US National Debt / Deficit - How does it end?

[knight22]

I think it will ultimately  turn out like any ponzi scheme and collapse under its own weight screwing almost everything in the economy. Then people will flocked into bitcoin and cryptocurrencies as the only reasonable alternative. The faster the people will switch, the less damage the economy will suffer.  

[lyth0s]

I think it will ultimately  turn out like any ponzi scheme and collapse under its own weight screwing almost everything in the economy. Then people will flocked into bitcoin and cryptocurrencies as the only reasonable alternative. The faster the people will switch, the less damage the economy will suffer.  

Actually I think a more gradual switch is the key to doing less damage to the economy. Rapid switches means that everyone is grabbing for bitcoin as fast as possible and throwing every dollar at it, making the dollar quickly worthless and people's savings hit rock bottom.

[RoadTrain]

I have a lot of my own thoughts and fears about where the US national debt is leading our nation and the world. I feel like I’ve done enough of my own studying to have a good understanding of what the likely outcome(s) are but want to get some perspective from other well informed individuals here on bitcointalk.

My conclusion is that the US debt is already so out of control that it will just keep rising until we either default on our loans or we enter a period of rapid inflation as we try to pull a Weimar Republic and print our way out of debt. Maybe someone will contradict this conclusion but I think that the majority will agree that the US financial collapse is beyond preventing at this point even if it is for different reasons than my own.

The real area of interest to me is how does this end? I’ve been reading the book “Patriots” which I believe is the darkest possible scenario for a post economic collapse US. The collapse I am more inclined to believe in is that we’ll face hyperinflation for a short period until the deficit is effectively paid off and during this time our economy will become a basket case. Critical services (electricity, police, firemen, most businesses), communication (Internet, TV, newspapers), and our government will continue to function throughout. The chaos will be at its worst for a matter of months. The worst hit will be the poor who depend on services that may fail such as welfare, food stamps, and other entitlements. There will be regional violence but nothing large scale or long lasting. The loss of life due to things relating to the collapse will number in the thousands or maybe tens of thousands but certainly not millions.

What is everyone else’s view on just how this could play out? Or perhaps are there any who believe this sort of collapse will just never happen?

What about stopping caring about government debt?

You'd better be worried about private debt levels (household and corporate).

The government won't default because it's a sole issuer of dollars. Gov't debt is denominated in dollars. As long as it holds true you can forget about it.
To get an idea I recommend reading Modern Monetary Theory basics. I can help you understand it if you encounter problems.

[Robert Paulson]

I have a lot of my own thoughts and fears about where the US national debt is leading our nation and the world. I feel like I’ve done enough of my own studying to have a good understanding of what the likely outcome(s) are but want to get some perspective from other well informed individuals here on bitcointalk.

My conclusion is that the US debt is already so out of control that it will just keep rising until we either default on our loans or we enter a period of rapid inflation as we try to pull a Weimar Republic and print our way out of debt. Maybe someone will contradict this conclusion but I think that the majority will agree that the US financial collapse is beyond preventing at this point even if it is for different reasons than my own.

The real area of interest to me is how does this end? I’ve been reading the book “Patriots” which I believe is the darkest possible scenario for a post economic collapse US. The collapse I am more inclined to believe in is that we’ll face hyperinflation for a short period until the deficit is effectively paid off and during this time our economy will become a basket case. Critical services (electricity, police, firemen, most businesses), communication (Internet, TV, newspapers), and our government will continue to function throughout. The chaos will be at its worst for a matter of months. The worst hit will be the poor who depend on services that may fail such as welfare, food stamps, and other entitlements. There will be regional violence but nothing large scale or long lasting. The loss of life due to things relating to the collapse will number in the thousands or maybe tens of thousands but certainly not millions.

What is everyone else’s view on just how this could play out? Or perhaps are there any who believe this sort of collapse will just never happen?

What about stopping caring about government debt?

You'd better be worried about private debt levels (household and corporate).

