USA Debt Repayable

[Hawker]

US national debt is something i don't understand no matter how i think about it.
First, while it's debt, i can't see it in the same sense as i see *my* debt.  If i default on my mortgage, my house will be taken away.  Bad thing.  If US defaults on its loans,  What happens?  

China (or any other nation with enough of our debt) dumps the dollar en masse, the economy tanks, and we're all boiling shoes - or each other - to eat.

lol no.  China makes stuff that it can only sell to Americans and it is owed billions.  The US has China by the throat and it would have squeezed it good and hard long before considering a default itself.

If the US were to default, the immediate consequence would be rioting grannies.  The majority of US debt is the savings of American citizens and default would be an arbitrary and unfair tax on those citizens.  It would lead to violence as people, especially the elderly, realise that their savings have been confiscated.  Expect mayhem in Florida!

No-one would dump the dollar.  I have no idea how you could even think that likely - people would be scrabbling for dollars as a default would mean the government is no longer printing them.

[1714984932]

1714984932

[1714984932]

1714984932

[1714984932]

1714984932

[myrkul]

US national debt is something i don't understand no matter how i think about it.
First, while it's debt, i can't see it in the same sense as i see *my* debt.  If i default on my mortgage, my house will be taken away.  Bad thing.  If US defaults on its loans,  What happens?  

China (or any other nation with enough of our debt) dumps the dollar en masse, the economy tanks, and we're all boiling shoes - or each other - to eat.

Why would China want to do that?  It'll lose a valuable trading partner & the money it is owed, plus risk what's politely called "armed conflict"?  They crazy?

Edit:  If you have bought into a pyramid scheme, and you're guided by greed alone (euphemism: "invisible hand"), would you yell "scam" & out the perpetrator, or keep quiet for a chance to get out with your $$$?

No, they wouldn't (probably) do that. But the threat of doing that is usually enough to keep the US on nice terms with China.

To compare it to your analogy, It would be like blackmailing the scammer with the threat of outing him, to ensure that you're one of the first ones cashed out.

[Hawker]

US national debt is something i don't understand no matter how i think about it.
First, while it's debt, i can't see it in the same sense as i see *my* debt.  If i default on my mortgage, my house will be taken away.  Bad thing.  If US defaults on its loans,  What happens?  

China (or any other nation with enough of our debt) dumps the dollar en masse, the economy tanks, and we're all boiling shoes - or each other - to eat.

Why would China want to do that?  It'll lose a valuable trading partner & the money it is owed, plus risk what's politely called "armed conflict"?  They crazy?

Edit:  If you have bought into a pyramid scheme, and you're guided by greed alone (euphemism: "invisible hand"), would you yell "scam" & out the perpetrator, or keep quiet for a chance to get out with your $$$?

No, they wouldn't (probably) do that. But the threat of doing that is usually enough to keep the US on nice terms with China.

To compare it to your analogy, It would be like blackmailing the scammer with the threat of outing him, to ensure that you're one of the first ones cashed out.

Someone wise said if you owe someone $1000, they have you by the throat.  If you owe someone a few billion dollars, you have them by the throat.  China is the weaker party in the US China relationship as the US can walk away - China can't.  IT needs to reach the US markets in order to survive while the US can import consumer goods from anywhere it wants.

[crumbcake]

US national debt is something i don't understand no matter how i think about it.
First, while it's debt, i can't see it in the same sense as i see *my* debt.  If i default on my mortgage, my house will be taken away.  Bad thing.  If US defaults on its loans,  What happens?  

China (or any other nation with enough of our debt) dumps the dollar en masse, the economy tanks, and we're all boiling shoes - or each other - to eat.

Why would China want to do that?  It'll lose a valuable trading partner & the money it is owed, plus risk what's politely called "armed conflict"?  They crazy?

Edit:  If you have bought into a pyramid scheme, and you're guided by greed alone (euphemism: "invisible hand"), would you yell "scam" & out the perpetrator, or keep quiet for a chance to get out with your $$$?

No, they wouldn't (probably) do that. But the threat of doing that is usually enough to keep the US on nice terms with China.

To compare it to your analogy, It would be like blackmailing the scammer with the threat of outing him, to ensure that you're one of the first ones cashed out.

Hate being the contrarian (we actually almost agreed on something in some other thread), but still don't get what you mean.  By "threat," do you mean similar to obviously empty interwebz threats on Scam Accusation board?  Those simply don't work.  As far as blackmailing a scammer who has your money?  If he's a smart guy, and knows you're guided by self-interest and not some hippy ethic, what do you suppose he'd do?

