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xrd 13 hours ago [-]
What is the hedge for this? Digging a really deep hole somewhere?
lumost 12 hours ago [-]
Hedging against currency collapse is notoriously difficult. But a reasonable set of hedges are assets that will have value regardless of currency changeovers. Eg housing, land, gold etc.
xrd 10 hours ago [-]
I just assume the USA will be the place where violent "repurposing" of land will happen because of all the guns here. Housing seems risky for that reason.
JumpCrisscross 8 hours ago [-]
> What is the hedge for this?
Cash. So you can buy into the dip. It’s historically a losing position, however.
fakedang 11 hours ago [-]
Anything that has steady value - land, gold, real estate with global appeal, manufacturing for the global market, etc.
zamalek 13 hours ago [-]
An yet people will die on the hill of "republican economics." I truly can't understand it.
kgwxd 10 hours ago [-]
You'd have to not understand anything, to understand it. "Qualified" people are the most unqualified, and "unqualified" people are geniuses. Just believe what the "unqualified" people say, and you can be a genius too.
Horatius77 11 hours ago [-]
Sad part is that, you can basically pick any random date over the past 50 years and this headline would ring true at that time. Our debt always seems to be at an all time high.
moregrist 10 hours ago [-]
That’s just not true. At the end of the 90s the US had a budget surplus and there was a discussion of how we were going to handle it.
Then George W. Bush enacted a big tax cut in 2001 that no one remembers because it was heavily weighted toward the top 1%. Suddenly we didn’t have a surplus problem anymore.
SideQuark 10 hours ago [-]
The surplus had dried up before Bush’s election, as the dot com bust tanked federal tax revenues.
Bush tax cuts did add to the deficit though.
bguebert 7 hours ago [-]
There might have been a budget surplus but we were still in debt.
Here they show the debt increasing through the 90s but by less than most other decades. I don't know if it takes into account inflation though so maybe that would have made the debt have less value. Seems like they didn't use any of the surplus to pay off the debt.
pseudohadamard 2 hours ago [-]
That wasn't necessarily Bush personally, who was never the sharpest knife in the drawer, but his strategists. The Republicans had convinced themselves that surpluses encouraged government spending so by wiping them out and "starving the beast" as they put it the resulting financial crunch would create a need to slash spending, cut social welfare, and reduce the size of government.
Actually now that it's set out like that, the strategists were just as much in la-la land as Bush was.
Gud 58 minutes ago [-]
That George Bush the 2nd is a doofus is a finely crafted PR image.
He knew exactly what he was doing.
anon7000 11 hours ago [-]
I mean, that’s how growth works. Like, if the economy normally grows, the economy is always the biggest it’s ever been. Debt’s always the highest. Human population is always the largest. Number of companies is always increasing. Amount of important economic infrastructure financed by debt is ever growing.
To be fair, I’m not saying our debt is in a good place. But just that we should expect it to always be the most it’s ever been, just like we’d always expect the economy to be the largest it’s ever been.
By itself, it doesn’t mean anything if it’s always increasing, what matters more is how quickly debt is growing and if we aren’t keeping up in how we pay it off
seanhunter 7 hours ago [-]
> Debt’s always the highest.
You don’t need to fund growth with debt necessarily- look at Norway for example. They have modest gdp growth and a net asset position. (And yes I know it’s because of their mineral wealth I’m just saying that growth doesn’t necessarily entail growing debt).
As an American, I hear "8 trillion dollars in debt" and it seems like monopoly money.
Nobody lets you borrow 8 trillion dollars without paying some of it back.
As far as I'm concerned, it's a made-up number, it's only gotten bigger every moment I've been alive, and nothing ever comes of it.
When the universe dies, the US national debt will be at one gajillion...
blitzar 14 hours ago [-]
Actually bill clinton paid some of it back (and created 22 million new jobs and an internship).
also the us debt is 38 trillion
pinkmuffinere 9 hours ago [-]
> (and created 22 million new jobs and an internship)
I appreciate the humor you hid in this aside.
gavinray 14 hours ago [-]
> also the us debt is 38 trillion
It's sort of like being given one fine that's $100, and one fine that's $250 billion.
You may as well keep increasing the number of second fine, because in no earthly circumstance will I ever be able to pay it back.
coldtea 13 hours ago [-]
>You may as well keep increasing the number of second fine, because in no earthly circumstance will I ever be able to pay it back.
When that's the case, you'd be surprised what happens when the breaking point comes.
Or do you think countries haven't gone bankrupt before?
fakedang 11 hours ago [-]
> because in no earthly circumstance will I ever be able to pay it back.
Well at that point, all hell breaks loose - that's the Weimar story all over again.