The government won't default because it's a sole issuer of dollars. Gov't debt is denominated in dollars. As long as it holds true you can forget about it.
To get an idea I recommend reading Modern Monetary Theory basics. I can help you understand it if you encounter problems.

printing a whole bunch of fiat untill its worthless and paying back with it is the same as defaulting

[toknormal]

Also the fact that we have, by far the strongest military in the world, we could easily invade a resource rich country, and start to sell their resources for our own benefit.

I love the way that Americans refer to "our" military as if they're owned by the general American citizen & exist for promoting their agenda / protection.

All the US military is good for is throwing their own citizens and those of other countries under a bus - both metaphorically and literally. They exist to further the interests of private interest rackets, nothing more. I'm not saying the actual personnel involved aren't acting in good faith - most of them surely are. It's just that they and the people they purport to protect have been taken for a merry go round ride for the last 40 years.

[botany]

Also the fact that we have, by far the strongest military in the world, we could easily invade a resource rich country, and start to sell their resources for our own benefit.

You would need to ensure that Russia and China don't step in. If the US tries to step into their backyard, it could easily flare up.

[RoadTrain]

I have a lot of my own thoughts and fears about where the US national debt is leading our nation and the world. I feel like I’ve done enough of my own studying to have a good understanding of what the likely outcome(s) are but want to get some perspective from other well informed individuals here on bitcointalk.

My conclusion is that the US debt is already so out of control that it will just keep rising until we either default on our loans or we enter a period of rapid inflation as we try to pull a Weimar Republic and print our way out of debt. Maybe someone will contradict this conclusion but I think that the majority will agree that the US financial collapse is beyond preventing at this point even if it is for different reasons than my own.

The real area of interest to me is how does this end? I’ve been reading the book “Patriots” which I believe is the darkest possible scenario for a post economic collapse US. The collapse I am more inclined to believe in is that we’ll face hyperinflation for a short period until the deficit is effectively paid off and during this time our economy will become a basket case. Critical services (electricity, police, firemen, most businesses), communication (Internet, TV, newspapers), and our government will continue to function throughout. The chaos will be at its worst for a matter of months. The worst hit will be the poor who depend on services that may fail such as welfare, food stamps, and other entitlements. There will be regional violence but nothing large scale or long lasting. The loss of life due to things relating to the collapse will number in the thousands or maybe tens of thousands but certainly not millions.

What is everyone else’s view on just how this could play out? Or perhaps are there any who believe this sort of collapse will just never happen?

What about stopping caring about government debt?

You'd better be worried about private debt levels (household and corporate).

The government won't default because it's a sole issuer of dollars. Gov't debt is denominated in dollars. As long as it holds true you can forget about it.
To get an idea I recommend reading Modern Monetary Theory basics. I can help you understand it if you encounter problems.

printing a whole bunch of fiat untill its worthless and paying back with it is the same as defaulting

You don't get the point. Can you explain what you mean when using the word "printing"?

[trader001]

All the foreign debt will eventually be paid off using asset hold by US.

Intellectual property, real estate or asset and service will eventually be used to paid off debt to foreign entities.

[botany]

All the foreign debt will eventually be paid off using asset hold by US.

Intellectual property, real estate or asset and service will eventually be used to paid off debt to foreign entities.

Selling real estate? I don't see that happening.
It is easier just to print money. 

[arbitrage001]

All the foreign debt will eventually be paid off using asset hold by US.

Intellectual property, real estate or asset and service will eventually be used to paid off debt to foreign entities.

Selling real estate? I don't see that happening.
It is easier just to print money.  

There are already a lot of Chinese buying up all kind of real estate in US and around the world.

All that money will need to eventually end up somewhere. Money manager and wealthy family won't just put the money in the bank account and let it eroded away.

[sab4you]

A government debt is different than a personal debt.  Government spending doesnt just burn away, even if its spent on what somebody may "waste" its spent on jobs and contracts and pushes money into the economy.  Look at the postal service, a collosal waste and cannot keep up with UPS or FedEx, but where does all that money go?

Additionally debt should be in relationship to the GDP output of the country.  If both are increasing at the same rate, then we remain the same.  The actual dollar value increases, along with inflation, so sticker shock always seem high.

Its an interesting subject with much to learn about and of course opinions

[botany]

All the foreign debt will eventually be paid off using asset hold by US.

