.
It’s scaremongering nonsense.
All treasuries will be swapped back into dollars on maturity and interest settled
by neilwilson - There is no way, unless by political choice, for the US to become insolvent, meaning, not paying it's "debt" in US dollarsby blahblaher
- > continue to earn USD for oil?
Iraq started taking Euros for oil. Shortly after that, they were invaded. Venezuela started selling oil for Yuan. Shortly after that, their president was kidnapped by American troops. Iran is selling oil in Yuan. Shortly after that, American bombs started falling on them.
There is a very strong incentive for oil producing nations to only accept USD.
by Tangurena2 - Nobody knows. There is no precedent for that happening in a post globalisation world.
Think sht would get very real for everyone fast both inside and outside the US.
Global economy can’t even deal with a ship stuck in the suez without wobbling…
by Havoc - I'll tell you what is going to happen, b/c it is happening as we speak. The U.S. Government is soft-defaulting on the debt by devaluing the currency. (The debasement rate is somewhere in the 7%-8% range)
There will never be a real default, but it is likely that the USD will lose reserve currency status. The U.S. Government has $114+ Trillion in total debt. (Something like $325,000 per person in the US) We are never paying that off. The only way we can do anything about it is to grow the economy and devalue the debt via inflation.
by ahnick - If the US becomes insolvent, that would severely impact the USD. But other currencies will not try to follow the USD, there would be no point in that. The USD would just lose more status as an anchoring point. The US is also not a major oil exporter, so presumably most oil will trade for other currencies, rather than try to sell for an inflationary currency.
In short, if the US becomes insolvent, the rest of the world will largely ignore what happens in the (at that point) 8th economy in the world, and mostly try to untie their economy from it.
by 317070 - by root-parent
- Financial markets work in strange ways.
The markets generally respond to US concerns by buying more US treasuries. That’s counter-intuitive but reflects the situation that if things hit the fan they feel loaning the US money is still the safest place for their money.
For better or worse there’s unlikely to be a scenario where the US becomes insolvent but it’s not far worse for those outside the US.
by cmiles8