
US debt surpasses $23T for first time - spking
https://thehill.com/policy/finance/468600-us-debt-surpasses-23-trillion-for-first-time
======
supernova87a
Well, just to inject a little bit of perspective here -- high absolute or (or
even) relative debt levels are not necessarily a hugely bad thing.

For example, Japan has 2x or more the per-capita debt that we in the US do.
Their debt is 2X their GDP! [1]

But Japan has a pretty high likelihood of repaying it, so it's not a problem.
We also are highly likely to repay our US backed debt (and we have the hidden
but dangerous capability to devalue our currency). And add to that the notion
that we've been getting debt issued at highly favorable interest rates, so we
borrowed for cheap.

With that said, however, as with one's household debt (this is one aspect
where comparing with a household is not wildly stupid) -- did we spend it on
things that were worthwhile? Are we getting a lot for having borrowed this
money or stimulus? Did we spend for future potential in our economy? Just
because we got it cheap doesn't mean it was a good expenditure.

I am inclined to say no. Our borrowing in this last year was pissed away on
unsustainable tax cuts, frivolous give backs, and a brute force cutting for
the symbolic gesture based on mostly fallacious logic. And when the recession
comes, our ammo will have been already spent. I mean borrowed.

And the kids will pay of course, for our midlife crisis Camaro.

[1] [https://www.marketwatch.com/story/heres-a-lesson-from-
japan-...](https://www.marketwatch.com/story/heres-a-lesson-from-japan-about-
the-threat-of-a-us-debt-crisis-2018-05-14)

~~~
throwaway07Ju19
IIRC when Japan hit that "2X" mark circa 1991 it lead to an economic stall
that appears to be permanent. Their economy has been stalled / zero-growth for
almost 30 years now. They are cautionary example not an aspirational one.

~~~
ianai
Their story highlights the importance of a far greater influence upon a market
than debt: population growth. Negative population growth is bad.

~~~
kzrdude
We need to find a way to live with negative growth in such things, because
we'll quickly meet the limits of this planet if we try to continue exponential
growth in people and resource usage.

~~~
tonyedgecombe
Negative growth and debt don’t go well together.

~~~
kzrdude
I'm afraid that negative growth and generosity won't go well together.

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segfaultbuserr
Only marginally related, but I highly recommend reading _Debt: The First 5000
Years_ [0] by David Graeber. By examining and analyzing anthropological
records, the author proposed a heterodox economic theory. Unlike the
conventional economic model which says the human economic system comes from
barter, currency, and finally debt/credit, the author argued that most
historical evidence showed that the origin of the human economic system is
actually debt/credit - The concept of debt came from the gift economy of early
human communities: one friendly person shares one item to one's neighbor, and
expect the neighbor provides something in return to help in the future. Barter
was the extraordinary rather than the norm: it was only used with outside
strangers (because they were not accountable under the human credit system of
the local gift economy).

Money and currency is actually a much later development as a method to
quantify the debt, in this process, subjective human emotion is removed and
replaced with an autonomous and objective economic machine.

From this point, the author gave an alternative interpretation and analysis of
human history. His conclusion is that the boom and bust of debt is an
important driving force in human history, in this process, the debt bubble
becomes bigger and bigger - until the unavoidable explosion of debt crisis.
Then there will be a radical breakdown of social order, Finally, a new society
is rebuilt, and all the debt from the previous society is canceled - this is a
periodic cycle that occurs at a scale of 100-300 years. And the author argued,
since the 1970, we have returned to (the beginning) of a new cycle.

You don't have to agree everything that the author claims, but the author is
good at telling a story, and it's a fascinating read. My summary is not
exactly what the author said, the Wikipedia article the P2P Foundation Wiki
[1] has a better summary, it includes transcripts of interviews.

[0]
[https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years](https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years)

[1]
[https://wiki.p2pfoundation.net/First_Five_Thousand_Years_of_...](https://wiki.p2pfoundation.net/First_Five_Thousand_Years_of_Debt)

~~~
lisper
> And the author argued, since the 1970, we are reaching the next cycle.

