[torginus]

Why is this a meaningful figure? It's not debt that matters its how much it costs to finance it. It's Finance 101 that if you manage to borrow below inflation rate, and you have the luck that what you paid for appreciates, then your debt will disappear over time.

On the contrary, trivial amounts of money with usury can ruin you financially.

[eigenspace]

This Finance 101 perspective is too clever by half.

Sounds like a great idea, right? But what if something out of your control[1] happens, and average interest rates on the debt burden go up from 2% to 14%? The USA can't afford to just pay off all of its debts. It must continuallly roll over it's old debts to new debts, and could easily find itself in a situation where debt servicing costs go up by an order of magnitude if the fiscal situation changes for long enough.

[1] Or in the case of the United States, you do something very stupid and very inside of your control

[torginus]

Not a finance person, but my understanding is that the US govt is indebted via bonds which pay according to their issued yields.

So the interest rates are the yield rates of said bonds, and if the dollar were undergo hyperinflation, then said debt would inflate away.

Sure, that would mean getting future financing would be difficult and expensive for the US, but that's a problem down the line, and goes beyond just the current debt.

For the record, I do not agree with current US foreign or domestic policy, but I wouldn't say it doesn't serve current US financial interests.

[eigenspace]

Copy-pasting my comment from elsewhere in the thread:

This is a fantasy. Do you really think lenders would just not notice if America inflated its currency away to get rid of its debts, and they'd just say "aw shucks you got us. Anyways, here's a new loan at the same terms as last time." ?

And what about the American public? Look at how much Americans freaked out over a year or two of 6% yearly inflation. How do you think Americans would respond to 30% monthly inflation like in Argentina or Turkey?

In almost all cases, you're better off just defaulting on loans than pursuing hyperinflation. The reason to go for hyperinflation is if you're worried about your creditors invading you for defaulting.

[hvb2]

> It's Finance 101 that if you manage to borrow below inflation rate

And when was the last time that happened? Pretty much only during inflation spikes. The vast majority of time, inflation is around 2% or maybe 3 or 4 recently, 10 year Treasury yields is well above 4.5%.

So maybe you have 40T USD lying around, and you're willing to lend it all to uncle Sam for inflation -.1%. if that's not the case then it's finance 101, and wishful thinking

[eigenspace]

While I also disagree with the person you're responding to, there's more leeway than just borrowing below inflation.

Roughly, so long as a government can borrow cheaper than nominal GDP growth (assuming a relatively constant ability to tax that growth), then the debt burden doesn't really grow, because your ability to finance the debt grows faster than the debt.

But the problem is that the USA hasn't even cleared this bar, and its debt burden is growing, and there's also the additional risk that if borrowing costs go up due to a lack of confidence in the US government or global instability, even the current debt pile could be unmanageable.