[Diederich]

US native here.

If I printed some $100USD bills, took them to the bank and tried to deposit them, they would have no value. The consensus is that you aren't allowed to print money.

The United States Government prints money all the time. This money has value because there is a world-wide consensus that it has value.

The simple fact is that there is and has been (for many decades) no safer place to park vast sums of money than with the United States Government.

There are limits, though it's not clear what they are. If the US Government printed 330 billion trillion dollars, and gave a trillion to each US citizen, then the consensus would be instantly broken.

The US Government printing 'a trillion here, a trillion there', at this moment in history, is not materially damaging the global consensus. This confidence is relatively easy to measure: when the US creates more debt, are there buyers? The answer is and has been for many decades 'absolutely yes'.

I'm not trivializing this borrowing, and I'm not vilifying it. It is a unique tool that should be used wisely.

[throwaway_jobs]

> The United States Government prints money all the time. This money has value because there is a world-wide consensus that it has value.

No the Government borrows against future taxes (consider that an accounts receivable), the borrowed money doesn’t have value because of consensus it has value because it is backed by future tax revenue.

If the government did as you say and borrowed a trillion per taxpayer the system would breakdown but not because of some “consensus” but because the account receivable (future taxes) is insufficient to payback the borrowed money.

[jfengel]

It is rather astonishing that rational people continue to believe that there is enough future tax revenue to justify this. It's entering dotcom-boom territory, where even the most optimistic future profitability can't justify this level of backing.

Part of it, I imagine, is that the US government is likely to benefit from future tech booms, as it has in the past (despite tax shenanigans from the tech companies themselves). It gets a piece of stock market profits -- a stock market whose own levels are also currently out of keeping with rational revenue expectation.

[throwaway_jobs]

It’s never getting paid back, there is so much number fudging to hide the reality of debt and guaranteed payments for future liabilities...we pretend we are $26T in debt (but when you add in the future liabilities We are over $148T in debt).

To your point being rational doesn’t really give insights into these issues, but talk to any government budget officer and the can give you a sobering reality of the situation.

[jfengel]

I wouldn't expect to pay it back in the sense of reducing the debt to zero. A government is (nominally) eternal, and can continue to revolve its debt indefinitely. It doesn't retire or die the way a person does. As long as it pays its interest, it can just borrow again every time a debt comes due.

But it's not reasonable for that debt to grow without limit. It has to be able to pay the interest on the debt, for which it requires revenue. We take in only around $3T a year in total. That's still a large fraction of that $26T debt, but we're also supposed to pay our actual obligations out of that -- which at the moment are over $4T. Eventually the debt service is going to be larger than our revenue, and I just don't see investors being willing to just let that amount ride as new debt.

And yet people will loan us money for 10 years at well under 1% interest. That keeps the interest burden down -- and yet with the debt growing at over $1T per year it can't last forever.

[catsdanxe]

So what would a rational person do? Stockpile guns and food? Invest in gold?

[inetknght]

Those seem like something someone with wealth might want to do. But for those without wealth... protests are pretty much the top of the short list of options they can take.

[atemerev]

Brace for impact. If and when the shit hits the fan, there will be no strategy _at all_ to keep the same economic levels. Everybody will suffer.

[jessaustin]

The assholes keep telling us this. If they believed it, one suspects they'd change their behavior.

[ethbro]

> No the Government borrows against future taxes (consider that an accounts receivable), the borrowed money doesn’t have value because of consensus it has value because it is backed by future tax revenue.

This is one of two reasons it has value.

As other comments mention, the other reason is because it's by far the leading global reserve currency. Which is to say it's an attractive mix of liquid, stable, and available, compared to alternatives.

Furthermore, there are certain commodities (e.g. oil), for which dollars are required.

As a result, other countries / parties may believe the dollar is overvalued, but they will still have to acquire them, at the market rate, to execute transactions.

As a result of that ongoing demand, the dollar will tend to be valued both on its future tax revenue value AND as a result of a substantial, continuous demand.

[Diederich]

The current US federal debt is roughly 110% of GDP. In a few weeks, I'm going to borrow about 350% of my yearly income in the form of a home loan. I'm currently paying about 30% of my pre-tax income on rent, and this future mortgage will be about 22% of my pre-tax income, so on that basis alone it makes a lot of sense.

Less than 10% of the total federal budget goes into debt payments.

The absolute numbers don't really matter, but the percentages do. Trends also matter, as long as they're considered carefully.

[mumblemumble]

One interesting thing about the federal government's debt is that it behaves very little like an individual's debt.

A pretty decent 10-year student loan right now is at 4% interest. And you generally have to pay it back with actual money that you earn.

A 10-year treasury note is at more like 1%, and nobody bats an eye at the government covering payments by issuing more notes. Meaning that, in effect, the US government is getting an indefinite interest-only loan at a pretty low rate.

Actual humans don't get to do that because of a sticky problem: eventually we age out of our money-earning years, and (hopefully some time later) we die. Lenders, understandably, have an interest in getting their money back before that happens. Or at least in getting to the point where the loan is collateralized by assets that are worth more than the loan's balance by the time that happens. And that's the ultimate reason why revolving debt gets worrisome: It's running down the clock.

The US government, on the other hand, is theoretically immortal. There's a risk that it might become insolvent at some point in the future, but there's not the same reason to worry about handling debt by endlessly revolving it, because there's no proverbial clock for it to run out.

[Diederich]

This is all true and on target. Comparing US federal debt to personal debt beyond anything but the most surface level is inappropriate.

Another class of entities that have a kind of 'forever debt' are large corporations. In general, they never want to be debt free. As I said elsewhere, it's about the percentages and trends.

To be clear: even this comparison has weaknesses. Indeed, US federal debt truly has no direct parallels.

[atemerev]

Of GDP in the largest economic boom, enabled by past borrowings.

[Diederich]

Yup, all true.

I'm not necessarily defending past or present fiscal policy. I'm pretty concerned about this stuff as well.

[baxtr]

What exactly are you concerned about?

[Diederich]

I'm fine with the US Government printing money when it makes sense to, such as during an economic downturn. However, since 2016, generally regressive federal tax policies without commensurate spending cuts during an economic boom have un-necessarily increased the national debt.

(To be clear: I don't think we should have been cutting social spending. But we definitely should not have been giving huge tax breaks to the most wealthy.)

[jessaustin]

Where do dollars come from? Many observers say that the Federal Bureau of Engraving and Printing manufactures them. These manufactured dollars are then distributed to banks and through banks to other firms and to the public. They are manufactured in the quantities necessary for efficient settlement of loans and other financial instruments. In particular, attention is paid to current goals for purchase of "Treasury" notes. These instruments are also manufactured by the USA government.

Obviously, an individual human can't operate like this. The USA government can, and has for decades. Remember the Gospels' admonition to "render unto Caesar."

[minikites]

Government budgets are not the same as corporate budgets.

[octo_t]

For most countries, this is true. The US is in a unique position because it is the global currency.

[grey-area]

You should also bear in mind that governments now buy more and more of their own debt (indirectly of course), so how much of that demand is real?

https://www.thebalance.com/who-owns-the-u-s-national-debt-33...

[Diederich]

Foreign governments bought about 1/3 of the debt issued by the US government in 2019.