100% of the time when a country has issued 31T in debt, it has not failed to issue more.
The $31T matters less than the fact that the buyer of last resort, who has been participating hugely in the market for decades, has judged it inadvisable to continue. This could have occurred at $3T or $300T. But it has occurred now, and this has serious implications for what the debt-issuers must do next.
MMT was never the prevailing theory. It has elements of truth to it, e.g. the limiter on American deficit spending is inflation. But deficits not mattering was always a fringe view.
At this point, the two party system means you pick between a party that does not care, and a party that pretends to. So far, nothing bad has happened either economically or to their electoral results.
There hasn't been a single-day-crash, but some bad things have definitely happened economically. We just hide it in "hedonic adjustments".
Not saying that's a good thing, but supply constraints and build costs are here to stay for the major metros. Interest rates and remote work being indefinite should help with prices and create buying opportunities for some in larger cities.
But it's better to play the real estate game by being pragmatic about what you can afford where (buy elsewhere and move, invest elsewhere before buying a primary, etc) and how to get to the next level instead of feeling entitled.
I accepted the reality years ago and did 2 investment properties in other cities before buying my primary in the city I wanted to live in.
It sucks to have to do that and take so long to buy a primary, but the game is about capital. And real estate is one of the few beautiful assets in a sea of bullshit you either 1) don't need or 2) doesn't provide any joy.
I know a lot of people on here have contempt for real estate investing but if you aren't in it, IMO, you are depriving yourself and your family of the absolute easiest way to make money and build wealth. And there are plenty of places where you don't need a ton of cash to get started.
IMHO, the only reason that the US debt is not a major problem is that no country whant to see the whole economic system collapse so no one will want that debt repaid as long as the interest are paid on time. And in the eventually that the USA is unable to pay the interest on time, a deal will assuredly be brokered to avoid that catastrophic solution.
The risk isn’t the need to come up with 31$T at some point the risk is people being unwilling to lend close to the inflation rate. The US economy is addicted to a subsidy from foreign borrowers, and that changing could be seriously problematic.
Addicted might be son overstatement.
Covid had a huge effect on the world and regardless of the various government responses they've all run into inflation issues.
The “US” in your comment is more than one entity. There is no single body that can just make more debt unilaterally.
In particular the spending is funded by selling Bonds, etc. to investors. Purchasers of those bonds include foreign countries, such as China.
The “US” in your comment is more than one entity. There is no single body that can just make more debt unilaterally.
Edit: To clarify, the “limit” to the debt is set by the market’s willingness to lend.
This does not seem to be true anymore.
I've been wondering if "low interest rates" juice the economy, or if "lowering interest rates" does. The presumption seems to be the former, but I suspect a drop in rates will eventually lead to a new equilibrium. In other words, there isn't much long term correlation between interest rates (at a particular level) and growth.
This was true perhaps in the 1950s to 1970s or so. It's not true today and very very not true in the last couple years. Nixon's actions back in the 70s set the slippery slope that will result in the USA no longer being dominate as a reserve currency.
What you are curious about is being a reserve currency.
https://en.wikipedia.org/wiki/Reserve_currency#Global_curren...
The advantage of being the reserve currency is that you can indeed print significant money at low inflation because so many other countries are the ones who end up paying the cost. It's not necessarily unlimited, but when you have a dominant position it can be practically unlimited wherein being able to rebase on a new reserve perhaps gold or bitcoin would still be more costly than assuming the cost of holding USD.
Which is why the euro was designed the way it is. They are effectively playing the long game. No single country controls the ability to print money and they have requirements which hurt countries who dont control their debt to gdp. Portugal, Italy, Greece, Spain are all in violation but they end up having to balance their budgets in the future. Greece can never print oodles of money to inflate their way out of their debt and deficit spending. Germany and france will NEVER allow that to happen. If Greece exits the EU it'll be their own demise with >50% poverty within years of that decision.
The USA will inevitably vote themselves more money, as they currently have, and cause so much inflation than the reserve currency hurts all the others and eventually the euro will become #1. When that happens European union will become quite strong and the brits will be kicking themselves for brexit.
Nah, us americans are too smart for all that. We'll just start a nice big war.
So what you're cynically referring to is the war economy. The caveat of debt to gdp is that it's a balance. If you could take on debt and invest properly to the point that the returned GDP is greater. Then you end up lowering debt to gdp.
The caveat of the war economy is that it's not spent on yourself. The trope as it were is that the USA has been 'nation building' in the middle east and ended up neglecting back home.
For example, I am super excited to learn more about the B21 raider later this year. I expect the cost per stealth bomber will probably be around $5 billion each.
