From Visual Economics. The upper-right corner's the real kicker.
10 comments:
Anonymous
said...
Quite telling that our former or current major competitors have more of our debt than our allies do.
As for that upper corner....this is more and more why I think the whole thing is funny money. It's just a level incomprehensible for payback. It can't be done, and under such conditions to force a payback are the conditions under which wars begin.
Agreed, none of them are fun but there is an option d) d) be written off.
We did it with debt to Europe after WWII. Now the question remains if others will do it for us (highly doubtful) but more likely they may just choose to never come and collect because of the stability we bring, debt and all. This is why I think it's funny money. It only really exists IF someone asks to see it and wants to collect. As long as they keep holding onto it, its meaningless.
I know you've told me I'm wrong on this before, the the sheer number which can never be repaid suggests something else could happen. Or we go to war over it. Them: "Where's my money?" Us: "Come and try to get it, chummmmmp."
There's no "they come and collect" -- it's up to us to pay them. If they say "that's OK, I forgive your debt", that's great, but otherwise refusing to pay creates a default, which means we immediately slap into zero-deficit mode, which the current parasites in congress can't handle.
But isn't ignoring the deficit what congress is already doing? I think when it was first said "Deficits don't matter" and then everyone decided he was right is when all this began and self propagated from there. Indeed, isn't that the beginning of the uptick on debt during his era? So if everyone is already ignoring the deficits then it's like we're defaulting on the debt already. At least that is what it looks like to me anyway.
There's a big difference between ignoring a vast deficit and being suddenly unable to run one (or even to finance around short-term cashflow irregularities). Imagine the gridlock if the Federal government could only spend cash on hand -- this would be fugly.
Seems to me there is again an answer to this - print you won cash since you are the treasury and the Federal Reserve. Oh I know - Weimar or Zimbabwean inflation right? But with just about all government payments done electronically, who can check the govt. to make sure they actually have the money in their accounts that they say they do? So I see no gridlock here - too many people depend upon our government to work and so they'll take the IOUs even if the foreign debt to back the IOU isn't there. Indeed, it's all a perception game on the value of that dollar. I think it's more based on the perception of US power and value rather than on any hard standard or backed up GDP/gold/other valuable.
I know I'm looking at this naively, but when NO ONE cares about the deficit besides a very small minority, does it really matter if everyone is still willing to use money backed by such debt?
As I say this...you know what would be a great way to prove my idea that deficits really no longer matter? Plot out each of these countries in the same way. Who owns their foreign debt and what type of deficit do they have? If they all come back showing the old ways (they live within their means) then someday we're going to have to pay the bill, hard. But if they're all in the red....then we have new economics at play here.
Most are in the read, but that's due to China and the Middle East, which are bursting at the seams with inflation because of how they're relating their economies to ours. At some point that music's going to stop playing and folks'll be looking for a seat.
The thing with a new economic situation is to understand why it's new and what its limits are. At the end of the day you can print money, but you can't print value.
I fully agree on your final point, and value is a perception issue. As long as the US is valued, we're golden. We start to slide into 2nd rate power though, then we're screwed.
10 comments:
Quite telling that our former or current major competitors have more of our debt than our allies do.
As for that upper corner....this is more and more why I think the whole thing is funny money. It's just a level incomprehensible for payback. It can't be done, and under such conditions to force a payback are the conditions under which wars begin.
Except it's not funny money: it must
a) be repaid (nasty scenario)
b) be defaulted (nasty scenario)
c) be inflated away (nasty scenario)
One of the three must hold, and neither are fun.
Agreed, none of them are fun but there is an option d)
d) be written off.
We did it with debt to Europe after WWII. Now the question remains if others will do it for us (highly doubtful) but more likely they may just choose to never come and collect because of the stability we bring, debt and all. This is why I think it's funny money. It only really exists IF someone asks to see it and wants to collect. As long as they keep holding onto it, its meaningless.
I know you've told me I'm wrong on this before, the the sheer number which can never be repaid suggests something else could happen. Or we go to war over it.
Them: "Where's my money?"
Us: "Come and try to get it, chummmmmp."
There's no "they come and collect" -- it's up to us to pay them. If they say "that's OK, I forgive your debt", that's great, but otherwise refusing to pay creates a default, which means we immediately slap into zero-deficit mode, which the current parasites in congress can't handle.
But isn't ignoring the deficit what congress is already doing? I think when it was first said "Deficits don't matter" and then everyone decided he was right is when all this began and self propagated from there. Indeed, isn't that the beginning of the uptick on debt during his era?
So if everyone is already ignoring the deficits then it's like we're defaulting on the debt already.
At least that is what it looks like to me anyway.
There's a big difference between ignoring a vast deficit and being suddenly unable to run one (or even to finance around short-term cashflow irregularities). Imagine the gridlock if the Federal government could only spend cash on hand -- this would be fugly.
Seems to me there is again an answer to this - print you won cash since you are the treasury and the Federal Reserve.
Oh I know - Weimar or Zimbabwean inflation right? But with just about all government payments done electronically, who can check the govt. to make sure they actually have the money in their accounts that they say they do?
So I see no gridlock here - too many people depend upon our government to work and so they'll take the IOUs even if the foreign debt to back the IOU isn't there. Indeed, it's all a perception game on the value of that dollar. I think it's more based on the perception of US power and value rather than on any hard standard or backed up GDP/gold/other valuable.
I know I'm looking at this naively, but when NO ONE cares about the deficit besides a very small minority, does it really matter if everyone is still willing to use money backed by such debt?
As I say this...you know what would be a great way to prove my idea that deficits really no longer matter? Plot out each of these countries in the same way. Who owns their foreign debt and what type of deficit do they have? If they all come back showing the old ways (they live within their means) then someday we're going to have to pay the bill, hard. But if they're all in the red....then we have new economics at play here.
Most are in the read, but that's due to China and the Middle East, which are bursting at the seams with inflation because of how they're relating their economies to ours. At some point that music's going to stop playing and folks'll be looking for a seat.
The thing with a new economic situation is to understand why it's new and what its limits are. At the end of the day you can print money, but you can't print value.
I fully agree on your final point, and value is a perception issue. As long as the US is valued, we're golden. We start to slide into 2nd rate power though, then we're screwed.
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