So... when was the last time this supposedly happened? Because I can't think
of even a single time in human history where there has been "a radical
breakdown of social order... a new society is rebuilt, and all the debts from
the previous society is canceled."

~~~
turtlecloud
WW2 where most of Europe was destroyed. Contrary to what mainstream media will
say is that a large part of it was Germany unable to pay war reparations from
WW1 and entering stages of hyper inflation during Weimar Republic. This of
course led to a certain party that was really against international bankers.
After the resulting chaos we have Pax Americana.

~~~
freewilly1040
Not a good example, Weimar republic debt wasn't caused by a bubble, it was
caused by the punishing burden placed on it by the Allies.

~~~
billjings
Which is why WWII and WWI are closely related: had I been writing that
comment, I would have said that the revolution in social order and
cancellation in debt happened in the period from WWI through to the end of
WWII.

In 1910, Europe was an aristocracy, and even the US social order was defined
by some enormous winners at the top. WW1 itself dramatically reoriented the
power dynamics internationally, which led to dramatic political change
everywhere, which setup the conflicts that resulted in WW2.

~~~
lisper
Sure, but none of this supports the stated thesis that these revolutions
happen every 100-300 years and that they are a result of debt bubbles. WWI was
not a debt bubble, it was a war. Not the same thing. It was also much less
than 100 years before the alleged onset of the current revolutionary cycle in
the 1970s.

------
hn_throwaway_99
Lots of comments saying "the absolute numbers don't matter". Which is pretty
much true, but the debt to GDP ratio is currently ~105%. The last time it was
that high was WWII.

The scary thing about that is we are in a booming expansion. Next time we hit
a recession or some other even mild shock to the system debt-to-GDP will
skyrocket even further.

Related, remember when the Republicans cared about the debt[1]?

[1] [https://www.crfb.org/blogs/23-senate-republicans-urge-
obama-...](https://www.crfb.org/blogs/23-senate-republicans-urge-obama-
address-deficit)

------
thinkingkong
Does it make sense to look at these figures in isolation? Like its
psychologically significant but GDP is also growing and so is inflation. It
seems like we would need to look at _at least_ all of those together to get a
better understanding of whats happening.

Is this inherently “bad” ?

~~~
rockinghigh
There are multiple ways to look at it. One bad sign is the large increase in
the budget deficit at a time of economy expansion (from $585B in 2016 to $980B
in 2019). Another aspect is how much of the budget has to be allocated to
paying the interest on the debt ($376B in 2019). The CBO listed consequences
of high debt in 2014: [http://www.crfb.org/blogs/cbo-consequences-growing-
national-...](http://www.crfb.org/blogs/cbo-consequences-growing-national-
debt)

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guelo
My suspicion is that the GOP strategy, if there is one, is to run large
deficits when they have power so that when Democrats get power they feel that
they are unable to spend on social welfare . Reagan, W, and Trump increased
the deficits while Clinton and Obama, after the stimulus, reduced it.

~~~
harryh
You don't have to be suspicious, this has been explicitly stated by many
fiscal conservatives on many occasions.

[https://en.wikipedia.org/wiki/Starve_the_beast](https://en.wikipedia.org/wiki/Starve_the_beast)

~~~
curtis3389
This quote from Alan Greenspan (emphasis mine) is a little unsettling:

> Let us remember that the basic purpose of any tax cut program in today's
> environment is to reduce the momentum of expenditure growth by restraining
> the amount of revenue available and _trust that there is a political limit
> to deficit spending_.

I wonder where that limit lies and what circumstances will we be in when we
find it.

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throwaway07Ju19
The US is ruled by two political parties and neither care about the debt.
Saving for a rainy day during times of prosperity is the exception rather than
the rule.

If we owe future generations anything it is 1) a sustainable environment and
2) a sustainable balance sheet. We may leave them neither.