[crumbcake]

US national debt is something i don't understand no matter how i think about it.
First, while it's debt, i can't see it in the same sense as i see *my* debt.  If i default on my mortgage, my house will be taken away.  Bad thing.  If US defaults on its loans,  What happens?  

China (or any other nation with enough of our debt) dumps the dollar en masse, the economy tanks, and we're all boiling shoes - or each other - to eat.

Why would China want to do that?  It'll lose a valuable trading partner & the money it is owed, plus risk what's politely called "armed conflict"?  They crazy?

Edit:  If you have bought into a pyramid scheme, and you're guided by greed alone (euphemism: "invisible hand"), would you yell "scam" & out the perpetrator, or keep quiet for a chance to get out with your $$$?

No, they wouldn't (probably) do that. But the threat of doing that is usually enough to keep the US on nice terms with China.

To compare it to your analogy, It would be like blackmailing the scammer with the threat of outing him, to ensure that you're one of the first ones cashed out.

Someone wise said if you owe someone $1000, they have you by the throat.  If you owe someone a few billion dollars, you have them by the throat.  China is the weaker party in the US China relationship as the US can walk away - China can't.  IT needs to reach the US markets in order to survive while the US can import consumer goods from anywhere it wants.

You're a really clear writer.  Enjoy reading your posts.

[Hawker]

...snip...

You're a really clear writer.  Enjoy reading your posts.

Thank you!  I love these forums.

[Schrankwand]

US national debt is something i don't understand no matter how i think about it.
First, while it's debt, i can't see it in the same sense as i see *my* debt.  If i default on my mortgage, my house will be taken away.  Bad thing.  If US defaults on its loans,  What happens?  

China (or any other nation with enough of our debt) dumps the dollar en masse, the economy tanks, and we're all boiling shoes - or each other - to eat.

Why would China want to do that?  It'll lose a valuable trading partner & the money it is owed, plus risk what's politely called "armed conflict"?  They crazy?

Edit:  If you have bought into a pyramid scheme, and you're guided by greed alone (euphemism: "invisible hand"), would you yell "scam" & out the perpetrator, or keep quiet for a chance to get out with your $$$?

No, they wouldn't (probably) do that. But the threat of doing that is usually enough to keep the US on nice terms with China.

To compare it to your analogy, It would be like blackmailing the scammer with the threat of outing him, to ensure that you're one of the first ones cashed out.

Someone wise said if you owe someone $1000, they have you by the throat.  If you owe someone a few billion dollars, you have them by the throat.  China is the weaker party in the US China relationship as the US can walk away - China can't.  IT needs to reach the US markets in order to survive while the US can import consumer goods from anywhere it wants.

Well, let me argue this one: Look at CHina's dollar debts in the last ten years. And then see who has anyone at some throat here. China understood this problem in 2000 already. And acted. Do not underestimate this country. They are not playing short term. Having lived there, let me say this: They are preparing for world domination. They don't want it, but they are preparing to react to the utmost catastrophy. Only this makes sense of some of their seemingly insane programs coming from the capital.

[Borisz]

Do not confuse making money with printing money. Only a (negligible) fraction of money exists in form of notes and coins.
Money does not represent wealth any more, but debt. Debt as such is not repayable, the system creates and (unfortunately) needs it.

Spot the differences
Before:


Now:


(The difference is that now there is no more value/cover behind money. Simply the promise that it will be accepted. It's "value" is arbitrary.)

This video shows some interesting facts: https://www.youtube.com/watch?v=vm3DixfL9o0

[farfiman]

US national debt is something i don't understand no matter how i think about it.
First, while it's debt, i can't see it in the same sense as i see *my* debt.  If i default on my mortgage, my house will be taken away.  Bad thing.  If US defaults on its loans,  What happens?  

China (or any other nation with enough of our debt) dumps the dollar en masse, the economy tanks, and we're all boiling shoes - or each other - to eat.

Why would China want to do that?  It'll lose a valuable trading partner & the money it is owed, plus risk what's politely called "armed conflict"?  They crazy?

Edit:  If you have bought into a pyramid scheme, and you're guided by greed alone (euphemism: "invisible hand"), would you yell "scam" & out the perpetrator, or keep quiet for a chance to get out with your $$$?

China's US debt holdings have been growing year by year ( with a few small dips). (http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/shlhistdat.html).

 Using your analogy ("keep quiet for a chance to get out with your $$$") , how would they do that?

If they stop buying debt and start selling it(even slowly)  that in itself could trigger a domino effect. At some point in time somebody ( doesnt have to be china) will be willing to admit that repayment is impossible and will do it anyway to try to get back something.