Intellectual property, real estate or asset and service will eventually be used to paid off debt to foreign entities.

Selling real estate? I don't see that happening.
It is easier just to print money.  

There are already a lot of Chinese buying up all kind of real estate in US and around the world.

All that money will need to eventually end up somewhere. Money manager and wealthy family won't just put the money in the bank account and let it eroded away.

True,but the real estate is not being sold by the US government...

[SLVR4ME]

it will be utter chaos, similar to how the soviet union went bankrupt.
once the government is unable to pay the salaries of the military and police and simultaneously the government welfare/pension checks stop coming it could get ugly.
although at this point most people in America are such obedient pussies that i doubt there will be much violence, they will just take it quietly.

This is soooo unfortunately true.
I believe George Carlin said it best - "The pussification of the American Male"

[RoadTrain]

A government debt is different than a personal debt.  Government spending doesnt just burn away, even if its spent on what somebody may "waste" its spent on jobs and contracts and pushes money into the economy.  Look at the postal service, a collosal waste and cannot keep up with UPS or FedEx, but where does all that money go?

Additionally debt should be in relationship to the GDP output of the country.  If both are increasing at the same rate, then we remain the same.  The actual dollar value increases, along with inflation, so sticker shock always seem high.

Its an interesting subject with much to learn about and of course opinions

The most important thing that "u.s. in debt, omg we gonna default" folks don't understand is accounting.
Debt issued by someone is an asset to someone else. When debt is issued, say, by a private sector corporation, it becomes an asset to someone in the private sector, but a liability to the corporation. Net assets of private sector don't change.
But when debt is issued by US Treasury it becomes asset to the private sector (both domestic and foreign) but a liability to the public sector. So issuing debt is actually adding net financial assets to the private sector, creating financial wealth.

This way budget deficits tend to improve private sector's financial health. Of course it's not a magic bullet, but people should really stop being scared of public debt.
There's no anything special, it's just an instrument to manage the economy.

[itsAj]

A government debt is different than a personal debt.  Government spending doesnt just burn away, even if its spent on what somebody may "waste" its spent on jobs and contracts and pushes money into the economy.  Look at the postal service, a collosal waste and cannot keep up with UPS or FedEx, but where does all that money go?

Additionally debt should be in relationship to the GDP output of the country.  If both are increasing at the same rate, then we remain the same.  The actual dollar value increases, along with inflation, so sticker shock always seem high.

Its an interesting subject with much to learn about and of course opinions

The most important thing that "u.s. in debt, omg we gonna default" folks don't understand is accounting.
Debt issued by someone is an asset to someone else. When debt is issued, say, by a private sector corporation, it becomes an asset to someone in the private sector, but a liability to the corporation. Net assets of private sector don't change.
But when debt is issued by US Treasury it becomes asset to the private sector (both domestic and foreign) but a liability to the public sector. So issuing debt is actually adding net financial assets to the private sector, creating financial wealth.

This way budget deficits tend to improve private sector's financial health. Of course it's not a magic bullet, but people should really stop being scared of public debt.
There's no anything special, it's just an instrument to manage the economy.

One thing that you are missing is the fact that in order to buy this asset, someone in the private sector must exchange cash (also an asset) for the treasury bond. There would be no change in the total amount of assets in the private sector. Also the private sector owning a lot of government bonds means they are not able to invest as much money in their own business that will likely be more productive.

[transient858]

- Assess the range of potential dangers to the US, along with benefits of US influence, and scale military spending appropriately, or let it grow more slowly with time.

Unfortunately scaling back the military kills huge numbers of jobs.

Scaling back the military kills huge numbers of unproductive jobs. If you put those people to work doing productive things instead, everybody will be better off.

Both military and defense industry related jobs are actually incredibly productive. The weapons that are created by defense related companies are able to save thousands (if not millions) of lives and can do incredible damage to our enemies. These weapons also can deter others from even thinking about attacking us.

Productive is defined as creating something of value at competitive price.

Only Keynesian economists think destruction has value with their broken window fallacy.

