The economic future of the NBA

[golden]

The American economy, though not without its warts, is the envy of the world. People were prognosticating recessesion since 2021 and it never came, in spite of rising rates. Air has already been let out of the can/USA housing bubbles, and the Fed now how plenty of room to drop rates and avoid recession.

Don’t panac! (Yes, this is an intentional typo - a little inside, I know)

I'm not an economist.... but a Debt-to-GDP ratio of 123% can't be a good thing, right?

https://www.usdebtclock.org/

[SkywalkerAC]

I'm not an economist.... but a Debt-to-GDP ratio of 123% can't be a good thing, right?

https://www.usdebtclock.org/

It's maybe not ideal but it's hardly a doomsday indicator. 8 countries in the world have higher, with Japan at 264%, Greece at 173%, Singapore at 168%, Italy at 142%. It may be a drag on the economy as a bigger slice of spending has to go toward servicing it, requiring an increased money supply which could lead to higher levels of inflation, but otherwise kind of just a number on a balance sheet.

https://worldpopulationreview.com/co...tio-by-country

Public debt can be thought of as money that a government put into the economy and didn't tax out. Adding too much to the debt too quickly (ie high deficit spending) especially when paired with low interest rates can result in inflation as we saw in recent years, but small deficits and surpluses can also induce recessions.

[golden]

It's maybe not ideal but it's hardly a doomsday indicator. 8 countries in the world have higher, with Japan at 264%, Greece at 173%, Singapore at 168%, Italy at 142%. It may be a drag on the economy as a bigger slice of spending has to go toward servicing it, requiring an increased money supply which could lead to higher levels of inflation, but otherwise kind of just a number on a balance sheet.

https://worldpopulationreview.com/co...tio-by-country

Public debt can be thought of as money that a government put into the economy and didn't tax out. Adding too much to the debt too quickly (ie high deficit spending) especially when paired with low interest rates can result in inflation as we saw in recent years, but small deficits and surpluses can also induce recessions.

Other than Singapore, whose economy has been slowing down... that's a pretty bad list of bedfellows. Japan's yen has been in a tailspin the last few years. Greece is slightly recovering, but their economy was a joke to begin with.

[Primer]

I'm not an economist.... but a Debt-to-GDP ratio of 123% can't be a good thing, right?

https://www.usdebtclock.org/

Debt to GDP is a pretty useless economic indicator.

The "debt" is just treasuries which the vast majority are held by US citizens. The debt is just how much money is sitting in an interest bearing treasury account instead of a non-interest bearing reserve account. It's not debt like household debt.

Japan has had a way worse debt to GDP ratio for decades and zero effect, they even went to negative interest rates and still couldn't get inflation.

The only time government debt becomes a problem is when they have debt in another nations currency. The USA has zero debt in foreign currencies. It's all US currency which we have an unlimited ability to service.

[slaw]

Debt to GDP is a pretty useless economic indicator.

The "debt" is just treasuries which the vast majority are held by US citizens. The debt is just how much money is sitting in an interest bearing treasury account instead of a non-interest bearing reserve account. It's not debt like household debt.

Japan has had a way worse debt to GDP ratio for decades and zero effect, they even went to negative interest rates and still couldn't get inflation.

The only time government debt becomes a problem is when they have debt in another nations currency. The USA has zero debt in foreign currencies. It's all US currency which we have an unlimited ability to service.

Yes, confidence in the dollar is permanent, just ask any scholar. Just like we all still use the Greek drachma, Roman denari, British pound, florin, Spanish silver, and Dutch guilder. You're all good.

[Primer]

Yes, confidence in the dollar is permanent, just ask any scholar. Just like we all still use the Greek drachma, Roman denari, British pound, florin, Spanish silver, and Dutch guilder. You're all good.

I'm very confused what point you're trying to make here. You'll have to elaborate.

[golden]

I'm very confused what point you're trying to make here. You'll have to elaborate.

I think what he means is that just because the debt is in your own currency and you can print infinite bills.... eventually another country won't accept it anymore if the purchasing power of a $1M USD is equivalent to a loaf of bread. There are limits to being insulated from the negative effects debt, just because it's your own currency, if the creditor loses confidence.

[slaw]

I think what he means is that just because the debt is in your own currency and you can print infinite bills.... eventually another country won't accept it anymore if the purchasing power of a $1M USD is equivalent to a loaf of bread. There are limits to being insulated from the negative effects debt, just because it's your own currency, if the creditor loses confidence.

Confidence in the dollar is so permanent people are using it by Doge Coin. But I'm sure it will all work. Did the US print that $10 trillion coin yet?

[Primer]

Confidence in the dollar is so permanent people are using it by Doge Coin. But I'm sure it will all work. Did the US print that $10 trillion coin yet?

You can use the US$ to buy anything you want in the world. No one will accept doge coin as payment for anything. It must first be converted to US$ or another currency people want. People have always had investments, doge coin is a speculative investment, same as holding a stock but way more volatile.