[crumbcake]

US national debt is something i don't understand no matter how i think about it.
First, while it's debt, i can't see it in the same sense as i see *my* debt.  If i default on my mortgage, my house will be taken away.  Bad thing.  If US defaults on its loans,  What happens?  

China (or any other nation with enough of our debt) dumps the dollar en masse, the economy tanks, and we're all boiling shoes - or each other - to eat.

Why would China want to do that?  It'll lose a valuable trading partner & the money it is owed, plus risk what's politely called "armed conflict"?  They crazy?

Edit:  If you have bought into a pyramid scheme, and you're guided by greed alone (euphemism: "invisible hand"), would you yell "scam" & out the perpetrator, or keep quiet for a chance to get out with your $$$?

China's US debt holdings have been growing year by year ( with a few small dips). (http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/shlhistdat.html).

 Using your analogy ("keep quiet for a chance to get out with your $$$") , how would they do that?

By simply doing what they're doing now?  Again, I see no advantages for China in destabilizing US economy.  If there are some obvious ones I'm missing, please point them out.

If they stop buying debt and start selling it(even slowly)  that in itself could trigger a domino effect. At some point in time somebody ( doesnt have to be china) will be willing to admit that repayment is impossible and will do it anyway to try to get back something.

China trying to dump US debt or claiming repayment impossible is no different than crying foul; see my response above.  If there are scenarios where dumping US debt is in China's best interest, point them out. 

[farfiman]

US national debt is something i don't understand no matter how i think about it.
First, while it's debt, i can't see it in the same sense as i see *my* debt.  If i default on my mortgage, my house will be taken away.  Bad thing.  If US defaults on its loans,  What happens?  

China (or any other nation with enough of our debt) dumps the dollar en masse, the economy tanks, and we're all boiling shoes - or each other - to eat.

Why would China want to do that?  It'll lose a valuable trading partner & the money it is owed, plus risk what's politely called "armed conflict"?  They crazy?

Edit:  If you have bought into a pyramid scheme, and you're guided by greed alone (euphemism: "invisible hand"), would you yell "scam" & out the perpetrator, or keep quiet for a chance to get out with your $$$?

China's US debt holdings have been growing year by year ( with a few small dips). (http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/shlhistdat.html).

 Using your analogy ("keep quiet for a chance to get out with your $$$") , how would they do that?

By simply doing what they're doing now?  Again, I see no advantages for China in destabilizing US economy.  If there are some obvious ones I'm missing, please point them out.

If they stop buying debt and start selling it(even slowly)  that in itself could trigger a domino effect. At some point in time somebody ( doesn't have to be china) will be willing to admit that repayment is impossible and will do it anyway to try to get back something.

China trying to dump US debt or claiming repayment impossible is no different than crying foul; see my response above.  If there are scenarios where dumping US debt is in China's best interest, point them out. 

How is that an answer ?- If they continue to buy more debt than the get repaid ( older debt) then they basically aren't getting paid back.  Currently it isn't in their best interest apparently so the game continues. BUT...  there are scenarios ( some wild) that might change their mind. 

1) "War".- The world is a crazy place.  So many unimaginable things have happened in the last 100 years. A world war could happen (  although slim ) that put china and the US on opposite sides.

2) "Collapse in sight "- Economic situation of the US turns towards critical.  Payback of debt seems close to impossible and the US import market ( main reason for them to hold back)  turns sour.

3) "Hot Potato"-  They get wind that some other big debt holder could be thinking of the same thing and want to try to get out before they are last with the hot potato

4) "Insanity"  - again a slim chance in this global economy but a crazy leader could do it just because.

[crumbcake]

US national debt is something i don't understand no matter how i think about it.
First, while it's debt, i can't see it in the same sense as i see *my* debt.  If i default on my mortgage, my house will be taken away.  Bad thing.  If US defaults on its loans,  What happens?  

China (or any other nation with enough of our debt) dumps the dollar en masse, the economy tanks, and we're all boiling shoes - or each other - to eat.

Why would China want to do that?  It'll lose a valuable trading partner & the money it is owed, plus risk what's politely called "armed conflict"?  They crazy?

Edit:  If you have bought into a pyramid scheme, and you're guided by greed alone (euphemism: "invisible hand"), would you yell "scam" & out the perpetrator, or keep quiet for a chance to get out with your $$$?

China's US debt holdings have been growing year by year ( with a few small dips). (http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/shlhistdat.html).

 Using your analogy ("keep quiet for a chance to get out with your $$$") , how would they do that?

By simply doing what they're doing now?  Again, I see no advantages for China in destabilizing US economy.  If there are some obvious ones I'm missing, please point them out.