~~~
purplezooey
It's not correct to say that neither party cares about the debt. Only one has
made it a lot worse.

~~~
Fjolsvith
Agreed. It's always the one who happens to be in control of the purse strings
at any given time.

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fnord77
It's the debt to income ratio that really matters.

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perfunctory
Absolute numbers like these are not very interesting and quite meaningless.
Much more interesting is debt to gdp ratio. Which also happens to be quite
high at the moment.

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ivalm
The US government has been continuously running a deficit for a long while.
I'm not sure what is the significance of $23T (over 22T, or any other number).
It's not even necessarily bad that we run a deficit, although perhaps it
should be limited to be in proportion of nominal GDP growth.

------
gbajson
Does anyone of you know who owns this debt? What will happen when citizens
decide to null it?

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zaptheimpaler
I'm not sure the existence of debt in itself is as much of a problem on a
macro scale as people think it is - the negative association to debt comes
from an intuition over personal debt like loans/credit cards, which doesn't
necessarily make sense on a macro scale.

Say company A lends $10 to B. B lends that $10 to C. C lends $1 each to 5
people.

The total debt in this case is $10 (B owes A) + $10 (C owes B) + $5 (5 people
owe C) = $25. Each borrower-lender pair increases the debt, even though its
all about the same $10.

Now if C defaults on their debt, it has ramifications all the way upto A. But
it won't cause a collapse unless the lenders start treating the debt as less
risky than it is. In the case of 2008, banks treated mortgage debt as
virtually risk-free and borrowed using that debt as collateral - so the
problem was that the debt was certified and treated as much less risky than it
really was.

~~~
ianai
I’d like the next person and all the people following who veto an idea because
of national debt to be forced to provide a thing which one dollar of debt
keeps the US government from doing. They need to provide 23T worth of effects
in the economy that are positive from paying 23T in USD debt off.

~~~
ianai
If I own 1000$ in US treasury bonds then I will make some return (like 3%)
after it vests some time from now. But if the US government tracts me down and
pays me the principle of 1000$ ahead of schedule then I have lost the
scheduled rate of return. It’s a harm to me and in aggregate a harm to social
wealth growth.

------
mdorazio
And as long as the treasury can sell debt for basically nothing it will
continue to surpass higher and higher numbers. I'm not holding out hope for
spending getting under control regardless of who gets elected in a year.

~~~
wahern
Most treasuries were held by the U.S. government itself, particularly the
Social Security Trust Fund. But the trust fund has now switched to net
withdrawal of its savings, which means the total outstanding debt will
increasingly be held by commercial and foreign ownership, rates may increase,
and, worse, become more volatile as the Trust Fund won't be there as a
cushion.

The upshot is that the ability of the U.S. to fund and service debt will
become increasingly vulnerable to the global economy. One reason why demand
for U.S. treasuries are so high is _because_ it was cushioned from global
economic forces. The U.S. was a safe haven. Debt-to-GDP ratio is important as
an indicator of your ability to weather global slowdowns and remain in control
of domestic budgeting.

So what the future brings is _accelerating_ volatility as the forces which
conspired to keep rates stable and low will begin to conspire to do the
opposite. Whether rates become burdensome long-term depends on many factors,
but the increased volatility alone could be hugely disruptive and costly.

~~~
mdorazio
This is an interesting point. For those curious about how US debt actually
breaks down among holders, there's a good summary in [1]. It depends "which"
debt you're talking about to determine who owns the most of it.

[1] [https://www.thebalance.com/who-owns-the-u-s-national-
debt-33...](https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124)

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oarabbus_
Serious question - who cares? I'm really not trying to be flippant. We keep
kicking the can down the road and that will never change.

------
purplezooey
One wonders when the US currency/debt crisis will occur. It will be bad.

------
cabaalis
Combine this with the fact that the largest asset the US government holds
$1.5T in student loans, and we've got a recipe for disaster.

"Let's borrow more from China, we can repay it with the proceeds from Billy's
liberal arts degree"

------
Phil_Latio
That's the way it is. If the US has a trade deficit and the companies and
private households are net savers, then there is only one sector left who can
make the required debt (without new debt, no new savings). Simple accounting.

If you don't want the government to make new debt (or at least not as much),
you have to force one of the other 3 sectors to make it.

\- Private households: You can't do that.

\- Companies: Everywhere we see tax cuts, so why would a country increase
taxes? Bad, but that's the way the world is these days.

\- Foreign countries (trade deficit): Looks like the only way at the moment.
Sorry, but Trump is on to something if he talks about fair trade.

