Who will pay for the world's debt mountain? It's you, dear saver.

[zdreg]

Well, first the US gov cannot "focus all of its income on debt repayment" any more than a household can. The real question is how much unallocated income can the Fed free up by cutting public benefits before the recipients of those benefits vote them out of office, or, in some cases, shift critical campaign donations to their opponents? Politically, those vast unfunded liabilities are much harder to default on or inflate away than the public debt. You can cheat the Chinese easier than you can cheat the Social Security and Medicare recipients.

Second, if every private and public entity in the US sold off its assets and magnanimously donated the proceeds to bail out the national government, who would buy all that stuff while all the potential buyers are selling? it is just as if everyone in the stock market decided to "cash in their chips" at the same time. They could not really obtain the nominal value of their assets. This is known as the "fallacy of composition." The other problem is that the present value of the Feds' total unfunded liabilities, not just the official national debt, is now in the neighborhood of $200 trillion. In addition, states, counties, cities, firms and other private entities, and households all have substantial debts as well. This problem is not exaggerated.

Third, just focusing on the narrow problem of the official Federal "debt held by the public" for a moment, it is a historical fact that countries that accumulate a public debt greater than 90% of their GDP have had a very difficult time avoiding reduced growth rates and financial crises. I highly recommend Kahneman's book "Thinking, Fast and Slow." One issue he deals with is that we all tend to rationalize why we will beat the odds, such as finishing a project much faster than others have finished similar projects, or why real estate prices in our city would not crash even if they did everywhere else, or why we can cope with debt burdens that have crippled others. What we ignore is that others usually had their own reasons why they were exceptions to the rule. This time is not different, we are not exceptional, and people who think this way are usually deluding themselves.

Politically, those vast unfunded liabilities are much harder to default on or inflate away than the public debt.

wrong. US politicians will take a leaf out of the playbook of Maduro , dictator of Venezuela, to pacify the whining American public. they will inflate the currency and impose more socialistic measures in order in theory to help the average man and the so called poor class. the masses will cheer these measures to bring about equality until these measures fail. starvation as in Venezuela will ensue. hard work productive American workers will flee across the border to Canada.
you are right America is not exceptional. they will fall for the delusions of socialism. they will suffer the consequences.

 

[Stockolio]

Well, first the US gov cannot "focus all of its income on debt repayment" any more than a household can. The real question is how much unallocated income can the Fed free up by cutting public benefits before the recipients of those benefits vote them out of office, or, in some cases, shift critical campaign donations to their opponents? Politically, those vast unfunded liabilities are much harder to default on or inflate away than the public debt. You can cheat the Chinese easier than you can cheat the Social Security and Medicare recipients.

Second, if every private and public entity in the US sold off its assets and magnanimously donated the proceeds to bail out the national government, who would buy all that stuff while all the potential buyers are selling? it is just as if everyone in the stock market decided to "cash in their chips" at the same time. They could not really obtain the nominal value of their assets. This is known as the "fallacy of composition." The other problem is that the present value of the Feds' total unfunded liabilities, not just the official national debt, is now in the neighborhood of $200 trillion. In addition, states, counties, cities, firms and other private entities, and households all have substantial debts as well. This problem is not exaggerated.

Third, just focusing on the narrow problem of the official Federal "debt held by the public" for a moment, it is a historical fact that countries that accumulate a public debt greater than 90% of their GDP have had a very difficult time avoiding reduced growth rates and financial crises. I highly recommend Kahneman's book "Thinking, Fast and Slow." One issue he deals with is that we all tend to rationalize why we will beat the odds, such as finishing a project much faster than others have finished similar projects, or why real estate prices in our city would not crash even if they did everywhere else, or why we can cope with debt burdens that have crippled others. What we ignore is that others usually had their own reasons why they were exceptions to the rule. This time is not different, we are not exceptional, and people who think this way are usually deluding themselves.

Great point of view... Only short term serious problem in the US unfunded liabilities is the Pension Funds. I think some people tend to forget Fiat Money isn't a Earth mineral or God's creation, it's easily created and destroyed at will... Do you honestly believe the world will awash in Debt Servicing and go stagnate for 10-20 years ? The world is moving into the Socialist end in the Long Business Cycle, where people who don't have much want the wealthier to pay for a bigger share, and when politicians use monetary stimulus to appease and win the public ( Central Banks ex. )

That will end in a catastrophic bust and hardship, through sky high Inflation and the destruction of Private Sector, leaving the world bubble much bigger in 10-15 years then it will be after the recession of 2019. At the current rate of Debt accelerating, with Central Banks going supercharged in last decade, at some point there will be an extreme crisis followed by a Monetary Reset which will support Debt Relief ( How much who knows ). I do not see how something that is man made will bring the world to it's knees... At some point, there will be somewhat of a Debt Reset or Debt Relief, money isn't real