If they stop buying debt and start selling it(even slowly)  that in itself could trigger a domino effect. At some point in time somebody ( doesn't have to be china) will be willing to admit that repayment is impossible and will do it anyway to try to get back something.

China trying to dump US debt or claiming repayment impossible is no different than crying foul; see my response above.  If there are scenarios where dumping US debt is in China's best interest, point them out.  

How is that an answer ?- If they continue to buy more debt than the get repaid ( older debt) then they basically aren't getting paid back.  Currently it isn't in their best interest apparently so the game continues. BUT...  there are scenarios ( some wild) that might change their mind.  

1) "War".- The world is a crazy place.  So many unimaginable things have happened in the last 100 years. A world war could happen (  although slim ) that put china and the US on opposite sides.

2) "Collapse in sight "- Economic situation of the US turns towards critical.  Payback of debt seems close to impossible and the US import market ( main reason for them to hold back)  turns sour.

3) "Hot Potato"-  They get wind that some other big debt holder could be thinking of the same thing and want to try to get out before they are last with the hot potato

4) "Insanity"  - again a slim chance in this global economy but a crazy leader could do it just because.

I thought i made it clear that i was addressing only rational possibilities for China.  So I'll make that clear now.  Considering irrational scenarios like your #4 (Insanity) is pointless.  If we concede the guy with his finger on the trigger is not governed by reason & self-interest, why muddy the waters with irrelevancies like US debt?

This also applies to your #1 (war).  Sure, wars happen.  Though I'm not sure how national debt plays into them.  Stick with me here, this is both funny & important:
In WW2, picture an imaginary land next to Poland uncreatively named Poland2.  Poland2 is identical to Poland in all respects but one:  It's in debt to Germany up to its eyeballs!  And the history's following the same path, with one notable difference:  Germany has to choose who to attack first:  Poland or Poland2? (Hint: Poland2 is making payments on its debt to Germany, which pays for gas, food & out-of-pocket expenses of the blitzkrieg.)
So war=craziness, just like #4.  Forget it.  If national debt factors into it, it's safer to have a whopping big one.

#2. (US economic collapse).  How would US debt to china affect China's  position (unless WAR, in which case go to #1)?
#3 (dumping US debt):  Already addressed.  See my previous replies.

TL;DR:  If China is irrational and chooses war, it's in USA's best interest to max out their credit with China.  If we ignore craziness, it's still better to owe than to pay -- international bonds of cooperation & friendship

[farfiman]

I thought i made it clear that i was addressing only rational possibilities for China.  So I'll make that clear now.  Considering irrational scenarios like your #4 (Insanity) is pointless.  If we concede the guy with his finger on the trigger is not governed by reason & self-interest, why muddy the waters with irrelevancies like US debt?

This also applies to your #1 (war).  Sure, wars happen.  Though I'm not sure how national debt plays into them.  Stick with me here, this is both funny & important:
In WW2, picture an imaginary land next to Poland uncreatively named Poland2.  Poland2 is identical to Poland in all respects but one:  It's in debt to Germany up to its eyeballs!  And the history's following the same path, with one notable difference:  Germany has to choose who to attack first:  Poland or Poland2? (Hint: Poland2 is making payments on its debt to Germany, which pays for gas, food & out-of-pocket expenses of the blitzkrieg.)
So war=craziness, just like #4.  Forget it.  If national debt factors into it, it's safer to have a whopping big one.

#2. (US economic collapse).  How would US debt to china affect China's  position (unless WAR, in which case go to #1)?
#3 (dumping US debt):  Already addressed.  See my previous replies.

TL;DR:  If China is irrational and chooses war, it's in USA's best interest to max out their credit with China.  If we ignore craziness, it's still better to owe than to pay -- international bonds of cooperation & friendship

Ok , lets take out the insane scenarios.    As far as #2 and #3  goes-  I still don't see any reason why China wouldn't start (very slowly and quietly as much as possible) to get rid of US bonds if they felt there wasn't a chance in hell they would get paid back because of the 2 reasons I stated.  Very bad US economic state is possible  ( some would say inevitable) and then It would be a matter of who got rid of as much debt as possible before it was too late.

[hayek]

I ran the numbers for America a while ago.

If America gave it's ENTIRE GDP - not taxes GDP - it would take > 16 months to pay off.

That's every person, business and corporation giving 100% of its earnings to pay off debt. That's also assuming government does not increase it's spending. That would do nothing to curb current spending either. That's why spending cuts are required. However, government never rescinds power so.....

[farfiman]

I ran the numbers for America a while ago.

