US Debt

[Urbandreamer]

I will have to agree to disagree with the concept that we NEED a significant national debt to function.

Anyway, listening to What-bitcoin-did I heard about this website (unrelated to bitcoin) that may be of interest to some on this thread.
https://www.usdebtclock.org/

It caused me to think and try a web search.
You may also be interested in this one as well.

https://www.nationaldebtclock.co.uk/

Oh I should possibly warn folks, What-bitcoin-did is often mostly about football.

[vand]

It is a concern because given that the US government spends $4 for every $3 they collect via taxation, they have no chance of running a balanced budget. Either you believe that the debt can continue to grow indefinitely - to 300%, 500%...? OR, you believe that it will, at some point stop growing.

No country has had a "balanced budget" since 1680 becasue that would destroy the economy. I found a quote on this from the economist William Vickrey that explains what I mean:

Sorry, that's just an absurd statement. How do you think the US shrank its debt after the war? It grew faster than the debt grew, ran budget surpluses, and was able to reduce its debt in the 25-30 years after WWII as a result.

The build up in debt is a relatively recent phenomenon, enabled by fiat monetary systems.

[scrumpyjack]

The big problem in trying to control US government spending is 'entitlements'. ie people are give the right to certain benefits and then the cost of those benefits subsequently soars way beyond expectations.

Apparently there was $2.6 Trillion in New Entitlement Program Spending In fiscal year 2022.

Entitlement Programs of the federal government include Medicaid, Medicare, Social Security, Unemployment, and welfare programs. Entitlement programs are rights granted to citizens and certain non-citizens by federal law.

The same happens in this country!

[ursaminortaur]

No country has had a "balanced budget" since 1680 becasue that would destroy the economy. I found a quote on this from the economist William Vickrey that explains what I mean:

Sorry, that's just an absurd statement. How do you think the US shrank its debt after the war? It grew faster than the debt grew, ran budget surpluses, and was able to reduce its debt in the 25-30 years after WWII as a result.

The build up in debt is a relatively recent phenomenon, enabled by fiat monetary systems.

The reduction was only really in debt/GDP. There were a few years of surpluses when the US debt went down a little but the overall trend was for it to increase in nominal terms

https://www.investopedia.com/us-national-debt-by-year-7499291

[Urbandreamer]

Entitlement Programs of the federal government include Medicaid, Medicare, Social Security, Unemployment, and welfare programs. Entitlement programs are rights granted to citizens and certain non-citizens by federal law.

The same happens in this country!

Indeed so.

BTW, since I mentioned the US civil war (1861-1865), guess when the last pensioner of that war died? Yes, you guessed it, she died three years ago.

Entitlements, even those with an obviously limited duration, can last longer than you expect.

RIP Irene.

[Urbandreamer]

Back on topic!

I'm currently listening to the MonayMakers podcast (about investment trusts not crypto) and have got to
0:40:44 – Holding US and UK index linked bonds
What is said about US debt and financial repression may also be of interest to readers of this thread.
https://money-makers.co/2023/10/14/mone ... -oct-2023/

[vand]

Sorry, that's just an absurd statement. How do you think the US shrank its debt after the war? It grew faster than the debt grew, ran budget surpluses, and was able to reduce its debt in the 25-30 years after WWII as a result.

The build up in debt is a relatively recent phenomenon, enabled by fiat monetary systems.

The reduction was only really in debt/GDP. There were a few years of surpluses when the US debt went down a little but the overall trend was for it to increase in nominal terms

[/table]

I said running nobody runs a "balanced budget" these days - that is one that does not grow your debt further. You don't need to run budget surpluses in order for GDP/Debt to shrink, you just need to stop growing Debt at a faster rate than GDP, and you can even still allow your debt to grow but at a slower rate than GDP - which is precisely what happened in the US during the postwar period.

The problem today is that debt is growing faster than GDP. That's a night and day difference.

[NeilW]

The problem today is that debt is growing faster than GDP. That's a night and day difference.

And yet Japan has a debt to GDP ratio of 263%, interest rates on the floor and next to no inflation.

Almost like it is a completely irrelevant ratio dreamt up by those who are hard of accounting.

There is never any problem servicing government debt. There is never any need to pay interest on debt. Because there really isn't any debt. If the people holding the debt (aka savings) don't like that then they can spend their savings, but only in the physical area that takes that denomination (the UK in the case of sterling). If they do that then that will generate *extra taxation* which when you do the really quite simple geometric series on the resulting transaction sequence will precisely match the size of the so-called debt. Debt being a store of taxation as well as value.