[Primer]

I think what he means is that just because the debt is in your own currency and you can print infinite bills.... eventually another country won't accept it anymore if the purchasing power of a $1M USD is equivalent to a loaf of bread. There are limits to being insulated from the negative effects debt, just because it's your own currency, if the creditor loses confidence.

Other countries gladly buy US treasuries with their US$'s so that they make interest on their US$'s (so do American citizens who own the vast majority of treasuries). If they don't want to buy treasuries and would rather sit on their US$'s and not earn interest that's just their loss. You can't buy US treasuries with a foreign currency, it's just other countries moving their US$'s from a reserve account that doesn't pay interest to a treasury account that does pay interest. The USA could just stop issuing treasuries entirely and pay off every treasury and there would be zero debt, nothing stopping them from doing that, literally just typing numbers on a keyboard and it's done. That's why using the "debt" as an economic indicator is pretty useless.

[Quirk]

Other countries gladly buy US treasuries with their US$'s so that they make interest on their US$'s (so do American citizens who own the vast majority of treasuries). If they don't want to buy treasuries and would rather sit on their US$'s and not earn interest that's just their loss. You can't buy US treasuries with a foreign currency, it's just other countries moving their US$'s from a reserve account that doesn't pay interest to a treasury account that does pay interest. The USA could just stop issuing treasuries entirely and pay off every treasury and there would be zero debt, nothing stopping them from doing that, literally just typing numbers on a keyboard and it's done. That's why using the "debt" as an economic indicator is pretty useless.

Primer dropping some MMT. Sometimes this groups surprises me.

[golden]

Other countries gladly buy US treasuries with their US$'s so that they make interest on their US$'s (so do American citizens who own the vast majority of treasuries). If they don't want to buy treasuries and would rather sit on their US$'s and not earn interest that's just their loss. You can't buy US treasuries with a foreign currency, it's just other countries moving their US$'s from a reserve account that doesn't pay interest to a treasury account that does pay interest. The USA could just stop issuing treasuries entirely and pay off every treasury and there would be zero debt, nothing stopping them from doing that, literally just typing numbers on a keyboard and it's done. That's why using the "debt" as an economic indicator is pretty useless.

Great stuff, Prime.

I'm not an economist, but I would suspect that "typing numbers on a keyboard" to erase trillions in debt would erode global confidence in the US economy and USD as a stable currency. I suppose you "could" do that... but only once and the confidence is shattered. It could/would devalue the dollar, lead to inflation and higher future borrowing costs, and start heading down the path of banana republics.

[Primer]

Great stuff, Prime.

I'm not an economist, but I would suspect that "typing numbers on a keyboard" to erase trillions in debt would erode global confidence in the US economy and USD as a stable currency. I suppose you "could" do that... but only once and the confidence is shattered. It could/would devalue the dollar, lead to inflation and higher future borrowing costs, and start heading down the path of banana republics.

You're still missing the point. It's not debt like our household debt, it's just interest owed on treasuries.

So it wouldn't erase the money of those owning treasuries, the USA would simply pay them their interest in full and move the money back to a reserve account which doesn't earn interest.

Instead of getting their interest over 10 years USA could just mark up their account to the amount they would make with the interest and that's it. Everyone would be quite happy because they would get their interest payments early. They just may be upset they can't move their new money back into an interest bearing treasury account.

The USA doesn't ever need to borrow its own money, they can create as much as they want whenever they want. That's why the whole "debt" and "borrowing" stuff is nonsense. They spend money into existence, they don't borrow it from anyone. The current system just likes to offset the new money created with an equal amount of treasuries, which "sort of" pulls those other $'s out of circulation since a treasury isn't technically liquid. In practice they are though there is always more than enough people willing to buy your treasuries if you want to cash out early.

Banana Republics get where they are because they borrow in other countries currencies and have no way to pay it back (see South America, Greece, etc...). The USA never borrows anything, they just get people to move their money out of reserve accounts into treasuries by offering interest on the treasuries.

[RaptorsVictim]

Other countries gladly buy US treasuries with their US$'s so that they make interest on their US$'s (so do American citizens who own the vast majority of treasuries). If they don't want to buy treasuries and would rather sit on their US$'s and not earn interest that's just their loss. You can't buy US treasuries with a foreign currency, it's just other countries moving their US$'s from a reserve account that doesn't pay interest to a treasury account that does pay interest. The USA could just stop issuing treasuries entirely and pay off every treasury and there would be zero debt, nothing stopping them from doing that, literally just typing numbers on a keyboard and it's done. That's why using the "debt" as an economic indicator is pretty useless.

I have studied economics, and I love it. It is just unbelievable when you say a statement like that. I think Berni Madoff will be so happy with a statement like that. USA is printing money days and nights and quantitative easing bears a mighty witness to that. You can not keep printing money and think that things will keep running. Eventually, the roof has to go down.

I think debt is a debt and using it to evaluate the economic situation of a country or a firm is a very rational indicator. I would not invest in a currency of a country that has the volume of debt like USA. It is just against economic rules. The long run will disclosure every thing. It is just a matter of time till you see USA economy is going down sharply.

[Quirk]

Zombie economics have entered the chat. If ya'll start citing stuff like sectoral balances here I'll be tripping.