[twiifm]

A government debt is different than a personal debt.  Government spending doesnt just burn away, even if its spent on what somebody may "waste" its spent on jobs and contracts and pushes money into the economy.  Look at the postal service, a collosal waste and cannot keep up with UPS or FedEx, but where does all that money go?

Additionally debt should be in relationship to the GDP output of the country.  If both are increasing at the same rate, then we remain the same.  The actual dollar value increases, along with inflation, so sticker shock always seem high.

Its an interesting subject with much to learn about and of course opinions

The most important thing that "u.s. in debt, omg we gonna default" folks don't understand is accounting.
Debt issued by someone is an asset to someone else. When debt is issued, say, by a private sector corporation, it becomes an asset to someone in the private sector, but a liability to the corporation. Net assets of private sector don't change.
But when debt is issued by US Treasury it becomes asset to the private sector (both domestic and foreign) but a liability to the public sector. So issuing debt is actually adding net financial assets to the private sector, creating financial wealth.

This way budget deficits tend to improve private sector's financial health. Of course it's not a magic bullet, but people should really stop being scared of public debt.
There's no anything special, it's just an instrument to manage the economy.

One thing that you are missing is the fact that in order to buy this asset, someone in the private sector must exchange cash (also an asset) for the treasury bond. There would be no change in the total amount of assets in the private sector. Also the private sector owning a lot of government bonds means they are not able to invest as much money in their own business that will likely be more productive.

You just proved his point that you don't understand accounting or financial markets

Who do you think are buying these Treasuries?  Some corporation trying to decide on opening a new factory or putting the money into bonds instead?  LOL

[itsAj]

A government debt is different than a personal debt.  Government spending doesnt just burn away, even if its spent on what somebody may "waste" its spent on jobs and contracts and pushes money into the economy.  Look at the postal service, a collosal waste and cannot keep up with UPS or FedEx, but where does all that money go?

Additionally debt should be in relationship to the GDP output of the country.  If both are increasing at the same rate, then we remain the same.  The actual dollar value increases, along with inflation, so sticker shock always seem high.

Its an interesting subject with much to learn about and of course opinions

The most important thing that "u.s. in debt, omg we gonna default" folks don't understand is accounting.
Debt issued by someone is an asset to someone else. When debt is issued, say, by a private sector corporation, it becomes an asset to someone in the private sector, but a liability to the corporation. Net assets of private sector don't change.
But when debt is issued by US Treasury it becomes asset to the private sector (both domestic and foreign) but a liability to the public sector. So issuing debt is actually adding net financial assets to the private sector, creating financial wealth.

This way budget deficits tend to improve private sector's financial health. Of course it's not a magic bullet, but people should really stop being scared of public debt.
There's no anything special, it's just an instrument to manage the economy.

One thing that you are missing is the fact that in order to buy this asset, someone in the private sector must exchange cash (also an asset) for the treasury bond. There would be no change in the total amount of assets in the private sector. Also the private sector owning a lot of government bonds means they are not able to invest as much money in their own business that will likely be more productive.

You just proved his point that you don't understand accounting or financial markets

Who do you think are buying these Treasuries?  Some corporation trying to decide on opening a new factory or putting the money into bonds instead?  LOL

If a private citizen buys $1 in government treasuries then they will have $1 less they can invest in a loan to a company that would potentially be borrowing money to build a new factory. This would make the cost of credit more expensive, and when the $1 is a trillion dollars the cost of credit goes up a lot more, potentially making an investment not possible for the factory.

[twiifm]

A government debt is different than a personal debt.  Government spending doesnt just burn away, even if its spent on what somebody may "waste" its spent on jobs and contracts and pushes money into the economy.  Look at the postal service, a collosal waste and cannot keep up with UPS or FedEx, but where does all that money go?

Additionally debt should be in relationship to the GDP output of the country.  If both are increasing at the same rate, then we remain the same.  The actual dollar value increases, along with inflation, so sticker shock always seem high.

Its an interesting subject with much to learn about and of course opinions

The most important thing that "u.s. in debt, omg we gonna default" folks don't understand is accounting.
Debt issued by someone is an asset to someone else. When debt is issued, say, by a private sector corporation, it becomes an asset to someone in the private sector, but a liability to the corporation. Net assets of private sector don't change.
But when debt is issued by US Treasury it becomes asset to the private sector (both domestic and foreign) but a liability to the public sector. So issuing debt is actually adding net financial assets to the private sector, creating financial wealth.

