Does federal debt matter anymore?

[lightbulb27]

Were spending like a drunken sailor... and that's an insult to most sailors...

The US hit 35 trillion by Aug 1 2024. By Oct 1... added 1/2 a trillion of debt. Wow! We now spend 1 trillion in interest every year. Of course, that spreads around in the global economy to "expand it"... but how long can we pay that interest?

No wonder the price of everything is going way up... and will continue to imho. They currency is being watered down. Does debt matter?

https://www.usdebtclock.org/

[Lynx122]

It does matter sooner or later shit is gonna collapse but nobody wants to deal with it in the moment. But I think the U. S. is already in a recession. It can take up to 2 years until they actually adjust the numbers and see what's really going on. Aside from Nvidia I don't think anybody's really doing great atm. I heard in the U. S. there's 1.6 trillion just in auto loan debt. and then people juggle their debt around they buy something on afterpay then they put that on a credit card then they use another credit card to pay off that debt etc. It's actually crazy. And the minimum payments these debts have are so small that even people who are like 60 k in credit card debt and completely in over their head can usually figure out some way to pay that. But it completly hides the underlying problems.

That's why in the last financial crisis it was so unexpected because these companies are so used to just cranking out stuff on credit sell sell sell and they don't care if these people don't have money. The whole economy is running on debt. And when the shit is about to hit the fan real bad the central bank lowers interest rates and sends the sign to the banks that more cheap money is coming and so the banks give out some more loans to people who are desperate and the economy is saved once again but the system is broken. In Europe I know people who have debt but they usually have serious problems in their life in general. Regular people do not have debt like in the U. S. they have a mortage if they own a house but that's it. The feeling is completely different here. People don't chase consumerism as much, most rich people are very discreet and don't need public attention. It's just a different attitude towards money.

[ChiTown33]

Agreed but consumerism is what turns our economy. And if you're a shareholder which it sounds like you are (Nvidia), you're benefitting from that beast.
I agree it's a problem. But it's also why we've had exponential growth over the past 4 decades.

[Lynx122]

@ChiTown33 it is nice if you only look at the numbers but I prefer stable growth that doesn't lead to disaster in the future :)

[ChiTown33]

I prefer stable growth as well but it's a free market for a reason. You cannot control every aspect of it.

[Telekinetic-Potato]

Technically, no.

The answer why is complicated and goes back to why we even have currency in the first place but I'll say this:

Our money isn't backed by gold so what is it backed by now?

largely, it's backed by our foreign policy. For example,

If a country who exports oil around the world says a barrel is worth $100 usd and America says no, it's worth $80 and that country says take a hike, then America shows up and blows up a ton of their oil tankers, taxes the fuck out of its import into any allied country and turns a blind eye to any crime against that country it would have ordinarily stopped, how much is the barrel worth now?

When a gun is pointed in your face, all of a sudden the debt doesn't seem to matter so much. When you get to make interest and gain political favor, the debt doesn't really have an effect on how anyone feels about using USD.

How many people do you know who keep lending money to people knowing they'll never get it back?

What makes the money you have worth what it's worth to you? When you negotiate pay at a new job are you thinking about the national debt or are you thinking about how much you can accomplish with it?

The fact is, the banks figured out how to make it so America technically can never go bankrupt. Not in any meaningful way. Not unless either our military becomes contestable or we loose respect amungst the world leaders who lean on us to take care of them.

[lightbulb27]

I'm seeing the eye of the potato here, good answer.
Does such systems break at some point? Unless that printed up currency is distributed broadly, it goes into a few hands. the few without begin to rebel...

[Telekinetic-Potato]

The only way really for it to break is for people to loose respect for the system. Our economy is so commercialized that big corporations control the flow of money in such a way that the working class is caught by the hair so to speak.

It's not always a big deal for a company to go bankrupt if its profitable otherwise.

But if people started conducting business with another currency, that could open doors for big problems. If people were to strike or revolt in some way, stopping the flow of goods and services.

In a case like that the currency is less about USD and more about the demands of the people and how much power they can manage to gain against the elites.

This being overly simplified

[lightbulb27]

yes has to be demand for the currency, that's the key. loss of trust drives them elsewhere. rome figured that out the hard way.
BRICS is trying, I have no idea how far off anyone is from a replacement... but the writing seems to be on the wall so to speak. always creates conflict as power shifts.