 

[zdreg]

"The United States had a debt-to-GDP ratio of 104.17% in the year 2015 and 105.4% in 2017, according to the U.S. Bureau of Public Debt. The U.S.experienced its highest debt-to-GDP ratio in 1946 at 121.7% at the end of World War II
Government Debt to GDP in Mexico is expected to be 45.30 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. In the long-term, the MexicoGovernment Debt to GDP is projected to trend around 48.00 percent in 2020, according to our econometric models."
Trump wants to build a wall to keep Mexican out. the reality is when the US is recongized as being a broke country with a dying currency the wall will exist to lock Americans in from fleeing the US to Mexico.

 

[Stockolio]

"The United States had a debt-to-GDP ratio of 104.17% in the year 2015 and 105.4% in 2017, according to the U.S. Bureau of Public Debt. The U.S.experienced its highest debt-to-GDP ratio in 1946 at 121.7% at the end of World War II
Government Debt to GDP in Mexico is expected to be 45.30 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. In the long-term, the MexicoGovernment Debt to GDP is projected to trend around 48.00 percent in 2020, according to our econometric models."
Trump wants to build a wall to keep Mexican out. the reality is when the US is recongized as being a broke country with a dying currency the wall will exist to lock American in from fleeing the US to Mexico.

Zerohedge russian puppet site, is that you ? Haha, we should all buy Gold right ? I am not even American and I am telling you, your in space

Name me one major economy that isn't drowning in debt, you do understand the US HAS to go in debt cause of Reserve Currency ? The demand for dollars is very very high, so it has to create a lot of them... You ever heard the term, taking it for the team ? Well that's what the US is doing, it will end bad if there isn't Debt Reset like after WW2, but when ever the dollar collapses, believe me even the worst of your nightmares will not comprehend what will happen to the world financial system.

Are you russian or chinese ? You need to be seriously biased against the United States, or have be Economically ignorant to say the US and there dollar will collapse cause of current Debt to GDP... In 30 years time maybe, but not anytime soon. You wanna see collapses, look at Emerging markets Bonds Issued in US Dollars. You will see many EM collapsing in 19-20

 

[zdreg]

You need to be seriously biased against the United States, or have be Economically ignorant to say the US and there dollar will collapse cause of current Debt to GDP..

it is the direction of the debt that is heralding future problems.

 

[Sinbin]

"The United States had a debt-to-GDP ratio of 104.17% in the year 2015 and 105.4% in 2017, according to the U.S. Bureau of Public Debt. The U.S.experienced its highest debt-to-GDP ratio in 1946 at 121.7% at the end of World War II
Government Debt to GDP in Mexico is expected to be 45.30 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. In the long-term, the MexicoGovernment Debt to GDP is projected to trend around 48.00 percent in 2020, according to our econometric models."
Trump wants to build a wall to keep Mexican out. the reality is when the US is recongized as being a broke country with a dying currency the wall will exist to lock Americans in from fleeing the US to Mexico.

Meh... a lot of the debt is structured in our own sovereign currency, which makes it easier to “spread the chaos”. I highly doubt the dollar collapses anytime soon. If D/GDP reaches 200-1, you’ll see a bunch of politicians scrambling to satiate it. Until then, I’m not that worried. I would make a push to ease around 150-1.

 

[zdreg]

you’ll see a bunch of politicians scrambling to satiate it. Until then, I’m not that worried. I would make a push to ease around 150-1.

please explain your thoughts clearly. satiate what? push to ease what?

 

[Sinbin]

please explain your thoughts clearly. satiate what? push to ease what?

That was more or less general. If Debt to GDP increases or keeps increasing... people start to worry. Politicians want to keep their jobs. If a growing concern is the amount of debt we have and debt servicing is harder (higher rates, high inflation, appreciation) most will look to decrease/satiate the growing D/GDP while making debt servicing easier for lendees.

In my own opinion, while the current debt metrics are alarming, I still don’t see the panic that some people do. However, if it’s brushed under the carpet for another 10 years without trying to reduce the D/GDP ratio, it could be very concerning.

 

[zdreg]

If a growing concern is the amount of debt we have and debt servicing is harder (higher rates, high inflation, appreciation) most will look to decrease/satiate the growing GDP while making debt servicing easier for lendees.

"most will look to decrease/satiate the growing GDP while making debt servicing easier for lendees"

you cannot do both simultaneously.

 

[ironchef]

OK you convinced me. I will join the party, borrow to the hilt and let the savers bail me out later.