[zie]

The other option is they raise taxes, cut spending and they actually pay those debts off.

All debt comes due eventually, you can choose to go bankrupt or you can choose to pay it.

But if neither option happens in your lifetime, you don't need to care, if you are just trying to optimize for yourself.

[shkkmo]

Federal debt "comes due" all the time. The option you haven't listed (which is the one we're engaged in) is: "You can choose to borrow more money to pay your creditors".

The interest on federal debt recently makes up (very roughly) 1/3 of our total deficit.

This is why when the US doesn't raise the "debt ceiling" we risk defaulting on our debts.

[zie]

That was my point.

At some point, we can't keep borrowing to satisfy our debt(s). The question then becomes, what happens? This current inflation is actually a not bad thing for US debt, as we are inflating away some of it. It totally sucks for those of us that want to buy food and shelter though.

Either we endure some hardship(s) and have a miserable decade or three or we crash and burn.

I'm betting we endure the hardships. The other option(s) are much worse.

[shkkmo]

> At some point, we can't keep borrowing to satisfy our debt(s)

Why not? It's just a question of the rate of growth of the debt, the interest rates the USG pays on its debt, the rate of inflation and the rate of growth of the GDP/tax base.

There is absolutely a level of deficit spending that can be supported indefinitely. The question is whether we are above or below that level, not whether that level exists.

[zie]

There is indeed a possibility that a govt could, theoretically, borrow indefinitely. There is a LOT of assumptions in that calculation though, and it's pretty obvious the USA and almost every government never bothers to even try to live in that range.

So while what you say is theoretically possible, it's practically impossible, as there is almost no incentives for any people currently in government to try and sustain that, and incentives absolutely matter.

If you know of a practical example of this theoretical indefinite borrowing, I'd be very, very surprised.

[sleton38234234]

>> you can choose to go bankrupt or you can choose to pay it.

There's another option. One that's far more politically favorable: You simply take out more and more debt, until finally the whole world sells US treasuries. at that point the fed prints unlimited amount of money to buy up all that debt. And when the US pays interest on that debt, it just pays it to the federal reserve which then sends it back to the US. This is the end game, we're looking at. And the result implies inflation and LOTS of it. that's what I mean when I say, they will default on the currency.

[astrange]

Does the market, who should know, agree with you?

(Hint: US 10 year T-bond rate is 3.4%. That's not very high. Also, we have the world's largest military and can do whatever we want.)

If you want an exciting doomer story to believe in, try deflation. It's worse than inflation, so you'll look more cynical.

[sleton38234234]

I mean sure: the fundamentals all point to deflation: the aging population, the increasing debt and technology are all deflationary.

But, in this day and age where the fed has sooo much power, it doesn't matter. see below.

>> If you want an exciting doomer story to believe in, try deflation.

The Govt and the fed are both on the same page, in this regard: they will almost NEVER allow a deflationary spiral to happen. If you watch a lot of financial news from people who read the fed and intrepret what they're signalling, you'll find there is widespread agreement on this (especially as of the 2018 powell put).

In the history of countless countries and currencies from all over the world, all the outgoing empires and countries end up defaulting on their currencies in the end game. See Ray Dalio's latest book, he's got a great explanation on this.

You bring up an excellent point about the T-bond rate. If everyone already knows the endgame, then why hasn't the bond market priced it in yet? Shouldn't everyone be dumping T-bonds en mass? Are they slowly? these are the questions I'm trying to get answered. Part of it is because the fed was already buying up a bunch of t-bonds, hence a sort of partial yield curve control. other participants, must not be ready to give up on bonds yet, especially the institutional investors who are looking at more short term gains rather than long term. You can still make money on bonds in the short run betting on interest rate fluctuations.

[zie]

That is our current trajectory, but anyone with a modicum of common sense knows there is an end.

The question, which was what my comment was about, is how we eventually get to the end. We either buck up and pay it, or we crash and burn.

I'm betting we buck up and pay it, and just have a very bad decade or three, while taxes go up and spending goes down.

[metaphor]

> And when the US pays interest on that debt, it just pays it to the federal reserve which then sends it back to the US.

Uhh yeah, about those remittances[1]...

https://fred.stlouisfed.org/series/RESPPLLOPNWW