It always gives me an ominous feeling to see these headlines. It's like we're walking out further and further on a frozen lake. "Hey, it's OK, the ice hasn't cracked yet! Let's keep going!"

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danesparza 11 hours ago | parent | next [-]

I think that's a pretty solid (pun intended) metaphor.

Past performance is not a predictor of future returns.

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petcat 11 hours ago | parent | prev | next [-]

I've always heard people say that the US debt doesn't matter when the debt itself is denominated in USD.

It's the old saying, if you owe the bank $1,000 then you have a problem. But if you owe the bank a trillion dollars then the bank has a problem.

Especially when that trillion dollars was spent on an insane fleet of aircraft carriers.

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eigenspace 11 hours ago | parent | next [-]

This idea is based on the fantasy idea of "it's fine because the US can just inflate away its currency to reduce its debts". This is also often used as an argument for why countries shouldn't join the Euro because they'd be giving up an important tool.

The reality is that purposefully inflating your currency to reduce your debt burden is going to upset your creditors just as much as if you just defaulted on your debts, but will have the added affect of crippling your economy with inflation. Look at how much Americans freaked out over a year or two of 6% yearly inflation. How do you think Americans would respond to 30% *monthly* inflation like in Argentina or Turkey?

It's not like lenders won't notice if the USA tried to print its way out of debt.

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ghastmaster 10 hours ago | parent | next [-]

> It's not like lenders won't notice if the USA tried to print its way out of debt.

For historical context, this is exactly what happened when the US was on the brink of leaving the gold standard.

> From 1963 to 1966, France secretly implemented Operation Vide-Gousset to repatriate 3,313 tons of gold reserves from the Bank of England and the New York Federal Reserve. It took over 44 boat trips and 129 flights to export the gold back to the Banque de France. Since France converted its dollar holdings into gold, the French made out well when the dollar fell during the Bretton Woods period and lost 96% of its value against gold. France then withdrew from the London Gold Pool in 1966 after recovering its gold holdings to force the US to endure heavier losses.

https://www.armstrongeconomics.com/markets-by-sector/preciou...

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chasd00 11 hours ago | parent | prev | next [-]

currency manipulation seems to be working for China though.

https://home.treasury.gov/news/press-releases/sm751

	▲	eigenspace 11 hours ago \| parent [-]
		1. Markets are aware of that and lend to China accordingly (the ones who are free to choose who to lend to). 2. Do you think Americans would tolerate having a government that purposefully suppresses their purchasing power through structurally low wages, and buying up foreign assets to supress the value of their own currency? 3. The part where China spends all their cash to buy US Treasuries to supress the value of their currency wouldn't really work as well for the USA when international trade is dollar denominated anyways, and the bulk of their GDP comes from domestic consumption. 4. The USA has a deficit. It'd need to borrow even more in order to finance the suppression of their currency, whereas China just redirects the money they earn from export surpluses.

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8note 10 hours ago | parent | prev | next [-]

they might be pissed off, but would lack standing to take land or something else instead. Ultimately you are fine, just without the ability to take on more debt. you get to keep your assets.

the scale of problem is much worse when Haiti was forced to pay France a debt for freeing itself of slavery. Having to produce physical goods and sell them is much harder than giving out paper or adjusting numbers

	▲	eigenspace 10 hours ago \| parent [-]
		What you're describing is identical with simply defaulting on loans and say "we're not going to pay you back". Inflating away your currency has the same effect with the added downside of destroying your economy simultaneously. ________ In fact, the only time I can really see the argument for wanting the ability to inflate away currency to escape debt is if the country is weak and in a precarious enough position that they are legitimately worried that actually formally defaulting would lead to an invasion.

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theappsecguy 11 hours ago | parent | prev [-]

To be fair, it wasn't 6%. The consumer basket gets manipulated in all sorts of ways, but in general it's just not an accurate representation of day to day impact. Food and housing went up much much higher than 6%.

	▲	eigenspace 11 hours ago \| parent [-]
		Whatever the number is, we know for a fact that it was 1. Extremely painful to Americans, and became one of the main pillars of their election. 2. Nowhere near high enough to cause any reduction in the USA's debt burden. I think modern Americans are way too soft to even imagine the sort of inflation that'd be required to erase their debts. Things have been too good and too stable for too long to understand what country-wide economic hardship would be like, and even if they somehow decided to choose that path, they'd panic quit it long before it was done long enough to have any effect.

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xnx 11 hours ago | parent | prev | next [-]

This used to be true, but less so after the US started alienating the rest of the world with tariffs and other erratic behavior. The US military has also been revealed to be incapable of controlling the strait of Hormuz.

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bcjdjsndon 11 hours ago | parent | prev | next [-]

Except it's not a bank, it's a country with a few hundred million people that need to work and eat. Once the lenders have a problem, it would already be the end for Americans.

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cucumber3732842 11 hours ago | parent | prev [-]

The quiet part you're not supposed to say out loud is the "if you don't use our currency to transact for energy and thereby let us tax it via inflation we'll regime change you" implication it comes with.

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kingleopold 11 hours ago | parent | prev | next [-]

end is probably ww btw. so are you all ready? last time it did work and lost of war debt was paid

	▲	sph 7 hours ago \| parent [-]
		That only works if you are on the winning side.

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pydry 11 hours ago | parent | prev [-]

Total debt / GDP is the wrong metric for that. There's no limit to the serviceability of debt in a currency you print.

It makes more sense to conceptualise it as the total size of a giant savings account run by the government.

We are walking further out on the ice but that is measured more in other ways - with harder metrics like inflation, access to cheap energy, resources, industrial density and capabilities and access to technology - not this headline number.

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somenameforme 11 hours ago | parent [-]

Even if we just ignore inflation and other issues, there's still a hard limit because governments don't literally just print money, but sells bonds at market rates. As confidence in the economic stability declines the interest rates the government is required to offer on those bonds trends upward. So right now even 10 year treasuries are selling with just under 5% interest. As a result we're now paying $1.4 trillion per year in interest alone, and that number is going up far faster than the economy is growing. This [1] graph looks quite disconcerting. And it's a vicious cycle. The less confidence there is in the stability of this game, the more the government will have to pay to sell that debt. And the more they have to pay, the more debt they end up needing.

[1] - https://fred.stlouisfed.org/series/A180RC1A027NBEA

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pydry 10 hours ago | parent [-]

>governments don't literally just print money, but sells bonds at market rates

no, sometimes they literally do exactly that.

google for quantitative easing. that's what it is and it's a tool that can always be used by monetarily sovereign countries to bring bond interest rates down by as much as they want.

insolvency thus isnt possible.

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hvb2 6 hours ago | parent [-]

> insolvency thus isnt possible.

You might want to look up Zimbabwe or Germany (after WW1). When your money becomes worth less than the paper it's printed on...

So, it's possible, and has happened before.

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raincom 6 hours ago | parent [-]

As long exporter nations want to swap their real assets with digits (US dollars), US is solvent.

	▲	hvb2 6 hours ago \| parent [-]
		Yes, and that's a function of knowing what you can buy for that dollar. As soon as you start devaluing your currency to get out of debt, not so much. I believe Argentina is a fine example of that