Comment by tim333
7 days ago
>The country is at risk of a debt spiral.
The US owes US dollars and can also issue US dollars. There are complications but it's not like you run up a credit card and can't pay.
7 days ago
>The country is at risk of a debt spiral.
The US owes US dollars and can also issue US dollars. There are complications but it's not like you run up a credit card and can't pay.
Well the good news is that there are multiple plausible paths forward.
The bad news is that they're all terrible.
The usual not terrible, not great solution is to keep the debt kind of constant and eventually it gets inflated away.
We mostly abandoned the long-term viability of that in the Bush years with the tax cuts plus expensive wars, and doubled down in Trump's first term (more tax cuts). That exhausted our margin for responsible emergency debt spending, and we had two crises on top of it (as always happens from time to time) so we were down to just playing for time and hoping for a way to spread out the pain rather than let it hit all at once.
We now do not appear to even be playing for time and are rushing toward the "all at once" thing.
Exactly. The Zimbabwe model
Can totally happen when the people in charge are economically illiterate and surrounded by sycophants or crooks (I'm not sure which Mugabe was), demanding a wealth transfer that can't be funded by the actual economy.
Inflation can also happen when production goes down, not just when money supply goes up.
Now I don't claim to be an expert at economics, I'm just a software nerd like most here and may be wrong so take with a pinch of salt, but the things I've heard that are associated with stagflation include de-globalisation and supply chain shocks (e.g. a trade war with major partners), tariffs, and shrinking labor force (aging population not helped by a combination of low immigration and aggressive deportation).
To even begin to understand Mugabe you have to understand his very long and strong relationship with the Chinese military and the reasons why they invested so heavily in his posse.
Yes, but if they let get into a debt spiral, the only solution becomes devaluation of the dollar to the point of hyperinflation. Only then debt is reduced, but it would be terrible for everybody except a few.
Devaluing the dollar would do wonders for post-tariff prices, and prop up exports.
I say it in jest, but I can't spot the problem with it because I'm not an economist.
Several issues:
- imports will become prohibitively expensive
- doing everything locally is less efficient
- the dollar will lose its world currency status
- then debt will become unsustainable