If the resulting spending boom is too much for the physical economy to handle at that point in time, then you simply put up taxation to reduce the number of transactions each spending chain can induce. Likely the automatic stabilisers will nip off the problem before you need to do that - if they are correctly designed.

It always amuses me that those people who whittle endlessly about national debt never seem to send their cash savings to the Commissioners for the Reduction of the National Debt, even though it is those savings that are causing it. (If you have a cash deposit, banks have the matching 'debt' as their balancing asset).

There should be a strict rule that anybody criticising national debt should be forced to provide receipts from CRND before they can speak on the subject. Put your money where your mouth is.

[vand]

The problem today is that debt is growing faster than GDP. That's a night and day difference.

And yet Japan has a debt to GDP ratio of 263%, interest rates on the floor and next to no inflation.

Almost like it is a completely irrelevant ratio dreamt up by those who are hard of accounting.

There is never any problem servicing government debt. There is never any need to pay interest on debt. Because there really isn't any debt. If the people holding the debt (aka savings) don't like that then they can spend their savings, but only in the physical area that takes that denomination (the UK in the case of sterling). If they do that then that will generate *extra taxation* which when you do the really quite simple geometric series on the resulting transaction sequence will precisely match the size of the so-called debt. Debt being a store of taxation as well as value.

If the resulting spending boom is too much for the physical economy to handle at that point in time, then you simply put up taxation to reduce the number of transactions each spending chain can induce. Likely the automatic stabilisers will nip off the problem before you need to do that - if they are correctly designed.

It always amuses me that those people who whittle endlessly about national debt never seem to send their cash savings to the Commissioners for the Reduction of the National Debt, even though it is those savings that are causing it. (If you have a cash deposit, banks have the matching 'debt' as their balancing asset).

There should be a strict rule that anybody criticising national debt should be forced to provide receipts from CRND before they can speak on the subject. Put your money where your mouth is.

And yet Japan is now a literally a dying country as its is on course to halve its population by then end of the century. It humours me when people suggest that the weight of national debt and what it does to a country's way of life doesn't play a big part in that. And while some tree huggers might actually want that, there has never been a case where large population decline and economic prosperity have gone hand in hand.

[Urbandreamer]

The problem today is that debt is growing faster than GDP. That's a night and day difference.

And yet Japan has a debt to GDP ratio of 263%, interest rates on the floor and next to no inflation.

Almost like it is a completely irrelevant ratio dreamt up by those who are hard of accounting.

There is never any problem servicing government debt. There is never any need to pay interest on debt. Because there really isn't any debt. If the people holding the debt (aka savings) don't like that then they can spend their savings, but only in the physical area that takes that denomination (the UK in the case of sterling). If they do that then that will generate *extra taxation* which when you do the really quite simple geometric series on the resulting transaction sequence will precisely match the size of the so-called debt. Debt being a store of taxation as well as value.

If the resulting spending boom is too much for the physical economy to handle at that point in time, then you simply put up taxation to reduce the number of transactions each spending chain can induce. Likely the automatic stabilisers will nip off the problem before you need to do that - if they are correctly designed.

It always amuses me that those people who whittle endlessly about national debt never seem to send their cash savings to the Commissioners for the Reduction of the National Debt, even though it is those savings that are causing it. (If you have a cash deposit, banks have the matching 'debt' as their balancing asset).

There should be a strict rule that anybody criticising national debt should be forced to provide receipts from CRND before they can speak on the subject. Put your money where your mouth is.

Well it HAS been a problem for some countries historically. The UK had to devalue the pound. France had to devalue the Franc. Germany, well we know what happened there.

Then there are those countries that had to replace their national currency. You know like Ecuador, El Salvador, Zimbabwe, The British Virgin Islands, The Turks and Caicos, Timor and Leste, Bonaire, Micronesia, Palau, Marshall Islands, and Panama. Some 65 others peg their currency to the dollar. That's simply the ones using the dollar. What of Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea and Gabon who use the Central African Franc which is pegged to the Euro.
For any of them your statements are CLEARLY untrue.

Then there are the issues with individual government debt in the EuroZone. The Greek debt was the last I recall.

I do hope that I'm not telling you something you regard as new, it's only been happening over the last 8 centuries in at least 65 countries and over five continents.

