The US can service essentially any level of debt, and has far lower levels of debt than, most notably, Japan, which continues to function entirely normally.

Certainly, there are countries in a worse place than the United States. Japan or Italy are the first to be likely to blow up in a big way. Greece is a good candidate for blowing up first, but it is small enough to be backstopped by the ECB. Italy is too big to be backstopped. The USA may fall, but it probably won't be the first major economy to do so.

Historically, governments have been prone to currency crises when their debt-to-GDP ratio exceeds 100%. The USA is just slightly above that now, and interest rates have remained low here (and in other countries) because central banks are monetizing the debt. But that can't be sustained forever.

Only if you assume that the US economy will stop growing, and with it the tax base. The US government’s ability to pay debt isn’t just its ability to print money. It’s also the ability to collect tax revenues and given how stable economic growth in the US has been for hundreds of years, it’s reasonable to assume that it can easily pay debts well over 100% of gdp.

Many countries have been above 100% for a while now without any apparent issues

It's not a hard-and-fast rule.

The problem is this: once you have a high level of debt, you become sensitive to interest rate changes. Your debt rises, so you have to increase interest rates to lure investors to buy the bonds. The high interest rate forces to you run a bigger deficit, do you have to borrow even more money. Then investors demand an even high risk premium. That's the cycle.

Once that process takes hold, the only way out is some combination of lower living standards, higher taxes, higher inflation and currency devaluation.

You're right that it hasn't happened yet in the modern era. But it will. Remember where you heard it first.

>Remember where you heard it first.

I first heard it in a book written in 1986. It showed debt growing exponentially and forecast hyperinflation and economic collapse. People have been crying about that particular wolf for quite a long time.

Central banks are only recently been making things harder. Previous 10 or so years were quite easy on government debt. Even in some cases being negative.

Central bank zero interest rates decimated pension and annuity earnings.

Not for long. Just as long as the Dollar is the world reserve currency. Something that seems to be coming to an end in the next one or two decades.

If the US's debtors wish to have their debts converted into a 2nd rate (i.e. non-reserve) currency, then by all means, let's see it happen. It will be easier to pay off the debt if that happens (just harder to accumulate more).

> If the US's debtors

I think you mean creditors. Debtors is the opposite.

The way I read it, debtor makes more sense to their point.

They don't need to sell their bonds in US Dollars. Just buying less is enough to play havoc with the American economy, given the gargantuan trade deficit it runs every year.

It's true that the country will be fine for a while but savers are getting decimated in the process.

That $1M nestegg will feel like $250k in a few years.

If you invest in real assets, such as stocks or real estate, your savings should be more or less safe from inflation.

So far in 2022 this has not been true. Compare the 1 year of VOO to inflation.

USD inflation, no idea but like +8-12% depending on what you are trying to buy? VOO -20%.

Ouch. Personally this year I have had better results holding cash than investing it to hedge.

There are always exceptions.

Fundamentally, when both prices and wages go up, there’s no reason to expect companies to lose real value.

AFAIK in 2022 we’re seeing cost-push inflation and wages haven’t really gone up, which could partially explain why companies are having difficulties producing and selling.

Inflation is headed down. It's not a completely clear picture yet, but I think this is the only reasonable conclusion from the current statistics. Things could change, but right now the arrows all point in the right direction.

The pace of growth has slowed, but it is still growing in absolute terms at multi-decade highs.

YoY inflation for the US:

Jun 22: 9.1% Jul 22: 8.5% Aug 22: 8.3% Sep 22: 8.2% Oct 22: 7.7% Nov 22: 7.1%

The only way I can understand your comment is if you are confusing inflation (change in price level) with price level itself.

Inflation is slowing down and has been for months.

[0] https://www.statista.com/statistics/273418/unadjusted-monthl...

So we've still got high inflation, and the fed seems like it's only got so long until it'll resume pumping money into the economy.

That’s why it’s better to have a mix of assets, some that can be easily liquidated, than cash.

$1m in the right assets could become $4m in youre scenario with the same purchasing power of the $1m before inflation.

In reality, you’ll probably lose some value though because the people holding cash that now have far less purchasing power, which torpedoes demand. Still better to be in assets than cash though.

>$1m in the right assets could become $4m in youre scenario with the same purchasing power of the $1m before inflation.

Yes, the "place bets in a rigged casino to beat inflation" strategy.

A terrible idea for people over 50 that are looking for a rock solid retirement solution but when the government is robbing savers, one of the only options.