/biz/ - Business & Finance

In 2022 interest payments were like 7% of federal spending. If this doubled or tripled, wouldn't things get out of hand pretty quickly?

bump

>>55100693
>>55100732
It's unsustainable, but not because they'll "run out" of money.

The government can magic money out of thin air with debt, which doesn't actually require an entity currently holding dollars to lend the government dollars.

So they'll never run out of dollars to pay down debt, but that will require more and more money "printing" by the government (it's not literal printing before some sperg comes to "well acktually", but the government can and does expand the dollar supply directly into the treasury).

So the risk isn't a default, it's the increase in the dollar supply causing more and more inflation. Unless the goods that are sold in dollars expands along with the money supply, you get inflation. The government issuing unbacked dollars also steals the value of the dollar from anyone currently holding it.

If this gets too extreme, instead of the government going bankrupt there'll be high or hyper-inflation as they meet and create increasing debt obligations with new dollars.

(1/x)

>>55101032

Wouldn't that cause the housing market to go to the moon?

>>55101032
If you hold dollars at the same time the government doubles the dollar supply, giving the dollars to themselves, then your dollars just lost a load of value because the government can come into the market and outbid you (and others) with the new dollars. In that way, issuing new dollars is a tax on anyone currently holding dollars.

if that gets too egregious then people will want to avoid holding dollars. That will make things worse, because an increasing amount of the deficit will need to be made up by new dollars instead of debt from people currently holding dollars.

The problem is that people and businesses do need currency to function, and the dollar might be doing this less than other currencies that could be used instead.

So government spending comes from:
1) Taxes inside the US
2) Debt from people holding dollars
3) Debt from made-up dollars (a tax on all dollar-holders)

The more 3) is used (above the rate the economy increases), the more value is lost from current dollar holders, and the worse the rate of return is for 2), which makes 2) less attractive.

The more 1) is used, the more high earning people and business will want to escape the US.

(2/x)

>>55101048
In desirable areas, definitely.

>>55101114
So despite what MMT says, you can't just happily print new money for government spending forever. If so, why does the government tax at all? Can't the government just issue debt for all its spending, and give a load of money to the poors to get the income distribution?

The reason to fund (some) spending with 1) is that not doing at all would cause too much inflation, and cause instability domestically as well as put off people lending real dollars to the government which adds to the cycle.

There's a new layer of complexity because all of this is "relative" in a sense. People and companies need to hold a currency, and if the dollar is sharting the bed they can only stop using it if there's an option that's actually doing better.

The real problem is government spending is just too high a proportion of the productive economy of the US. That means it can't be funded in the long term without new dollars, because the funding can't be raised directly. Whether or not that turns into a real problem depends on how other currencies are doing, how much the economy will grow, and how much the government will spend.

In summary I don't have any special predictions, but this is at least more background.
TLDR is dollars are soft money that the government can't run out of, but that could cause other problems down the road.

>>55101114
>2) Debt from people holding dollars
I understand how the government can get money from taxes and debt from made-up dollars, but what do you mean by debt from people holding dollars?

>>55101166
Yeah this is usually where I start to get lost. I get that people and companies need to hold currency, but that's not enough to prevent things from going to shit, right?

How can the government prevent increasing fiscal debt and interest payments from impacting the dollar? Is this something that *will* happen if the government continues to keep a large deficit and things continue on their current course, or is that more of a grey area? In my mind it must have a lot to do with confidence and what people know, because if I'm the government and I expand the money supply by 10%, the purchasing power, in real terms, of dollars doesn't drop instantaneously. People have to adjust prices and make the decision whether or not to continue holding dollars. I guess the question there becomes to what extent will the amount of money the government has to create out of thin air to service increasing debt affect the dollar and how quickly?

Does it make sense that there's a sort of positive feedback loop here, where the increase in debt will increasingly affect and inflate the dollar? As in we should expect inflation to increase, increasingly, in the long-term? Now the government seems like it has a very vested interest in keeping interest rates low.

Thanks for the post anon. A lot of this is just me thinking out loud. If you're willing to put in more effort, is it a correct notion that banks also sort of create money out of thin air with fractional reserve banking? How's all that differ in its impact on inflation and its effect on the dollar?

>>55100693
>DCAing into SPY
like everybody thus it go up....

>>55100693
>Fiscal
>401k
>DCA
>SPY
>the Fed
>just print money
>balancing act
>www.msn.com

>>55101032
>It's unsustainable, but not because they'll "run out" of money.

>The government can magic money out of thin air with debt, which doesn't actually require an entity currently holding dollars to lend the government dollars.

>So they'll never run out of dollars to pay down debt, but that will require more and more money "printing" by the government (it's not literal printing before some sperg comes to "well acktually", but the government can and does expand the dollar supply directly into the treasury).

>So the risk isn't a default, it's the increase in the dollar supply causing more and more inflation. Unless the goods that are sold in dollars expands along with the money supply, you get inflation. The government issuing unbacked dollars also steals the value of the dollar from anyone currently holding it.

>If this gets too extreme, instead of the government going bankrupt there'll be high or hyper-inflation as they meet and create increasing debt obligations with new dollars.

>(1/x)

>>55101048
>Wouldn't that cause the housing market to go to the moon?

>>55101032
>>55101048
>plebbitspacing
How many cat photos do you have saved on your computer?

>>55100732
>Largest chunk is social security
Kek what a fucking scam

>>55101699
>>55101687
>>55101676
You okay anon?

>>55101166
>So despite what MMT says, you can't just happily print new money for government spending forever.
This is not what MMT is saying in this regard.

>>55102439
And it'll only get worse

Bump

>>55100693
Social Security is the biggest commie scam. Corpos didnt want to pay their employees fairly and now the American People are paying the price. Fuck boomers.
Its unconstitutional
Its fiscally irresponsible
Its communism

>>55101480
>what do you mean by debt from people holding dollars?
US treasuries. The three ways the government gets money are taxes, issuing treasuries to the market, or issuing treasuries that the Fed buys so the government can spend regardless of how much demand there is in the market for US treasuries. The problem is that the Fed is buying those treasuries with newly printed money thus causing inflation.
The irony of all this is that, while the Fed does “control the money printer” they and the federal government really have way less control over the economy than they would like everyone to believe, and less control than most people believe. What the Fed does really doesn’t matter as much as people think.

>>55100693
>Hyperinflation
The US will print money to infinity. There will just be massive inflation and extremely high interest rates. Liquidity will be very low. Basically, normal fags will live in a pod and eat bugs. Research Argentina in the 1990s.

>>55106239
>Corpos didn't gibs
Ngmi if you expect to make it waging. Enjoy your globalism tho.

Test

>>55107325
The ability to change the interest rate is pretty huge, no?

>>55108118
They don’t really set *the* interest rate. Interest rates for treasuries and other things are set by the market and regularly move differently than the Fed funds rate.

Bump

>>55102983
It’s a jew

>>55107444
You could if it weren’t for jews stealing most of the value through multiple policies

Interesting to see what will be in the debt ceiling deal. Probably kicking the can down the road

>>55103166
Ive looked over some college material teaching MMT and one of the main points is that theres no more need to be fiscally prudent because money isnt constrained like that anymore. So I would say yes, it does say that

>>55110514

>>55113142
Now the need to be fiscally prudent is so you don't inflate your currency to shit

>>55100732
abolish
> social security
> income security
could be even temporary
problem solved