This book may be of interest to many.
https://www.amazon.co.uk/This-Time-Diff ... 0691152640

I would say that her [Carmen Reinhart's] book with Ken Rogoff on debt crises and financial crises is an extraordinary piece of work. -- eral Reserve Chairman Ben Bernanke, speaking before the House Budget Committee (6/9/2010)

[E]ssential reading . . . both for its originality and for the sobering patterns of financial behaviour it reveals. -- Economist

Regarding spending in the UK, you do know that we import a huge amount of our food. War time diet and dig for victory anyone? We are also a net importer of oil and gas. Gas which is used to generate electricity. Humm, did anyone notice price rises on those items?

As for people putting their money where their mouth is:

Didn't we already agree that this was not a bitcoin thread?
However since you raise the issue, you are wrong again. There ARE people who are doing so.
Here is the link that I previously posted, on this thread, to a panel of just such people. Talking to many others.
https://www.youtube.com/watch?v=QFqjw47biPM

I didn't originally post it about saving or putting your money where your mouth is. But you did ask and it does apply.

I'm sure that someone else could provide examples of people saving in gold, it doesn't have to be bitcoin. The simple fact is that many disagree with you and chose to do so financially.

[vand]

As a thought experiment, if national debt doesn't matter... why does every government still bother to raise tax revenue? Wouldn't it just be simpler and easier to print all the money they want to spend and pile it onto the national debt each year?

If you are going to slowly increase the national debt in real terms by 3-10% a year because you run constant budget deficits, why not just run a 100% budget deficit, go whole hog and increase it by 40% a year (govt spending as % of GDP)? It never has to be repaid, so why does it matter how quickly it increases?

[GoSeigen]

there has never been a case where large population decline and economic prosperity have gone hand in hand.

Who is your authority for this statement?

GS

[Bubblesofearth]

And while some tree huggers might actually want that, there has never been a case where large population decline and economic prosperity have gone hand in hand.

Past population declines have tended to be caused by one or more of the four horsemen. The Black Death is probably the most oft-quoted example. Various wars would be another. So not surprising that economic prosperity, certainly in the short term, has suffered alongside such declines.

Population declines as a result of declining birth rate are much rarer and, indeed, may only be a recently emerging phenomenon. Growth of the human population has been pretty inexorable up till now. As such it's too early to say what the economic consequences of such a decline will be. A lot of jobs are unnecessary and more will likely be so in a future where AI becomes more prevalent. The worry in the past has been unemployment as a consequence of e.g. mechanisation but a declining population helps solve that problem.

Bottom line, despite plenty of gloomy forecasts, no-one really knows what the economic consequences of a natural population decline will be. One thing that is certain (IMO) is that an overall decline in the human population is well overdue and will be good for those remaining and for future generations.

BoE

[vand]

there has never been a case where large population decline and economic prosperity have gone hand in hand.

Who is your authority for this statement?

GS

Hmm.. history? Population collapse and empire collapse are intertwined. Ancient Rome lost >95% of it's population. Can you point to an example that contradicts my statement? I would genuinely love to know, because I can't think of any.

[vand]

And while some tree huggers might actually want that, there has never been a case where large population decline and economic prosperity have gone hand in hand.

Past population declines have tended to be caused by one or more of the four horsemen. The Black Death is probably the most oft-quoted example. Various wars would be another. So not surprising that economic prosperity, certainly in the short term, has suffered alongside such declines.

Population declines as a result of declining birth rate are much rarer and, indeed, may only be a recently emerging phenomenon. Growth of the human population has been pretty inexorable up till now. As such it's too early to say what the economic consequences of such a decline will be. A lot of jobs are unnecessary and more will likely be so in a future where AI becomes more prevalent. The worry in the past has been unemployment as a consequence of e.g. mechanisation but a declining population helps solve that problem.

Bottom line, despite plenty of gloomy forecasts, no-one really knows what the economic consequences of a natural population decline will be. One thing that is certain (IMO) is that an overall decline in the human population is well overdue and will be good for those remaining and for future generations.

BoE

Yes there have been population declines since industrialization,but they have been caused by exogenous shocks rather than driven by demographic trends.

You can recover from wartime population losses pretty quickly with an immediate baby boom that tends to follow a large scale conflict, but demographic trends have much more powerful forces behind them that if not irreversible have still to be figured out.

You say that no one knows what will happen in a future with population decline but immediately contradict yourself that you are certain it will be for the better..

[GoSeigen]

Who is your authority for this statement?

GS

Hmm.. history? Population collapse and empire collapse are intertwined. Ancient Rome lost >95% of it's population. Can you point to an example that contradicts my statement?

