How will the US debt situation play out?

Slightly above ‘average’ inflation-levels, compounded over time, creating an intrinsic tax on wealth and inflating away the debt-to-gdp ratio so it remains roughly the same or near-same levels. Combine that with an increase in retirement age, a reduction in retirement benefits, and an increase on social-security tax incrementally over the next decade. Gen Z will perhaps be the first with a retirement age of 69 (nice).

What I never hear with our unprecedented US debt. Currently at 120% of US GDP. Is how much wealth and assets the federal government owns.<p>Just in land assets - The Federal government owns 640 million acres of land. Including 47% of all the land in the west. 60% of Alaska is owned.<p>For example, if an individual owes 120% of their year income. Is it that bad, when that individual owns assets valued at 5-10x that?<p>Would the US sell off these assets? Probably not. But, it is an option. And they could sell some of these to US citizens or to the states.<p>But, the Federal government is incredibly asset wealthy in comparison to a simple debt vs GDP ratio.

Ray Dalio <i>exactly</i> answers your first question in this video(45m): <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>The short answer is war, likely with China.<p>The long answer is civil unrest. Billionaires who feel threatened by people who want to re-distribute wealth (tax the wealthy), use their wealth to put &quot;strongmen&quot; into power to defend their interest. Strongmen destroy innovation which weakens the military, which invites enemies to challenge your strength. If the world feels that the value of your currency is under threat (and if you are at risk of losing a war, it <i>is</i> under threat), you lose reserve currency status, which means all of a sudden you can no longer import the goods your economy needs to function, then your economy and&#x2F;or currency collapses.<p>&gt; What should the layperson (US &amp; non-US residents) do to safeguard against it?<p>The only way out of this is to produce more value than we spend and to tax billionaires (not for the money, but to decrease their ability to buy government influence).<p>We are pretty doomed until our aristocracy decides to start being responsible instead of greedy, which is unlikely.<p>You could also move to New Zealand. That&#x27;s the plan that many of our greedy billionaires have when the consequences of their greed are fully realized... Just like a &quot;senior&quot; engineer writing really complex code might leave to another company when it&#x27;s time to pay the maintenance cost for that complexity.

US debt is fine as it is, and US will always be able to pay it (it can just print more money).<p>The issue is how much of the US government budget it takes to pay the interest, which is exploding right now as interest rate is 5%+, leaving a big bill for future generations.<p>This money comes from the same budget that contributes to medicare, social security, maintenance of roads etc.<p>The big bill for future generations isn&#x27;t actually something the Americans will pay, but how its currency will weaken and lose its reserve status, as it will need to print more money.<p>Currency debasement has a lot of negative consequences, such as... huge inflation. Prices will go up.<p>Currencies of other countries will become stronger and the US is a country that is heavily reliant on imports, those imports will be more expensive for the average US American resident.<p>There are plenty of references of high debt in history, and the most recent ones happened in Latin America, check Argentina for example.<p>It went from being a rich country in the 60&#x2F;70s to mass poverty Today, 50 years later, making its currency completely useless and now they are trying to kill the peso and just use the dollar, a currency they do not have the printing machine.<p>The dollar at some point might become a currency nobody would consider parking their money with, this has really negative consequences to the US, as having a stable currency is a pre-requisite for many investments.<p>For reference, the average PE ratio (price-to-earnings) for US companies are at least 2x of Brazil. Brazil has a somewhat stable currency(higher average inflation), but weaker than the dollar. People are less willing to invest in Brazilian companies because there&#x27;s a currency risk.

&gt; I don&#x27;t know much about finance and global economics.<p>Neither do most people on HN. In fact, &quot;global economics&quot; is actually filled to the brim with wild speculation. Most people have very little idea how the future will work out, or overemphasize a &quot;model&quot; view that abstracts the reality of global politics and economics into something like a simple y = mx + b equation and then insist on the inevitability of their model.<p>You need to think more about <i>power</i>. Where does the US&#x27;s power come from? Is that likely to change? How will the political situation change in America and what effect will that have on the global reality of US power and, crucially, the <i>perception</i> of US power abroad? Will the USD remain the defacto standard global currency and reserve? The further you get into the future the less certain we can be about any of these questions beyond simple speculation.

