It Is Now Mathematically Impossible To Pay Off The U.S. National Debt | Hacker News Reader

It Is Now Mathematically Impossible To Pay Off The U.S. National Debt

theeconomiccollapseblog.com

9 pointsrams8 comments

Warning: This was written by someone who does not actually understand the banking system.

He suggests that the amount of US debt greater than the money supply which seems like a problem, but: It has been suggested that the same dollar can be used to pay off debt over and over - this is theoretically true as long as the dollar remains in the system.

PS: When you almost understand the banking system it's easy to think it's going to collapse at any second. However, it's actually a vary stable system where the money you spend is actually someones debt which creates demand when they need to pay that debt back. (Simplified but surprisingly accurate.)

Yeah, his problem begins with this statement:

If the U.S. government went out today and took every single penny from every single American bank, business and taxpayer, they still would not be able to pay off the national debt. And if they did that, obviously American society would stop functioning because nobody would have any money to buy or sell anything.

Nobody? In this whole exercise, money is neither created nor destroyed... just moved. So, we still have the same exact amount of money in the system... it's just been redistributed to the debtholders. And lots of people hold US government debt.

Your post script is probably the best simple explanation for why our banking system isn't going to fall apart tomorrow. Thank you. Furthermore, this article ignores basic principles of inflation and the idea that the government operates on a very long-term time horizon (hundreds of years), versus individuals who have a physically limited lifespan. While this is no excuse for reckless financial policy, the idea that it's all going to fall apart tomorrow because of this notion that the government has more debt than money supply is foolish.

So, he's basically saying that the net worth of the U.S. is negative, which, of course, is a very bad thing. Which means it's impossible to pay it off right at this moment, of course. I'm not sure why that implies it can never be paid off, though. Not that that makes the situation much better, though.

This guy is economically illiterate. Where does he think the "dollars" (I think he means currency, rather than money) that's "in the bank", spent on paying off the debt, actually "goes"? It seems like he thinks debt is a kind of negative currency, whereby currency and debt cancel one another out and disappear.

The reality is that currency is just a means of transferring wealth from one place to another, over time or space. If we had a hypothetical infinitely fast and efficient transactional system, we could get by with only a single "dollar" in the whole world. Currency is just the stuff in the transactional pipes joining different entities.

I certainly don't understand macroeconomics very well, but I'm inherently suspicious of a system that demands exponential growth, ie unless the GDP grows every year, people start predicting ruin. If this implies that the system is unable to stably exist in a static scenario, it seems to me that there is some sort of perpetual borrowing from the future to sustain the present going on, and that reminds me of a another system that only functions during exponential growth: a pyramid scheme. Can someone more knowledgeable comment on this?

Note that as soon as someone points out the possibility of an asset sale (e.g. some of that land owned by the government out west), he moves the goal posts.

Based on this and the article previously submitted to HN (http://news.ycombinator.com/item?id=1109325, and heck, the title of his blog!) I'm afraid that he's at best an Eeyore.

This post completely misses the difference between money and wealth.

National debt is payed with the wealth of a nation, actual money is only a representation of that wealth.

PG explained it better here: http://www.paulgraham.com/wealth.html

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