How many schools could you build with $5 billion if they decide to build just 1 less? How many roads could be built if you build 2 less?
My cynicism is more along the lines of
A. Lots of people think GDP == real wealth and can't seem to wrap their heads around our argument
B. You don't have to do better than you have been to keep the global-economic pole position, you just have to be doing better than everyone else. I'm not gonna elaborate on the rest of this, I'll leave that as a sad exercise to the reader.
I really really hope we don't start or find ourselves required to participate in a war.
We have a balance of trade deficit and our entire relative geopolitical position is based on the strength of the dollar. There of course could be consequences to us of high debt levels
A reminder that the US told the world go to fuck themselves (Nixon Shock) in 1971, and they never learned their lesson. When you take a look at the DXY in 2022, it's clear they never will.
Which is fine with me, my global purchasing power is phenomenal at the cost of literally 7 billion people who love working much harder than I do, for my benefit.
I couldn't be happier. Thanks, world.
He has a Nobel prize for his work in economics. He has been a professor of economics at multiple prestigious universities. Surely that makes him qualified to opine on economic policy, even when it is a bit outside of his specialization.
Also, while he does share opinions about things outside of his area of expertise, I don't view him as claiming some unearned expertise in those areas.
Why Economics Is Not Yet a Science [2]
But Economics Is Not an Experimental Science [3]
[1] https://www.theguardian.com/commentisfree/2015/oct/11/nobel-...
[2] https://www.taylorfrancis.com/chapters/edit/10.4324/97813154...
Krugman represents a failure mode typical to modern science. Science won its respect through its commitment to truth. This caused scientific credentials to be held in high esteem. Now, it is becoming more and more common for people with little personal integrity and commitment to truth to obtain these credentials and use them as a cudgel to push through some blatantly political and unscientific theories and views.
One example of this is very popular recently within American and European central banking community push to quantify and mitigate risk of climate change to the stability of financial system: as much as climate change is a planetary scale problem our species have never faced before, it is not in any significant way a risk to the stability of financial systems. Nevertheless, banking regulators are all about this non stop for past few years. This is because they want to do something about climate change (as most people should!), and they have power over very important part of the global economy, so they pretend, using all their scientific credentials, that climate change is a risk to financial systems, purely so that they can claim that fighting it is within their mandate. This might be good from the perspective of utilitarian morality, but the problem with being utilitarian is that people quickly learn to ignore voices coming out of your mouth, because you have proven yourself to be a person who will lie to them with zero qualms if this happens to be expedient in any given moment. Given this, there should be no surprise that trust in experts and in institutions in developed world is at all times low.
(As an additional example of how silly it is for central bankers and regulators to focus on “climate change risk to financial system”, note how they utterly and entirely missed other things that actually significantly impacted financial stability in real world: pandemic, war in Ukraine, or, for that matter, recent utterly predictable pension crisis in UK. If they failed to be prepared there, why would anyone believe that they can do a good job on the alleged climate change risk to financial stability? I certainly don’t, I only trust experts who have zero power to affect anything, and consequently zero incentive to push convienient falsehoods.)
More recently he's been a bit more into hackish punditry and is prob. most famous among regular people for his somewhat abrasive nyt column. I think your idea about and API is not ideal. Is it enough to trust some randos on hacker news to identify Charlatans?
How can that be. nobel prize and all.
It's possible that someone wins a Nobel prize, and then maybe a decade or two later) turns into a charlatan. I think Linus Pauling could be an example: Two Nobel prizes, but later in life he was known for promoting crackpot theories about massive doses of Vitamin C being a miracle cure for cancer. Clinical studies failed to confirm this, and it is regarded as quackery.
> And the new paradigm suggests both that public debt isn’t a major problem and that government borrowing for the right purposes is actually the responsible thing to do.
> Here’s where it becomes crucial to realize that the world has changed: Interest rates are much lower than they were in the past, and all indications are that they’ll stay low for years to come.
The phrase "for the right purposes" sounds like a scape goat for government spending. What is a right purpose? Morally speaking - almost anything. Economically speaking, I imagine only things that are likely to increase net GDP over the long haul.
It seems clear to me that you can draw a pretty clear line between quantitate easing & government bailouts of companies during COVID to a sizable quantity of current inflation. Asset prices rose in the market, which bubbled down to housing, rent, and consumer products. Supply shocks for oil and trade commodities were part of the equation but only a part. From everything I've read on federal bank history, the more money that's in supply means the higher inflation - almost by definition. You can only issue so much debt out of nothing before dollars are fighting over the same core commodities.
[1] https://www.nytimes.com/2020/12/03/opinion/biden-republicans...