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When will US debt matter again? Never, as long as there's demand for U.S. treasury bills? We blew past 90% of GDP and, according to WSJ article, may get to 122% of GDP in 10 years. Or maybe debt never mattered, other than as a political talking point.
I think debt matters if interest rates end up settling above 3-4% to keep inflation at the 2% target.Quote:
Originally Posted by dschane
Not that the debt will cause a catastrophe - see Japan for what sort of debt can be carried without causing some sort of death spiral - but that reducing debt in that scenario will allow for lower rates and stronger economic growth.
(Saying 3-4% as the desired rate so the Fed has room to cut to head off a recession.)
ETA: the Fed currently foresees a long run rate of 2.9%
Japan engages in financial repression to sustain its debt burden. That's not my opinion, it's an economic definition. Financial repression wrecks the dynamic performance of private industry. Financial repression means investors earn returns lower than the rate of inflation. Debt not causing a "death spiral" is a low bar in a thread ostensibly about people earning positive returns on their investments, rather than zero or negative returns for decades as is the case in Japan.
Perhaps more after lockup especially since so many are unlocked. Even if the Donald doesn't sell he'll surely hedge or lend out shares for shorting with that borrow rate.Quote:
Originally Posted by 4matic
Right. “He” might not sell but his advisors and family will so he can deny it. On to the crypto grift.
My guess is US debt will not be a major problem until it is, and then it will be a crisis(real one). As long as there is good demand for treasuries, should kick the can down the road. But sure would be nice to have that money to spend on something useful. Pretty crazy spending more on interest payments than national defense now:
21 % Social Security
14 % Medicare
13 % Net Interest
13 % Health
13 % National Defense
Put another way, U.S. debt will not be a major problem (higher interest rates are just one of the ways debt still causes drag) as long as the world's largest provider of liquid assets is perceived as reliable and relatively safe.
Americans benefit from global dollar dominance. If global real demand for U.S. government securities were to fall for any number of reasons then, absent deficit reduction, we'd see a switch away from the current monetary dominate regime to a low growth fiscal dominate regime like Japan.