US National Debt Tops $31T

Something interesting I learned recently is that the debt load carried by the US is not anything special (when considered as a percentage of GDP) compared with other countries. (e.g. most of Europe is actually worse off, China isn’t far behind.)<p><a href="https:&#x2F;&#x2F;en.m.wikipedia.org&#x2F;wiki&#x2F;List_of_countries_by_external_debt" rel="nofollow">https:&#x2F;&#x2F;en.m.wikipedia.org&#x2F;wiki&#x2F;List_of_countries_by_externa...</a>

I&#x27;d like to see some compelling evidence that supports the seemingly prevailing economic theory that the US can issue an unlimited amount of debt just because it&#x27;s denominated in USD and interest rates are historically low. From another NY Times opinion piece (in [1]).<p>&gt; And the new paradigm suggests both that public debt isn’t a major problem and that government borrowing for the right purposes is actually the responsible thing to do.<p>&gt; Here’s where it becomes crucial to realize that the world has changed: Interest rates are much lower than they were in the past, and all indications are that they’ll stay low for years to come.<p>The phrase &quot;for the right purposes&quot; sounds like a scape goat for government spending. What is a right purpose? Morally speaking - almost anything. Economically speaking, I imagine only things that are likely to increase net GDP over the long haul.<p>It seems clear to me that you can draw a pretty clear line between quantitate easing &amp; government bailouts of companies during COVID to a sizable quantity of current inflation. Asset prices rose in the market, which bubbled down to housing, rent, and consumer products. Supply shocks for oil and trade commodities were part of the equation but only a part. From everything I&#x27;ve read on federal bank history, the more money that&#x27;s in supply means the higher inflation - almost by definition. You can only issue so much debt out of nothing before dollars are fighting over the same core commodities.<p>[1] <a href="https:&#x2F;&#x2F;www.nytimes.com&#x2F;2020&#x2F;12&#x2F;03&#x2F;opinion&#x2F;biden-republicans-debt.html" rel="nofollow">https:&#x2F;&#x2F;www.nytimes.com&#x2F;2020&#x2F;12&#x2F;03&#x2F;opinion&#x2F;biden-republicans...</a>

I’m a pinko but even I think the debt is a huge problem. With debt above 100% GDP it means servicing our debt (much of which is not in long term notes) takes X% of our GDP where X is basically the prevailing interest rates. So in a high interest rate environment, say 7%, we need to spend 7% of GDP just on interest. This comes out of our taxes where it’s more like 40% of government tax revenue.<p>Essentially that means we can’t raise rates past a certain point without either austerity or risking a debt spiral. If inflation is bad enough that those rates are necessary to stop it, practically it means we’re gonna have to deal with inflation until we are safe to raise rates high enough to stop it. Which also requires some austerity in the short term while we wait for debt to become a smaller portion of GDP.<p>Funnily enough, other countries have it even worse than us, and they’re throwing a hissy fit that we’ve raised rates where we have (already at levels they can’t match) since it weakens their currency relative to the USD. That actually appears to be our current blocker of higher rates moreso than our ability to make payments, per recent Federal Reserve activity.

So... does this just go up indefinitely without consequence? It seems like it&#x27;s rarely spoken about vs the 10-year, inflation, mortgage rates, and other metrics.<p>It looks like it has never gone down in any meaningful way. [0]<p>[0] <a href="https:&#x2F;&#x2F;fred.stlouisfed.org&#x2F;series&#x2F;GFDEBTN" rel="nofollow">https:&#x2F;&#x2F;fred.stlouisfed.org&#x2F;series&#x2F;GFDEBTN</a>

Ray Dalio has a great educational video on the history of debt and how nations always end up dealing with it.<p><a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=xguam0TKMw8" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=xguam0TKMw8</a><p>We know how this story ends, yet we seem helpless to do something different. Why?

Anyone smart at economics able to share what type of pressure the US is facing on servicing the growing debt (making interest payments) with rates increasing? Does the fed fund rate directly affect how much interest has to be paid on national debt?

I remember in 2008 the National Debt Clock had to add a 14th digit [1] [2] to accommodate the growing debt. Seems a matter of time before it will need a 15th.<p>[1]: <a href="https:&#x2F;&#x2F;www.wsj.com&#x2F;articles&#x2F;BL-REB-2108" rel="nofollow">https:&#x2F;&#x2F;www.wsj.com&#x2F;articles&#x2F;BL-REB-2108</a><p>[2]: <a href="https:&#x2F;&#x2F;observer.com&#x2F;2008&#x2F;10&#x2F;durst-to-add-extra-trillion-dollar-digit-to-national-debt-clock&#x2F;" rel="nofollow">https:&#x2F;&#x2F;observer.com&#x2F;2008&#x2F;10&#x2F;durst-to-add-extra-trillion-dol...</a>

I really struggle to wrap my head around the idea that the largest holder of US debt is the US government itself:<p><a href="https:&#x2F;&#x2F;www.thebalancemoney.com&#x2F;who-owns-the-u-s-national-debt-3306124" rel="nofollow">https:&#x2F;&#x2F;www.thebalancemoney.com&#x2F;who-owns-the-u-s-national-de...</a>

This will be solved by taxes, inflation, war, or a combination of the three, sadly.

