National debt
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Started by mcfarm - July 19, 2020, 10:43 a.m.

Not that anybody is watching because there are nothing but clowns in our congress but last month we added 863 billion to out debt. It took around 200 years and several dozen Presidents to incur that much debt but we did it in a month, Sound pretty scary to me.

By wglassfo - July 19, 2020, 12:57 p.m.
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The question I have is:

Does debt really matter when the entire world seems to be  in the the same boat. Everybody is increasing debt. Even china seems to be on the same paper money race to the bottom

As I have posted before nobody expects the debt to be paid, so why worry. 

If somebody has info on various country debt level it would be interesting to see where the USA is compared to other countries debt

This time it is different, at least as mcfarm told us

By bear - July 22, 2020, 3:11 p.m.
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debt is going to be surging for every govt body,  since revenue is plunging.   the shutdown is devastating.  japan and europe already monetize about half their debt.  (central banks print money and buy bonds to support the functioning of govt).  japan borrows half its budget each year,  and the central bank buys more than half the bonds.  

at some point this will stop working,  and interest rates will rise.  

i read somewhere that luxembourg has a debt/gdp ratio of about 1000%.  not sure if this is accurate.  

remember, it is not just debt that matters.  other things also will hurt,  like taxes that are too high.  too much socialism.  too much bureaucracy.  and intentionally keeping an economy shut down.  

it will get worse.  what happens when pensions are going bust?  will libs take over washington, and have massive national bailouts of pension plans?  where will the money come from.  

even so-called conservatives in washington are moving more and more to embracing MMT,  and having uncle sam and the fed throw more money at the problems.   

this is one of the reasons why we will end up more and more like argentina (by 2070).  

By mcfarm - July 22, 2020, 6:14 p.m.
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Bear, what an awesome post about our debt.....thanks, hope lots read it

By metmike - July 22, 2020, 8:38 p.m.
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Good points bear. By 2070?

How about in less than 10 years. 

I've been saying/thinking the same things for 20 years and  the debt continues to accelerate higher with nothing bad happening. 

How can this not end up in a train wreck eventually?

Just the interest on the debt is hard to pay. 

The National Debt Sinkhole: How Government Addiction To Debt Will Be Our Economic Undoing


Government debt is exploding across the globe like no other time in history.

Despite the genuine need for government spending in this unique environment, there will unfortunately be negative economic consequences of it as well.

An ECB study shows that above certain thresholds of debt-to-GDP, expanding government debt not only has a diminishing return but also weighs on future economic growth.

National debt soaks up private savings, which prevents investment in productive ventures. It crowds out public investment dollars. And ultimately it suppresses productivity growth.

There is, however, an investment that should perform well in the low-growth, low-rates, low-inflation environment ahead.

      This idea was discussed in more depth with members of my private investing community,High Yield Landlord.  



We have always found, where a government has mortgaged all its revenues, that it necessarily sinks into a state of languor, inactivity, and impotence.


David Hume, 1752




Now compare that to the strongly correlated long-term trends of net saving (private savings - government deficit spending) to GDP and real GDP growth:



As net saving fell, so also did real GDP growth. The past decade, during which the US enjoyed the longest bull market on record, the economic expansion was the weakest since WWII. It was also the first full decade in which federal debt exceeded 90% of GDP each year. And in the twenty years from 1999 to 2019, the amount of GDP growth produced by each additional dollar of debt fell 25%.

By wglassfo - July 22, 2020, 8:44 p.m.
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1st of all nobody in congress plans of being around when the SHTF

2nd of all Nobody plans on paying the natn'l debt

The only thing anybody has to worry about is a loss of confidence in fiat

At that time folks will lock for some things else to use for money

Fiat is so much easier to use, gold or silver is clumsy to handle but in the early days people did use gold coins

So you could have a coin with 1/10 purity another with 1/100 purity another with 1/1000 and so on

By bear - July 24, 2020, 12:13 p.m.
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metmike... no bad effect?  look at your graph again.  growth is stagnating.  it has been getting weaker, and weaker.  follow the trend into the future,  & ask yourself when does it goe Negative?  

this trend is partly due to high debt levels.  this is not just my debt, it is all debt.  if i have too much debt it is hard for me to ramp up my spending.  if the state has too much debt it is hard for the state to ramp up their spending.   economies around the globe are stagnating because of too much debt,  to much taxation, too much bureaucracy, etc.   argentina has proven that MMT does not work.  they have 40% inflation, and 40% unemployment because they use MMT to address every shortfall.  

so YES, the high debt levels have had a very bad effect.  and it will get much worse over the next several decades.

and at some point,  the market tries to force a liquidation.   this is what happened in the 1930's.  all the debt was purged from the system.

the difference today... we have too many people who think that the answer to everything is to have govt bodies to print and spend money to try to deal with every crisis.  

long term this will destroy the currency.  

our massive economy will eventually go down the drain,  because of the coming depression, and the destruction of our currency.  

my estimate of 2070 is based on 100 yr time cycles.  big inflation episodes in america did Not happen in the first half of the 1800's or 1900's.  it happened in the 1860's and 1870's,... and in the 1970's and 1980's.  

the high inflation part of the cycle happens in the second half of the century.  

the depression part of the 100 yr cycle happened in the 1830's, and 1930's.    (ironically,  there were coin shortages in the late 1830's, but there was not high inflation).  

By wglassfo - July 24, 2020, 4:25 p.m.
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1st of all bear has it right. He understands and can explain much better than myself

However, I think a depression will come much sooner than 2070

We might see it in 10 yrs or less

Depressions are usually preceded by inflation. At least the 1930 era depression that destroyed so many families, Germany included. Before that I dunno but 1930 is good enough for me

Inflation is here now. The CPI or what ever the gov't uses is bull crap

Now to MM thoughts

I hope you did not seriously think RE was a good investment as in bricks and mortar

I will gladly answer any questions but will keep the post short unless there is a question or some thing else