This way budget deficits tend to improve private sector's financial health. Of course it's not a magic bullet, but people should really stop being scared of public debt.
There's no anything special, it's just an instrument to manage the economy.

One thing that you are missing is the fact that in order to buy this asset, someone in the private sector must exchange cash (also an asset) for the treasury bond. There would be no change in the total amount of assets in the private sector. Also the private sector owning a lot of government bonds means they are not able to invest as much money in their own business that will likely be more productive.

You just proved his point that you don't understand accounting or financial markets

Who do you think are buying these Treasuries?  Some corporation trying to decide on opening a new factory or putting the money into bonds instead?  LOL

If a private citizen buys $1 in government treasuries then they will have $1 less they can invest in a loan to a company that would potentially be borrowing money to build a new factory. This would make the cost of credit more expensive, and when the $1 is a trillion dollars the cost of credit goes up a lot more, potentially making an investment not possible for the factory.

You got the concept backwards.  The Fed engages in QE.  Then buying the bonds from Treasury.  This drives down interest rates to encourage private sector to borrow money.

The idea is that the corporations take advantage of low rates to build factories.  It hasn't produced the intended result but that's the idea.

The actual debt held by US private investors is pretty small.  I don't think you can draw conclusions about economic output and debt

http://www.factcheck.org/2013/11/who-holds-our-debt/

[RoadTrain]

A government debt is different than a personal debt.  Government spending doesnt just burn away, even if its spent on what somebody may "waste" its spent on jobs and contracts and pushes money into the economy.  Look at the postal service, a collosal waste and cannot keep up with UPS or FedEx, but where does all that money go?

Additionally debt should be in relationship to the GDP output of the country.  If both are increasing at the same rate, then we remain the same.  The actual dollar value increases, along with inflation, so sticker shock always seem high.

Its an interesting subject with much to learn about and of course opinions

The most important thing that "u.s. in debt, omg we gonna default" folks don't understand is accounting.
Debt issued by someone is an asset to someone else. When debt is issued, say, by a private sector corporation, it becomes an asset to someone in the private sector, but a liability to the corporation. Net assets of private sector don't change.
But when debt is issued by US Treasury it becomes asset to the private sector (both domestic and foreign) but a liability to the public sector. So issuing debt is actually adding net financial assets to the private sector, creating financial wealth.

This way budget deficits tend to improve private sector's financial health. Of course it's not a magic bullet, but people should really stop being scared of public debt.
There's no anything special, it's just an instrument to manage the economy.

One thing that you are missing is the fact that in order to buy this asset, someone in the private sector must exchange cash (also an asset) for the treasury bond. There would be no change in the total amount of assets in the private sector. Also the private sector owning a lot of government bonds means they are not able to invest as much money in their own business that will likely be more productive.

You just proved his point that you don't understand accounting or financial markets

Who do you think are buying these Treasuries?  Some corporation trying to decide on opening a new factory or putting the money into bonds instead?  LOL

If a private citizen buys $1 in government treasuries then they will have $1 less they can invest in a loan to a company that would potentially be borrowing money to build a new factory. This would make the cost of credit more expensive, and when the $1 is a trillion dollars the cost of credit goes up a lot more, potentially making an investment not possible for the factory.

The common misconception is to think that credit is somehow limited to certain amounts.
The reality is that it's only constrained by the borrower's creditworthiness. So if there's a creditworthy company willing to borrow $1 dollar, it will be able to do it, no matter how large is the government debt.

Another misconception is to think that government debt is somehow removes money from the financial system. First of all, what do you think happens to money raised by debt issuance? It goes back to the economy by government spending. The second point is that government debt is quasi-money (an almost perfect collateral) by being an integral part of Fed's payment system.

If the private sector holds a lot of government bonds, it's for a reason. And the reason is that the private sector is willing to save. And you can't just go and stop issuing debt hoping it will help restart the investment cycle. The economic policy must be a lot smarter than that.