It&#x27;s hard to say much with certainty here beyond just recognising the current path is unsustainable. Obviously the debt&#x2F;GDP cannot increase indefinitely without either the government ending up bankrupt, or more likely hyperinflation.<p>The issue I think we have today is that there&#x27;s no real political motivation to fix these problems and people are unhappy and unwilling to make scarifies, such as paying higher tax or cuts to government spending.<p>However, the US is in a relatively strong position given many developed countries find themselves in similar positions. The US has a lot of debt, but it&#x27;s not that much more than other comparable nations. The US also has more fiscal room to raise taxes as reduce its deficit.<p>My guess would be that other nations find themselves in a serious sovereign debt crisis first and this will worry politicians and the US public enough that drastic action is taken.<p>The most obvious outcome in the US is higher taxes and increases to the pension age. While European countries that take action will likely rely more on spending cuts in addition to increasing the pension age.<p>But this assumes that productivity isn&#x27;t going to boom in the years to come from AI or something similar. A significant increase in productivity would be the best solution to this problem, but we shouldn&#x27;t assume that&#x27;s coming.<p>As an individual the best thing you can do to safeguard from this is diversification so you&#x27;re prepared either way. You&#x27;ll want to own assets that give you protection from inflationary or a hyper-inflation scenarios – things like gold, a diversified stock portfolio and property. The other slightly less likely risk would be some kind of economic crisis that results in a global deleveraging, in which case you&#x27;ll probably want to ensure you&#x27;re debt free and have plenty of savings. If you have savings, have no debt, own property, and have a some diversified investments you&#x27;ll probably do okay whatever happens.<p>If you&#x27;re anticipating a crisis and want to maximally profit from it then you&#x27;ll need to decide if you think the risk is hyperinflation or an economic crisis followed by a deleveraging event similar to the great depression. If you think hyperinflation is likely then taking a ton of long-term fixed debt out now and buying assets like gold or property would be the best option. If you think a great depression event is likely then you want to ensure you&#x27;re debt free and maximise your savings.

It can play out anyway short term because of the numbers things and all sorts of financial manipulations gone wrong,<p>But long term USA is still #1 producer of value overall.<p>Whatever happens- us is in the better position then the rest of the world.<p>Long term. As long as democracy works, private property is respected and entrepreneurs are encouraged.

As the US winds down globalization, the people of the rest of the world will seek protection against inflation at home and savings will continue to flow into US Treasuries for the foreseeable future.

“Debt: the first 5000 years” is an interesting read that addresses your question. In short the author argues that debt- especially government&#x2F;country level debt- is good for the country issuing the debt and bad&#x2F;a liability for the country who owns the debt. In other words, the more we “owe” China, the better off we are and the worse off China is. It’s sort of like that saying “if you owe the bank 100 it’s your problem, if you owe the bank $1,000,000, it’s their problem”. Same thing. “We” can “owe” China a billion trillion trillion dollars, but it’s all abstract. What will China do if we don’t pay? How do they call in that debt? We used their money to build the best navy in the world.<p>If we equate the national debt to a single person with $100k in credit card debt, the reality isn’t all that bleak. He declares bankruptcy, gets to keep his house and car, and some or all of the shit he bought with the $100k… only thing is his “score” is low for 7 years. If America were to do the same, I don’t know that anything different would happen. Some countries would stop lending to us. Some third world countries probably don’t have a choice but to lend to us. That might cause inflation or hyper-inflation since the U.S. Dollar would be devalued internationally. At the same time, if the president decided there were WMDs in Russia or Africa, we may suddenly find ourselves relieved from economic burden through conquest (like what Russia is trying to do). No one wants to sell us oil? No problem, we’ll invade The Congo or Russia. Japan had a similar situation in WWII- they in part invaded other countries for their resources. Nazi Germany as well. Two cases of the economy going in the shitter and the answer being war. But now it’s not some rinky-dink island nation or once-bitten-twice-shy Germany- it’s the United fucking States.

Whaddabout the Singapore debt situation, how will that play out?

We need a race to the bottom to devalue everything.

<a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Hyperinflation" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Hyperinflation</a>