Nope, I can't be bothered to try to contradict a fact pulled out of someone's rear end. I was just wondering how much value could be attached to it, and if you'd quoted an interesting study I might have read it. I am generally cautious of statements using the words "never", "all", etc, usually someone trying to prove a weak point.

GS

[vand]

Hmm.. history? Population collapse and empire collapse are intertwined. Ancient Rome lost >95% of it's population. Can you point to an example that contradicts my statement?

Nope, I can't be bothered to try to contradict a fact pulled out of someone's rear end. I was just wondering how much value could be attached to it, and if you'd quoted an interesting study I might have read it. I am generally cautious of statements using the words "never", "all", etc, usually someone trying to prove a weak point.

GS

So you can't produce evidence to the contrary whereas there is ample evidence to support my argument. Ok..

[vand]

It's noticeable that even the almight Chat GPT cannot give an affirmative answer, as it keeps misinterpreting the question of overall population decline for just slowing population growth.

I asked

"Are there any cases of countries that had periods of increasing economic prosperity while at the same time undergoing long term negative population growth - ie population number shrinking for more than 10 years - since the industrial revolution"

And all it could come back with (wrongly) was Japan again, but Japan's decline has only been ongoing for about 6-7 years...

OpenAI response

"
New chat

Default (GPT-3.5)

User
Are there any cases of countries that had periods of increasing economic prosperity while at the same time undergoing long term negative population growth - ie population number shrinking for more than 10 years - since the industrial revolution

5 / 5


ChatGPT
Yes, there have been cases of countries experiencing periods of increasing economic prosperity while simultaneously undergoing long-term negative population growth since the Industrial Revolution. One notable example is Japan.

Japan's economy experienced rapid growth in the post-World War II period, known as the "Japanese economic miracle." During this time, the country saw significant industrialization and economic development. However, Japan has also been dealing with a declining population for several decades. The combination of factors like low birth rates and an aging population has led to a negative population growth trend.

This phenomenon can be attributed to various factors, including changing demographics, societal norms, and government policies. It's an interesting example of a country achieving economic success while facing demographic challenges
"

So there is my research. Please show me yours...

[Bubblesofearth]

Past population declines have tended to be caused by one or more of the four horsemen. The Black Death is probably the most oft-quoted example. Various wars would be another. So not surprising that economic prosperity, certainly in the short term, has suffered alongside such declines.

Population declines as a result of declining birth rate are much rarer and, indeed, may only be a recently emerging phenomenon. Growth of the human population has been pretty inexorable up till now. As such it's too early to say what the economic consequences of such a decline will be. A lot of jobs are unnecessary and more will likely be so in a future where AI becomes more prevalent. The worry in the past has been unemployment as a consequence of e.g. mechanisation but a declining population helps solve that problem.

Bottom line, despite plenty of gloomy forecasts, no-one really knows what the economic consequences of a natural population decline will be. One thing that is certain (IMO) is that an overall decline in the human population is well overdue and will be good for those remaining and for future generations.

BoE

Yes there have been population declines since industrialization,but they have been caused by exogenous shocks rather than driven by demographic trends.

You can recover from wartime population losses pretty quickly with an immediate baby boom that tends to follow a large scale conflict, but demographic trends have much more powerful forces behind them that if not irreversible have still to be figured out.

You say that no one knows what will happen in a future with population decline but immediately contradict yourself that you are certain it will be for the better..

If you read what I wrote a bit more carefully you will notice I was postulating a better future following an overall decline in the human population. The economic consequences of a natural decline in any given countries population are more uncertain.

BoE

[scrumpyjack]

As a thought experiment, if national debt doesn't matter... why does every government still bother to raise tax revenue? Wouldn't it just be simpler and easier to print all the money they want to spend and pile it onto the national debt each year?

If you are going to slowly increase the national debt in real terms by 3-10% a year because you run constant budget deficits, why not just run a 100% budget deficit, go whole hog and increase it by 40% a year (govt spending as % of GDP)? It never has to be repaid, so why does it matter how quickly it increases?

It clearly does matter, particularly for a country like us that has to import lots. It is all about 'confidence'. Our money is only worth something because people (including foreigners) think it is. Look what happened when Truss spooked the markets and that was a very minor example. Excessive growth in National Debt will at some point trigger a collapse in confidence and with it a collapse in our currency, and an inability to pay for imports. OK, a collapse in our currency will also cause a fall in the real burden of our national debt, but our idiot masters have issued a lot (>25% of debt) in indexed linked debt that does not devalue with the debasement of our currency.

No, the idiot left wing magic money tree 'economists' are, IMO, idiots!