I&#x27;d be curious to understand the interest rate the US government is paying on the debt verses some other highly indebted countries.<p>I poked around on google, and it looks like China has around 50% Debt to GDP ratio , Japan had something like 250%, and Russia&#x27;s was around 20%. I have no idea what I should conclude from this -- other than I don&#x27;t think it&#x27;s possible for someone to foreclose on the US for not paying it&#x27;s debt --- and that if we had massive inflation, and Debt is not inflation adjusted you could drastically reduce the debt -- but you&#x27;d have to increase the interest rate on new debt you were issuing.

Debt is a misnomer when the debt is serviced exclusively with printed money.<p>Seems to me they use the term because it works better politically

Debt as percent GDP:<p>2000–55%<p>2008–68%<p>2016–105%<p>2020–129%<p>2022–123%

Someone tell them to stop buying lattes so they can pay off their debt.

One aspect to this that is less obvious: A bubble in equities accompanied by low unemployement is also basically a bubble in tax receipts. If this reverts to the mean, we could quickly be in a painful situation.<p>Macro analyst Luke Gromen likes to point out that non discretionary expenditures (entitlement PAYGOs + interest on the debt + TGA drawdowns) already equals more than 100% of tax reciepts. Meaning even if we had focused politicians who were aggressively cuttting (which we don&#x27;t), even at our elevated tax receipts, it would be structurally impossible to get back to a budget surplus without structural changes. Again, this does not bode well for the likely event where tax receipts fall off of a cliff next year.<p>If anything, it&#x27;s a good argument that despite all the tough talk, the Fed cannot keep rates elevated for too long.

Correct me if I&#x27;m wrong, but this combined with high borrowing rates and a looming recession, basically mean that we are going to again destroy the economies of countries who depend on low borrowing rates, the way we did with Greece and others in 2007? That could mean a second global financial recession. Which would prompt the world to more seriously begin moving their business to China. The promises of stability from the US dollar are obviously a sham if it means destroying their economies every 15-20 years.

Where do you all think that money in your savings accounts comes from (originally, not your immediate counter-party)?<p>Government spending. The government (or FED) are the only ones that can spend more money into existence.<p>Just imagine what will happen if the government starts to seriously make big changes to reduce that debt. Deflation is my guess, unless the FED prints to counteract them. In which case the &quot;debt&quot; just changes hands.

Note that this is federal only: no accounting for debt carried on state, county, city, or public utility district balance sheets.

One of the benefits of inflation is that debt becomes worth less!<p>A bigger crisis is the looming social security and Medicare trust running dry and benefits needing to be cut by 25%. It&#x27;s scheduled to happen within the decade.

Run FIAT into the ground, then transition to a new form of currency most likely CBDC. Money is all made up anyway. It&#x27;s a point of transition that I feel will happen in my lifetime.

No surprise for anyone paying attention. In fact, it&#x27;s folks like Paul Krugman that have espoused and supported policies that have lead us to this point. We have continuously elected and elevated people who are happy to spend beyond our means from the government coffers, and primarily spend in ways which do not actually directly help the citizens of the US.<p>We have had ineffective and irresponsible leadership in this country for a very long time, nearly my entire lifetime. Unfortunately, the factors that lead to these irresponsible leaders getting elected are only accelerating, so I don&#x27;t feel positively about the future state of US national debt or fiscal responsibility.

I thought it was OK because countries are allowed to operate ponzi schemes?

There is a mathematical certainty implied here that I believe many people here can understand. Compounding interest is exponential. We are borrowing money to pay the interest, this will continue until something breaks.

Yet another &quot;unprecedented&quot; data point - that doesn&#x27;t even make the Top 10 for world-wide public debt-vs-GDP:<p><a href="https:&#x2F;&#x2F;www.visualcapitalist.com&#x2F;global-debt-to-gdp-ratio&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.visualcapitalist.com&#x2F;global-debt-to-gdp-ratio&#x2F;</a>

Yes, and?<p>Tracking debt in nation state currency is spoken tradition, not immutable law of science.<p>Carrying forward spoken tradition about debts of the past is not an obligation of us or the future.<p>Just because some apes wrote an IOU down doesn’t bind my sensibilities and agency to serving that IOU. If I’m not mistaken outside parties are not beholden to contracts they did not sign in our legal system. So no law of physics and no law of man obliges me to care about the burden others agree to carry.<p>Go ahead and come collect, China. We’ll just nuke each other into the Stone Age. The real gap is a thing; we can close ports and make ephemeral debts a non-issue really fast.<p>Headlines like this are to remind people who believe in such things to not forget some debt they don’t owe serving.

US has successfully made every other currency worse, so rest easy, the USD is the least-dirty-shirt in the laundry now, and everyone knows it<p>Euro - sunk by energy concerns and war<p>Yuan - sunk by China&#x27;s isolation from global community<p>Yen&#x2F;Pound - sunk by being too much like America without the clout<p>Gold&#x2F;Silver&#x2F;Crypto - never got off the launch pad as a global pricing mechanism<p>the world has no choice but to embrace the USD

young people your future has been stolen .

The whole system is fraudulent. Scheme on top of scheme on top of scheme. Look at Payment for order flow. Who benefits. Who created the system in the first place. Bernie Madoff. When he went to jain for his scheme did they remove the systems he built to help make that fortune, absolutely not.<p>Everyone learns inside a fraudulent system so thats what they know. It&#x27;s a giant echo chamber.<p>Here come the down votes.

How about stop giving money to wall street and banks and actually take money away from them when margin called or when they fail.<p>It&#x27;s not like the money is going anywhere. Everyone is hoarding.<p>Hey i gambled away all the money you gave me. Cool here have some more.