| >The parent said debt based economies. The US has an economy and government system that is increasingly drowning in debt (check out the corporate balance sheets in the US; nationally it's horrific; Yes, that is what happens when your currency is the world reserve currency. Every nation exports their products to you but they never want to import anything from you. Therefore you run into a domestic unemployment problem and you must take on an increasing amount of debt just to keep your economy stable. That's the "exorbitant privilege" the privilege to be forced to take on debt. It's called a privilege because smart leaders recognize that you can have your cake and eat it too but neither Obama nor Trump have taken advantage of that, all they did was let the disadvantages outweigh the benefits. Trump merely wanted to reduce the disadvantages by starting a trade war with China. >that situation has been spurred on by the Fed's forever low interest rates, Those low interest rates aren't spurred by government debt. They are spurred by low inflation, if possible the interest rates would be at -1% or deeper but things like treasury bonds, cash and in theory Bitcoin prevent interest rates below 0%. >which encourages corporations to take on ever greater sums of debt because it's artificially cheap, which will ultimately lead to zombies ala Japan). Yes, those corporations are supposed to grow their business and employ people, even if those companies are useless to society, because the beneficial effects of employment will completely outweigh the downsides of zombie companies. However, inflation never came and unemployment is taking forever to shrink. (precovid of course) >The Federal answer to that is to print ever increasing sums of fiat USD, because there are no foreign buyers left that can absorb tens of trillions in new US government debt. There are lots of foreign buyers for USD though which drags inflation way down. >The Fed unavoidably becomes the primary buyer of the US Government's debt (this is where a nation begins eating itself; that began for the US over a decade ago now as a trickle, that trickle is picking up pace). This argument makes sense when the debt is fueled by Trump style tax cuts because you are ruining your ability to pay the debt back in the future, I mean, how are you supposed to pay the debt back if not by raising taxes above previous levels? If you spend it on one time stimulus the risk of the debt growing only exists until the economy has recovered. If you spend the money on infrastructure you can actually net a greater return in the future. >Once upon a time not so long ago it was a huge deal that China held a trillion dollars of US government debt, now that sum is a joke, a mere portion of one spending program this week or next. That's how quickly the US is imploding fiscally. It's a huge deal in the sense that it obligates the Fed to increase the money supply and the government to increase debt as mentioned in my first point. China buying US government debt IS the problem, in the sense that it forces the US government to go into more debt. If China is actively hurting the US economy, it is doing so by buying US debt which means it is not importing products from the US, which means China is not creating jobs in the USA. If China ever decides to unwind its US debt only good things will happen to the US economy. |