When Do We Really Need To Start Worrying About The Debt? (1 Viewer)

[James Daulton]

I'll put this under the politics section even though it's the fault of both parties.

The national debt was $23T before all this stimulus started.  I think we can safely say we'll end FY20 with the debt between $27T and $28T.

Even at the low rates we have today, debt service payments are about $400B and close to 10% of the annual budget.  They were projected to overtake military spending spending in 10 years, but after this latest round of stimulus combined with lower tax revenues, 3 - 5 years seems more likely.

What will be the ramifications to our country when $0.20 of every dollars is used to service debt?  Heaven forbid interest rates ever rise to 4 - 5%.

I think within the next 10 years we are due to massive tax increases and cuts to entitlements.  This will likely depress the economy and compound the issue, but what choice do we have?

 

[lod001]

  Never. The debt will always increase, it will never go down and I've already explained that it doesn't matter and there is nothing you can say to prove otherwise.

Mods go ahead and merge this with the deficit thread. It's the same thing with a different title.

 

[James Daulton]

  Never. The debt will always increase, it will never go down and I've already explained that it doesn't matter and there is nothing you can say to prove otherwise.

Mods go ahead and merge this with the deficit thread. It's the same thing with a different title.

So debt service that is 1/5 of our annual budget means nothing?

 

[Bottomfeeder Sports]

So debt service that is 1/5 of our annual budget means nothing?

It means that the master plan to dismantle Social Security and Medicare can begin as the beast would have been starved (the more sinister version of "starve the beast").    Or maybe those being screwed over by those that make the robber barons of a century ago look like saints finally stop voting to have payroll taxes fund tax cuts for the rich. 

 

[Slapdash]

When a democrat is president.  Debt only seems to matter then.

 

[timschochet]

When a democrat is president.  Debt only seems to matter then.

This. 

 

[moleculo]

When a democrat is president.  Debt only seems to matter then.

This.

 

[moleculo]

This. 

 

[timschochet]

  Never. The debt will always increase, it will never go down and I've already explained that it doesn't matter and there is nothing you can say to prove otherwise.

Mods go ahead and merge this with the deficit thread. It's the same thing with a different title.

You’re like Keynes on steroids. But you’re wrong. If it ever reaches a point when the cost of serving it consumes the budget we’re in trouble. And don’t start with the trillion dollar coin stuff- Weimar Germany tried that. 

 

[RCon]

I'll put this under the politics section even though it's the fault of both parties.

The national debt was $23T before all this stimulus started.  I think we can safely say we'll end FY20 with the debt between $27T and $28T.

Even at the low rates we have today, debt service payments are about $400B and close to 10% of the annual budget.  They were projected to overtake military spending spending in 10 years, but after this latest round of stimulus combined with lower tax revenues, 3 - 5 years seems more likely.

What will be the ramifications to our country when $0.20 of every dollars is used to service debt?  Heaven forbid interest rates ever rise to 4 - 5%.

I think within the next 10 years we are due to massive tax increases and cuts to entitlements.  This will likely depress the economy and compound the issue, but what choice do we have?

Simple answer: it matters when the dollar stops being the global currency of choice. It's possible it may not even matter much at that point, as we would pay off the debts in new dollars that would then be, globally, virtually worthless.  The issue at that point would be that it would become difficult to borrow more money because who would loan it?

 

[NREC34]

Simple answer: it matters when the dollar stops being the global currency of choice. It's possible it may not even matter much at that point, as we would pay off the debts in new dollars that would then be, globally, virtually worthless.  The issue at that point would be that it would become difficult to borrow more money because who would loan it?

Global currency will be digital. They are blowing up the system now intentionally, I think, so it happens. A lot of other countries do not like the dollar being reserve currency. 

I wish I knew how gold will fit into it. 

 

[James Daulton]

Simple answer: it matters when the dollar stops being the global currency of choice. It's possible it may not even matter much at that point, as we would pay off the debts in new dollars that would then be, globally, virtually worthless.  The issue at that point would be that it would become difficult to borrow more money because who would loan it?

I don't agree.  When we start paying 20% of the budget in debt service, that will greatly limit our ability to invest in the US.

Are you suggesting we'll just continue to print money, borrow, what?

 

[Skoo]

Don't worry, buy Bitcoin!

 

[Slapdash]

You’re like Keynes on steroids. But you’re wrong. If it ever reaches a point when the cost of serving it consumes the budget we’re in trouble. And don’t start with the trillion dollar coin stuff- Weimar Germany tried that. 

He is right in that the debt will very likely never decrease in nominal terms

 

[The Commish]

Simple answer: it matters when the dollar stops being the global currency of choice. It's possible it may not even matter much at that point, as we would pay off the debts in new dollars that would then be, globally, virtually worthless.  The issue at that point would be that it would become difficult to borrow more money because who would loan it?

Perhaps saying the same thing, but as soon as confidence is lost in the US (path we're on now if you believe all the other nations in the world), it then matters.  And if that tipping point is ever reached, it will be an instant flip of the switch.  It's all confidence based at this point...when that goes, it matters immediately.

 

[James Daulton]

Perhaps saying the same thing, but as soon as confidence is lost in the US (path we're on now if you believe all the other nations in the world), it then matters.  And if that tipping point is ever reached, it will be an instant flip of the switch.  It's all confidence based at this point...when that goes, it matters immediately.

