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by RC_ITR 999 days ago
Shhhhh.

We kind of need to keep that lie quiet so the Treasuries market stays liquid (I mean, kind of weird we all know the government openly manipulates the rate of return on the world's most common financial instrument, no?).

It's kind of why we can't min the $1tn coin to fix the debt ceiling. Everyone just agrees it's pretty convenient to ignore the market's weirdness and run with it (because the illusion of a risk free rate is a nice one).
1 comments
pclmulqdq 999 days ago
The coin has other issues regarding the creditworthiness of the US and inflation risk.

Having some level of debt seems to be good, but at this point, servicing the debt is a significant fraction of the US federal budget, so it's getting a bit out of hand.

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RC_ITR 999 days ago
Not if that debt created meaningful uplift in GDP (i.e. the theoretical pool of $ that the government can tax).

Sure, it's easy to say 2% of GDP is too much, but would we be better off if debt was 60% lower and GDP was 50% lower? Debt-service as a % of GDP would certainly be lower!

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pclmulqdq 999 days ago
It's easy to say over 100% of GDP is too much when you compare to other nations and historical periods. The US debt is well over 100% of GDP. Below that, you can start to argue about the best level.

The US basically seems to be only getting away with the current huge debt load due to the petrodollar, and other countries are trying to break that hegemony.

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RC_ITR 999 days ago
Why?

Is it also easy to say the stock market being over 100% of global GDP is too much? That’s only been true for the past few years too.

One is an absolute value thing and another is an annual thing.

There’s absolutely no logical reason for 100% of GDP to be compared to either thing.

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pclmulqdq 999 days ago
The absolute value of the debt is related to an annual thing: the interest payments on that debt. Those interest payments account for almost 10% of the US federal budget now, and that number will only rise with interest rates.
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RC_ITR 995 days ago
The absolute value of the stock market is related to annual dividends.

>that number will only rise with interest rates.

Not if nominal GDP/the tax base grows faster. The thing most people miss (and I'm amazed at this given the past few years) is that the point of government debt is to grow the economy.

You can debate whether or not you think it's effective or if we are over-doing it, but you have to at least acknowledge that putting more money into the economy has the theoretical potential to created positive sustainable GDP, which increases the tax base.

Look at Hoover Dam for example - debt funded, but probably responsible for trillions of dollars of GDP over the years. [0]

https://www.federalreservehistory.org/essays/reconstruction-...

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