The minute the US isn't able to project power globally, and the minute the Gulf states shift even a single transaction away from the petrodollar, the USD is finished. At that point, it might not make sense for them to accept the USD or dollar-denominated debt, either because of constant devaluation or the pointlessness of holding onto US Treasuries (because the US won't pay its debt). No one would buy US debt as a safe haven any more, which means the US won't be able to fund its budget.
kasey_junk 2 hours ago [-]
You’ve been able to buy gulf oil in non-us currency all along. You can buy it in yuan, pounds, euros etc.
Dollar hegemony isn’t because of the petrodollar. It’s the other way around. The oil states throw off huge amounts of profit and oil is such a big market you need the dollars reach to service it.
fakedang 1 hours ago [-]
You can't buy them off the bat from a petrostate. Heck, even China had to enter multi-year special negotiations with Saudi Arabia to even get a batch of oil sold in yuan terms. Gaddafi and Saddam Hussein were the two proponents of selling oil in euros, and look where that led them.
The spot market is different but that's not where most of the world's oil is sold.
> The oil states throw off huge amounts of profit and oil is such a big market you need the dollars reach to service it.
The oil states prefer dollars (and have pegged their currency to the dollar) solely because of a number of historical decisions that enabled dollar hegemony, which made the oil states peg their currency to the dollar and prefer the USD. That's changing now, but only very recently and at a snail's pace.
kasey_junk 21 minutes ago [-]
You can’t trade oil in any currency off the bat. It’s a complex market involving globe spanning logistics and geopolitics.
But I’ve personally traded oil in euros and know people that trade it in pounds daily. The yuan negotiations were complex because China wanted to get the currency controls set right so that it didn’t destabilize their peg while the saudis didn’t want get stuck with the worlds most illiberal currency.
This week India went back to trading for oil in rupees with an American global adversary at the behest of the US president.
The gulf states bargain on security was a boon for them and the states, but again the correlation was reversed. The Americans provided security, a willing and ravenous market for the goods and a stable liberal currency when few others could.
darth_avocado 11 hours ago [-]
You’re missing the magic sauce: every other government is also equally fiscally irresponsible.
fakedang 1 hours ago [-]
Doubt. Western governments sure, but not Asian governments, who are the majority buyers of Middle Eastern oil.
Gud 55 minutes ago [-]
And also not all western governments..
lithocarpus 11 hours ago [-]
mmm..
A better analogy would be this:
You have $100k income, and $800k debt, on which you have to pay ~$40,000 interest every year. That takes up a good chunk of your income. But if the debt doubled, at the same interest rate, you could really be in trouble.
darth_avocado 11 hours ago [-]
If I pay $40K interest every year on my $100K salary, I’m in trouble. If I owe $80K in interest every year on my $100K salary, the bank is in trouble.
hyperhello 9 hours ago [-]
Or are they, really?
moi2388 6 hours ago [-]
Not if your income was partly “getting loans from the bank” and now the bank won’t lend you money anymore, which is more in line with what the debt means for the us.
rationalist 14 hours ago [-]
also the U.S. unfunded liabilities is over 100 trillion*
* That was the number that I first heard, but a quick search shows it's estimated anywhere from 80 trillion to 210 trillion dollars.
quickthrowman 13 hours ago [-]
Clinton didn’t do much of anything to pay down the total amount of outstanding debt, but he (and Congress!) did have positive effects by balancing the government’s budget. Outstanding US government debt chart from FRED: https://fred.stlouisfed.org/series/GFDEBTN
The budget was balanced and/or a surplus for the years from 1997-2001, which meant a lot less money was borrowed (or fewer bonds were sold, depending on how you want to look at it.)
The percentage of public debt to GDP also fell substantially from 1993-2000, which is a better metric than gross debt levels anyways. Here’s a chart of that from FRED: https://fred.stlouisfed.org/series/GFDEGDQ188S
liveoneggs 12 hours ago [-]
it means we gave $8T to someone and slowly pay it.
The US government does spent a pretty large amount of its budget paying some of the debt back. More now that there's been multiple brinkmanship games of threatening a default for political points.
rationalist 14 hours ago [-]
The interest on the debt alone, is 1 trillion dollars a year.
rcxdude 14 hours ago [-]
And that's at basically the lowest interest you can possibly get a loan.
rationalist 14 hours ago [-]
The U.S. GDP is about 31 trillion, so 3 percent of that isn't bad, as long as we can continue to grow more than that, forever.
Although according the the article, the interest payments account for one fifth of revenue, projected to be one quarter in ten years.
izacus 13 hours ago [-]
The core of the issue is that the new debt isn't taken at low 3% interest right? So the servicing costs are rising faster than the economy is growing.
coldtea 13 hours ago [-]
>as long as we can continue to grow more than that, forever.