[Telekinetic-Potato]

Well there's some kind of meeting taking place this month that apparently is going to consist of some heavy hitters in the finance/banking world.

With bitcoin slowly becoming accepted, I think they're probably coming up with plans for how to set up a similar system even if the world switches to decentralized currency.

If there's one thing the American government is good at, it's regulating the fuck out of stuff.

It will be interesting to see how trumps anti war actions affect their decisions if he makes it into the Whitehouse.

[DrPepper12]

Can't resist: That definitely gives new meaning to fiat currency!!

[Telekinetic-Potato]

@DrPepper12 😂

[NaultD]

Majority of it is held by USA investors. So that money is reinvest back into the US economy get taxed again and rumble and shakes our economy as needed. Keeps the oil and pistons from seizing engine that is the economy.

We also have foreign investors. There's a saying "If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem." So with that in mind we use that as soft geopolitical power to manipulate things. Like China playing nice compared to Russia.

One hand washes the other or if you are a tumor you get cut off from the global economy. China probably close to a trillion invested in the US. so if they fuck around and find out they lost a trillion on day one and now that trillion will be invested to blockade China ports from global trade.

From here inflation over time also makes it more manageable over time. So the potential power of it right here right now is out performing the power in needs to be paid off later. In a few thousand years the national dedt will be the same as a house morgage at some point.

Now I'm curious if we will ever make a new currency? Today's $100 will one day be 1 cent and just for convenience we recalibrate everything back to small denominations.

[NaultD]

Redenomination is a new vocabulary word i just learn.

Bet who will pass this nessary hurdle in our economy? progressive left or conservative right? I'm just saying progress is in our name sake for a reason.

[DrPepper12]

Debt matters. Although around 70% of that debt is held by USA American citizens and corps so effectively we owe that money to ourselves. Even still, if either China or Europe sold off or proffered their US bonds for redemption it would collapse the USA economy in minutes. Yeah, debt matters.

Reagan sold countless future generations of Americans down the river just so he could "spend the Soviets into the ground". USA decline starts with him. "Saint Ronnie" belongs in hell. All his scheming and lies led us here: Private Dumfuq Bonespurs SALUTING a North Korean general. MAGA heads would explode if a Democrat did it...

[Avicenna]

Figures a leftist would be dumb enough to try to put a far-left partisan spin on this mess.
No bonds are callable, but, yes, they can (currently) easily be sold on the very liquid secondary market.

[DrPepper12]

Sorry that's the correct term. Still doesn't change that Reagan left us here

[WindAtMyBack]

It matters a great deal. But politicians redirect the debate for political reasons. They make it about taxes, rich people, etc. They have the attitude that if you can somehow manage to pay for it, then it's OK to spend it.

No it's not OK. Cut the damn government because it's too big. The debt and taxes are side issues. They are still important, but they wouldn't be an issue if the government would just cut itself in half like it should - then cut itself in half again.

[exitseven]

Yes, the service on the debt is now larger that our defense spending. It is a big problem. The federal budget need to be cut and politicians need to make this a priority. Too bad it will never happen.

[DrPepper12]

Or raise more revenue?

[exitseven]

@DrPepper12 yes, tax the shit out of the. imiddle class again

[AviatorTom]

It should but it doesn't. It's just a number thrown around. Sooner or later, though, someone (our grandchildren, most likely) are going tp have to pay it off, one way or another.

[Avicenna]

It matters very much. And it will matter even more when interest rates rise and the federal government uses inflation to try to reduce the debt or simply defaults.

[Anonymous]

Remember back in 1992 it was only like 3 trillion.🤣

Where is Andrew Jackson when we need him.

[lightbulb27]

I remember when an aircraft carrier cost 2 billion... under Regan.
I wonder what the founding fathers would think of the nation now... there's a reason they made gold their money!

[genericname85]

it only matters if you're in a country where other countries could actually enforce you giving them their money back. if you're the one able fucking everyone up, it doesn't matter.

[Dargil]

Sooner or later, the money will run out. Then there will be widespread chaos and anarchy and our enemies will move against is.

[noohair]

Debt matters!!! It is not prices going up it is the value of out paper going down.