Can you guys unpack this a little.  Does it have to do with rising interest rates if the world loses confidence in the dollar?

 

[RedmondLonghorn]

I'll put this under the politics section even though it's the fault of both parties.

The national debt was $23T before all this stimulus started.  I think we can safely say we'll end FY20 with the debt between $27T and $28T.

Even at the low rates we have today, debt service payments are about $400B and close to 10% of the annual budget.  They were projected to overtake military spending spending in 10 years, but after this latest round of stimulus combined with lower tax revenues, 3 - 5 years seems more likely.

What will be the ramifications to our country when $0.20 of every dollars is used to service debt?  Heaven forbid interest rates ever rise to 4 - 5%.

I think within the next 10 years we are due to massive tax increases and cuts to entitlements.  This will likely depress the economy and compound the issue, but what choice do we have?

Short answer: several years ago

 

[dickey moe]

Neither party cares about debt while they hold power. Nothing will change until economic collapse and a great reset.

 

[The Commish]

Can you guys unpack this a little.  Does it have to do with rising interest rates if the world loses confidence in the dollar?

Confidence in the US as a whole.  Look back at the 08-09 financial crisis.  Wachovia bank got swallowed up based on confidence.  They had made a really poor purchase to extend westward, however, even with the poor purchase, the financials were on point and the bank was in good standing on paper.  Confidence overruled the financials though and they sold to WF based on perception.  That's a microcosm of what I am referring to.  

 

[Slapdash]

Confidence in the US as a whole.  Look back at the 08-09 financial crisis.  Wachovia bank got swallowed up based on confidence.  They had made a really poor purchase to extend westward, however, even with the poor purchase, the financials were on point and the bank was in good standing on paper.  Confidence overruled the financials though and they sold to WF based on perception.  That's a microcosm of what I am referring to.  

It's not exactly that simple due to the mechanics of international trade.

 

[The Commish]

It's not exactly that simple due to the mechanics of international trade.

I get that....I was talking of the "confidence" factor in general.  My larger point is, we are no longer at a point where the markets and economies are based on tangible indicators as much as they are confidence.  Confidence has replaced economic principles in a lot of areas including the markets.  We need not look any further than the computers doing 60-65% of the trading on Wall Street today based on alogrithms influenced by many factors outside financial statements including social media.  It's almost like financial statements are a thing of the past.

 

[msommer]

Normally debt above GDP is bad. So if the confidence of the rest of the world (that makes the US Dollar the prefered reserve currency) dissipates, you are already screwed big time

 

[Slapdash]

Normally debt above GDP is bad. So if the confidence of the rest of the world (that makes the US Dollar the prefered reserve currency) dissipates, you are already screwed big time

What ultimately would get rid of that confidence would be, IMO, very high inflation.  Failing that, the USD and USD demonominated safe assets will remain in high demand.   CNY/CNH and the EUR have too many structural problems to seriously compete at the time.

Of course the MMT that @lod001 keeps talking about would hold that any soverign financial system can is never actually constrained by it's own debt. 

 

[msommer]

What ultimately would get rid of that confidence would be, IMO, very high inflation.  Failing that, the USD and USD demonominated safe assets will remain in high demand.   CNY/CNH and the EUR have too many structural problems to seriously compete at the time.

Of course the MMT that @lod001 keeps talking about would hold that any soverign financial system can is never actually constrained by it's own debt. 

Failing to meet debt demands might be problematic as well

 

[Slapdash]

Failing to meet debt demands might be problematic as well

You can always create new fiat to do that.

 

[msommer]

You can always create new fiat to do that.

Perhaps I am misinterpreting your words, but I read them as either (interpretation 1; printing more money (which should deflate the value of the currency which the receivers won't like much) or interpretation 2; defaulting on your loans, which I doubt is your meaning

 

[Slapdash]

Perhaps I am misinterpreting your words, but I read them as either (interpretation 1; printing more money (which should deflate the value of the currency which the receivers won't like much) or interpretation 2; defaulting on your loans, which I doubt is your meaning

Yeah, the point is you can't default (well you could make that decision politically).  When I read: Failing to meet debt demands that implies default.  Sorry for any misunderstanding. 

 

[lod001]

So debt service that is 1/5 of our annual budget means nothing?

yep. You will eventually realize it. What did Fed chairman Powell just say on national TV? 'We will never run out of money'. Direct quote.

 

[lod001]

Failing to meet debt demands might be problematic as well

See my previous post. 

 

[James Daulton]

yep. You will eventually realize it. What did Fed chairman Powell just say on national TV? 'We will never run out of money'. Direct quote.

Crazy.

 

[Slapdash]

yep. You will eventually realize it. What did Fed chairman Powell just say on national TV? 'We will never run out of money'. Direct quote.

Instant classic 

 

[lakerstan]

Instead of going on a diatribe about the end of the Gold standard and transition to Fiat currency, I think I'll have breakfast....

 

[SaintsInDome2006]

Yesterday. 2009. Now. 

 

[SaintsInDome2006]

Money is a commodity.

- Engels.

 

[Sand]

When we start to drive inflation rather than the deflation we've been fighting for some time now.

 

[Summer Wheat]

Perhaps I am misinterpreting your words, but I read them as either (interpretation 1; printing more money (which should deflate the value of the currency which the receivers won't like much) or interpretation 2; defaulting on your loans, which I doubt is your meaning

What if we print more money, but don`t tell anyone else we are doing it?