"Being chased while on foot by a pack of hungry cheetahs is not that bad, as long as we can keep our distance"
kelseyfrog 12 hours ago [-]
You also have to understand that the foundation of money is debt in the sense that if we paid back all the debt, money wouldn't continue to exist. The sum total of debt exceeds the total quantity of money.
blitzar 13 hours ago [-]
paying off one credit card with another credit card doesnt really pass the threshold of "paying some of the debt back"
Cash. So you can buy into the dip. It’s historically a losing position, however.
Then George W. Bush enacted a big tax cut in 2001 that no one remembers because it was heavily weighted toward the top 1%. Suddenly we didn’t have a surplus problem anymore.
Bush tax cuts did add to the deficit though.
https://www.investopedia.com/us-national-debt-by-year-749929...
Here they show the debt increasing through the 90s but by less than most other decades. I don't know if it takes into account inflation though so maybe that would have made the debt have less value. Seems like they didn't use any of the surplus to pay off the debt.
Actually now that it's set out like that, the strategists were just as much in la-la land as Bush was.
He knew exactly what he was doing.
To be fair, I’m not saying our debt is in a good place. But just that we should expect it to always be the most it’s ever been, just like we’d always expect the economy to be the largest it’s ever been.
By itself, it doesn’t mean anything if it’s always increasing, what matters more is how quickly debt is growing and if we aren’t keeping up in how we pay it off
You don’t need to fund growth with debt necessarily- look at Norway for example. They have modest gdp growth and a net asset position. (And yes I know it’s because of their mineral wealth I’m just saying that growth doesn’t necessarily entail growing debt).
Nobody lets you borrow 8 trillion dollars without paying some of it back.
As far as I'm concerned, it's a made-up number, it's only gotten bigger every moment I've been alive, and nothing ever comes of it.
When the universe dies, the US national debt will be at one gajillion...
also the us debt is 38 trillion
I appreciate the humor you hid in this aside.
You may as well keep increasing the number of second fine, because in no earthly circumstance will I ever be able to pay it back.
When that's the case, you'd be surprised what happens when the breaking point comes.
Or do you think countries haven't gone bankrupt before?
Well at that point, all hell breaks loose - that's the Weimar story all over again.
The minute the US isn't able to project power globally, and the minute the Gulf states shift even a single transaction away from the petrodollar, the USD is finished. At that point, it might not make sense for them to accept the USD or dollar-denominated debt, either because of constant devaluation or the pointlessness of holding onto US Treasuries (because the US won't pay its debt). No one would buy US debt as a safe haven any more, which means the US won't be able to fund its budget.
Dollar hegemony isn’t because of the petrodollar. It’s the other way around. The oil states throw off huge amounts of profit and oil is such a big market you need the dollars reach to service it.
The spot market is different but that's not where most of the world's oil is sold.
> The oil states throw off huge amounts of profit and oil is such a big market you need the dollars reach to service it.
The oil states prefer dollars (and have pegged their currency to the dollar) solely because of a number of historical decisions that enabled dollar hegemony, which made the oil states peg their currency to the dollar and prefer the USD. That's changing now, but only very recently and at a snail's pace.
But I’ve personally traded oil in euros and know people that trade it in pounds daily. The yuan negotiations were complex because China wanted to get the currency controls set right so that it didn’t destabilize their peg while the saudis didn’t want get stuck with the worlds most illiberal currency.
This week India went back to trading for oil in rupees with an American global adversary at the behest of the US president.
The gulf states bargain on security was a boon for them and the states, but again the correlation was reversed. The Americans provided security, a willing and ravenous market for the goods and a stable liberal currency when few others could.
A better analogy would be this:
You have $100k income, and $800k debt, on which you have to pay ~$40,000 interest every year. That takes up a good chunk of your income. But if the debt doubled, at the same interest rate, you could really be in trouble.
* That was the number that I first heard, but a quick search shows it's estimated anywhere from 80 trillion to 210 trillion dollars.
The budget was balanced and/or a surplus for the years from 1997-2001, which meant a lot less money was borrowed (or fewer bonds were sold, depending on how you want to look at it.)
The percentage of public debt to GDP also fell substantially from 1993-2000, which is a better metric than gross debt levels anyways. Here’s a chart of that from FRED: https://fred.stlouisfed.org/series/GFDEGDQ188S
https://www.youtube.com/watch?v=KLQlOK3AWSs
Federal Outlays: Interest as Percent of Gross Domestic Product (FYOIGDA188S) https://fred.stlouisfed.org/series/FYOIGDA188S
Although according the the article, the interest payments account for one fifth of revenue, projected to be one quarter in ten years.
"Being chased while on foot by a pack of hungry cheetahs is not that bad, as long as we can keep our distance"