What's the point of keeping track of debt if you can keep raising it indefinitely? Why not just forget about it and use the available resources as needed.

It's just a legacy system. We're still in the process of converting it.

Donald Trump once addressed this by saying "So long as oil is traded in US dollars, debt doesn't really matter." And I kind of have to agree with him. So long as the hemoglobin of the global economic engine is still there, the debt can keep being issued with out concequence.

But this only holds while oil is still relevant and/or available.

So it works short term but over the course of decades it is a big problem.

The market will remain solvent and irrational far beyond all logic.

Honestly I can't see any candidates to actually replace the dollar. To become the world reserve currency the issuing country has to be very stable, make their capital markets as open and transparent as the US, accept running a large trade deficit and issuing government bonds to almost anyone no matter the geopolitical situation.

China is stable, but without a regime change they are not at all interested in opening their financial markets. India is large and a little more open, but the big question mark is stability (both external wrt Pakistan/China and internally). The EU could do it but first they'd have to get buy-in from the export giants which seems unlikely and they'd also strain the relationship with the US.

An alternative to repaying debt is inflating it away, which is what we've been doing.

Is it possible for the US to take on bigger and bigger debt because it has a huge national defense budget?

I have often heard that household/consumer debt cannot and should not be treated the same way as the debt a government holds. But it is still something to be concerned about because Argentina printed a lot of money to pay off debts I believe and that devalued their currency a lot.

No, the economy must decide between guns and butter. Military expenditures are destructive and wasteful. The US can afford its disproportionate and non-productive military expenses because it is subsidized by the rest of the world buying US treasuries and the dollar as the world reserve currency since the end of Bretton-Woods combined with sovereign fiat.

This is a world historical anomaly that is underappreciated. When the world dollar regime goes, so too will our unbounded budget and ability to impose global sanctions unilaterally.

Defense spending is not the biggest part of government expenses. It's about 12%.

https://fiscaldata.treasury.gov/americas-finance-guide/feder...

And that doesn't even include state and local government spending.

yes thats basically, going along the lines of the Chartalist / Modern Monetary Theory view of money, and combining it with the Petrodollar theory of money.

sorry - edit - tried to keep this short, keep messing up. Theres a lot of deep rabbit holes if you want to dig into those theories online.

just keep in mind a lot of economists disagree with MMT / Chartalism and some even disagree with what a Petrodollar is.

This works great until it doesn’t. Interest rates are rising and debt isn’t as cheap as it was. At some point it will be unsustainable but we just don’t know when. I fear that we will push the limits on this until it’s too late.

> Interest rates are rising

This doesn't affect old debt unless it needs to be refinanced. Only new debt. Plus, interest rates will most likely not be 5-6% within the next 12-36 months.

Will they be higher than they were at 0.25%? Yeah, probably. But isn't a 2-3% interest rate "healthier"? It provides alternative investment options instead of "let's all pile into equities even though valuations are already detached and the entire market is trading at 35.96x (which it was at Jan 1, 2021)"

> This doesn't affect old debt unless it needs to be refinanced.

That's a really big unless. That's the whole point.

How much debt is refinanced at what rate/how often versus new issue?

A lot of non-government debt is likely to be floating rate. America is somewhat unique, with a large consumer fixed debt market in mortgages thanks to government subsidies, but that's not the norm.

The debt does matter because it is a source of inflation.

But US never experienced that inflation because of the dollar being the reserve currency. So all the debt created in the US just becomes assets for lenders worldwide. This doesn't happen with other currencies. No one is running around to buying Indonesian Rupiah denominated debt.

If the demand for US dollars declines, one can imagine all the debt not finding buyers, causing inflation to go through the roof.

All that said, the US is very privileged but it's not likely to last as other countries are actively hunting for alternatives.

US government debt is mostly bought by Americans who might reasonably be expected to step up and take a loss for their country. The rest is countries like China who are looking safely stash some money or to get dollar currency to make purchases denominated in dollars.

The US government has, from its inception, pretty much operated with a deficit and done fine. With such a gargantuan GDP and supreme position in foreign relations, the US should be a utopia for its citizens

i too have been told for 50+ years the National Debt will bury us. Often by people like Ross Perot who have their own glorious business foul ups that for some reason get completely ignored when they are discussing "how things ought to be".

Now that i actually have savings, i load on up T-bills paying 5 percent, and Ibonds paying like 6 or 7, now im thinking "God i love the national debt, its so awesome, its literally free money, i wish there was more national debt. The national debt should sell t-shirts and drop an album".