~~~
bilbo0s
In all honesty, even foreign countries won't work.

You would need to find foreign nations meeting all three of the following
criteria:

-Wealthy enough to buy goods. Can't really sell much to Lesotho for instance.

-Net consumers as opposed to net savers. Places like China you have that dreaded 90/90 trap. Where 90 percent or more of families feel a need to save 90 percent or more of their disposable income. Probably because they have both a one child policy and a completely nonexistent social safety net.

-Which is a good segué for the third necessary condition, a government willing to grease the gears of consumption with fiscal and monetary policy. Policies like, for instance, providing their citizens with a reliable safety net. (In addition to cultural tendencies of course.)

At any rate, as we look around the world, you just don't see any nations out
there meeting all those criteria. The trade war is more about trying to turn
China into a country that does meet those criteria. I'm not too hopeful that
will happen though to be honest. The Chinese proclivity to save is not born
simply of a lack of a safety net to look after you in old age, it's also
deeply ingrained culturally. Has been for thousands of years. Chinese have to
be pretty wealthy before they become spendthrifts. And like you said, how do
you force a guy to spend money instead of saving?

It's a tough problem all the way around.

------
cft
Exit stock positions into cash, short most "unicorns" that are pure product of
QE: Pinterest, PagerDuty, etc. Exchange some cash for BTC, in case the Fed
won't be able to contains inflation when the bottom falls out.

~~~
crb002
As someone who bought on the dip in 2008, 30% cash is the sweet spot. 20%
buying into the dip. 10% to keep you from having any cash flow problems that
make you sell off to stay above water.

------
crb002
Only $120 billion in fed overnight loans to prop up liquidity to keep blowing
money on short term treasury auctions. Totally not a 5 alarm economic fire
raging.

~~~
crb002
The one chart to rule them all,
[https://fred.stlouisfed.org/series/HTRUCKSSAAR](https://fred.stlouisfed.org/series/HTRUCKSSAAR)

If that were lower I would be less worried. The sky high market is why I
worry. If the Fed has to prop things up that bad in an all time high economy
they will have no control in a free fall crash.

------
turtlecloud
Current gov has no interest in paying off debt. All conspiracy theories lead
to the elites plundering the existing system and then defaulting. This will
lead to the collapse of the USD and a new digital currency will take its
place.

~~~
purplezooey
the elites!

------
mempko
It's clear most people have no idea how government debt works. Everyone thinks
it's like a household, that the government spends it's revenue and borrows
money from someone else.

Imagine you are the JohnDoe family. You are able to issue JohnDoe bucks. You
spend the JohnDoe bucks first and then later ask for some of them back (as
taxes). The difference between what you spend and what you get back is called
the JohnDoe deficit. And the aggregate of the deficit is the JohnDoe "debt".

On the other side of the transaction, those that provide services to the
JohnDoe family now have JohnDoe bucks and because they didn't have to give all
of them back to the JohnDoe family they keep some in bank accounts.

Another way to say this, the US debt can also be called "US people's savings".

JohnDoe also issues bonds with a percent return. Some of the people with these
JohnDoe bucks might buy the bonds to get the return.

The question is, is the JohnDoe family ever in danger of not paying those
bonds back? The clear answer is no, they can always pay back any debt as long
as it's denominated in JohnDoe bucks.

Wouldn't you like to be the JohnDoe family?