If America gave it's ENTIRE GDP - not taxes GDP - it would take > 16 months to pay off.

That's every person, business and corporation giving 100% of its earnings to pay off debt. That's also assuming government does not increase it's spending. That would do nothing to curb current spending either. That's why spending cuts are required. However, government never rescinds power so.....

Well, the majority of the debt is to its own people so no real point in taking it  and giving it back-might as well just default on that...but ..oh, you can't. That's why some say the collapse is inevitable .Only question is when and how it will play out.

[crumbcake]

I ran the numbers for America a while ago.

If America gave it's ENTIRE GDP - not taxes GDP - it would take > 16 months to pay off.

That's every person, business and corporation giving 100% of its earnings to pay off debt. That's also assuming government does not increase it's spending. That would do nothing to curb current spending either. That's why spending cuts are required. However, government never rescinds power so.....

Just a bit of perspective:
http://b-i.forbesimg.com/jamesgruber/files/2013/03/Euro-debt-Mar132.png

[ashaw596]

I mean, the debt isn't a real problem as in we can't pay it back. Usually with the interest rates they set on their bonds (I think it was like .00000001% a while back or something) its not too far ahead of inflation or GDP growth. It would be easy to pay it back if we wanted to (if we just balanced the budget, inflation and interest payments would slowly get rid of it and the US is going to be around for a long time so the bond holders aren't in much of a hurry) but theres no real reason they want to. The real problem with US debt is that it raises lowers demand for other investments (like stocks and bonds) so businesses have less money available and it wastes a good bit of our tax dollars on paying interest. We're not in any risk of defaulting on our debts unless we go into a depression for like 20 years and none of the rest of the world does. People still buy the government's bonds because they are actually the safest place for money that gives interest. Europe has those pesky countries going bankrupt and Asia's using up their cash building up their capital and infrastructure and the rest of the world doesn't have enough money or isn't stable.

So basically, its repayable, but no ones ever going to care enough to repay it. My guess is that if it ever goes down, its going to be because of inflation (or not depending on government spending).
The government goes for cyclically balanced budget during recessions and then just never realize they made it out.

[crumbcake]

I thought i made it clear that i was addressing only rational possibilities for China.  So I'll make that clear now.  Considering irrational scenarios like your #4 (Insanity) is pointless.  If we concede the guy with his finger on the trigger is not governed by reason & self-interest, why muddy the waters with irrelevancies like US debt?

This also applies to your #1 (war).  Sure, wars happen.  Though I'm not sure how national debt plays into them.  Stick with me here, this is both funny & important:
In WW2, picture an imaginary land next to Poland uncreatively named Poland2.  Poland2 is identical to Poland in all respects but one:  It's in debt to Germany up to its eyeballs!  And the history's following the same path, with one notable difference:  Germany has to choose who to attack first:  Poland or Poland2? (Hint: Poland2 is making payments on its debt to Germany, which pays for gas, food & out-of-pocket expenses of the blitzkrieg.)
So war=craziness, just like #4.  Forget it.  If national debt factors into it, it's safer to have a whopping big one.

#2. (US economic collapse).  How would US debt to china affect China's  position (unless WAR, in which case go to #1)?
#3 (dumping US debt):  Already addressed.  See my previous replies.

TL;DR:  If China is irrational and chooses war, it's in USA's best interest to max out their credit with China.  If we ignore craziness, it's still better to owe than to pay -- international bonds of cooperation & friendship

Ok , lets take out the insane scenarios.    As far as #2 and #3  goes-  I still don't see any reason why China wouldn't start (very slowly and quietly as much as possible) to get rid of US bonds if they felt there wasn't a chance in hell they would get paid back because of the 2 reasons I stated.  Very bad US economic state is possible  ( some would say inevitable) and then It would be a matter of who got rid of as much debt as possible before it was too late.

But if China's "very slowly and quietly" shifting US debt, why should US care, unless you're implying that US should improve its credit rating so it could borrow more?

[farfiman]

But if China's "very slowly and quietly" shifting US debt, why should US care, unless you're implying that US should improve its credit rating so it could borrow more?

Because the cat would get out of the bag. Once it is a known fact ( and it would be eventually) the Dollar would be toast.

[Hawker]

But if China's "very slowly and quietly" shifting US debt, why should US care, unless you're implying that US should improve its credit rating so it could borrow more?

Because the cat would get out of the bag. Once it is a known fact ( and it would be eventually) the Dollar would be toast.

How come?  US bonds are among the safest place to put a few trillion.  If China doesn't take them, someone else will because there are very few places where you can put a trillion dollars and count on getting it back.