Government to borrow nearly $1 trillion this year 84 percent jump from last year

Thanks. My first question was "Government? Which government?"

It does say chicagotribune.com.

> So much for the lie that Trump would "end big gov".

The Republicans like to talk about fiscal responsibility to attack “tax and spend” Democrats, but when the Republicans are in power they are much more inclined to cut taxes than spending (they certainly redirect spending, but they never cut as much as they cut taxes.)

The US hasn't had a sustainable budget since 2002.

The Obama years added ~$10 trillion in debt in eight years. How was that sustainable exactly?

For the last decade, the CBO has been forecasting blown out budget deficits starting about now, because of entitlement costs. There's no scenario where the budget deficit doesn't explode, unless you cut entitlements, dramatically raise taxes, or both.

Have a look:

https://www.cbo.gov/sites/default/files/cbofiles/images/pubs...

Not really - What I assume you are thinking about is the Fed buying the treasuries(with their money printing skills) that are issued in their QE program. However QE is winding down, and a larger and larger % of that borrowed money comes from private investors using their own money. While after the recession the fed was responsible for buying more than half of the treasuries for years, those days are over.

How so? I thought the Treasury sold bonds on the open market to finance the deficit.

coinmarketcap says: Market Cap: $398,126,739,977 so about 0.4 trillions for all crypto - everything and the kitchensync included.

This article says that this year alone, the government is borrowing 1 trillion.

I wonder if people who say crypto is a bubble are factoring in seignorage, especially in this order of magnitude.

If the % required to service it was growing significantly, that'd be a problem. The debt outstanding growing, on its own, doesn't matter.

The government is not a human who better pay off their debt by 65 or they're screwed. The government'll keep receiving income "forever", in a pretty predictable way. So there is no reason to ever stop borrowing; it'd be leaving money on the table (utility of a dollar now > utility of a dollar later).

The federal government’s debt to income ratio is roughly 4:1. Private entities get loans with that level of debt all the time.

The US government has a long history of repaying it's debts. I'd say that can continue indefinitely, so long as the debt-to-GDP ratio remains manageable.

All of our debt is paid and almost of it gets paid within 10 years and it probably always will be. That's how we do it.

That's because the government's deficit is the people's surplus, by simple accounting identity. Paying off the debt would be catastrophic. Andrew Jackson did it, and 1 year later we had a financial crisis. Clinton gave us a surplus, which led to a financial crisis. It's very simple: either the government is in debt to the people, or the people are in debt to the governmet. The latter is a perverse situation.

Please read about Modern Money Theory. https://www.youtube.com/watch?v=TDL4c8fMODk https://www.nytimes.com/2017/10/05/opinion/deficit-tax-cuts-...

this podcast says its because the usd is the dominant world reserve currency (a lot of trade is priced in usd, critically oil due to USA alliance with saudi arabia) so there is high foreign demand for usd. they allege that keeping it this way - keeping demand for usd high - is why USA occupies the middle east.

it also says that the usd is dying and that the USA's free lunch (ability to borrow endlessly without consequences) is now ending or already ended, though the politicians will deny it.

they also say that if you are russia or china, the obvious move is to hire a bunch of blockchain engineers, try to unload your usd treasury bonds (forcing a financial crisis in the USA in the 2020s when the USA politicians don't realize they can't borrow anymore), and then simply wait, and when the dollar dies you can step in and "save the world" from the dying dollar with their new cryptocurrency.

obviously, russia famously had meetings with Vitalek (ethereum founder) and there is a huge amount of blockchain investment happening in China right now.

https://www.macrovoices.com/336-anatomy-of-the-u-s-dollar-en...

I think it's a perspective problem. Since this issue is more complex, I'll use a simpler one - nuclear weapons. There has not been major unrestrained warfare directly between modern nations in what's approaching a century. Very few people alive today have lived through this sort of warfare. So it becomes a unicorn. Yet we still have things like nuclear weapons. And people see these as a relic of times past. Why would you want these sort of weapons when this sort of warfare no longer exists? And so naturally we have an increasing push to try to get rid of nuclear weapons, a stark reminder of a 'less enlightened times.'

Of course the reality is that this era of peace we've created has largely been enabled by nuclear weapons. Mutually assured destruction is indeed MAD but it has been the one thing, in the entire history of our species, that has managed to prevent this sort of conflict. Without nuclear weapons nations like the US, China, and Russia would certainly have long since came to 'hot war' in the process of determining who's ideology will be the world ideology. And that certainly would have drawn in the rest of the world, one way or the other: to wit, World War 3.

And so too today in economics, most people have lived during an era when the US has been more than capable of 'printing' (not how many is made - another complex topic) vast sums of money while suffering no real economic consequence, as well as being involved a system where we are only able to pay off old debts by taking on new debts - with no expectation of this ever really changing. If a private organization was behaving as we do, it would be considered a Ponzi Scheme. The reasons for this economic immunity are complex -- the fact our currency is indirectly backed by oil is a major player. But the point is is that people don't see any nuance here. We've always been able to behave this way (from the perspective of most people), so why would anything suddenly change? Probably a similar scenario to what happens at the end of any other meaningfully long era.

There are a lot of misconceptions about the nature of national debt. You should read about Modern Money Theory. https://www.youtube.com/watch?v=TDL4c8fMODk https://www.nytimes.com/2017/10/05/opinion/deficit-tax-cuts-...

Remember, the US is monetarily sovereign. The government has the ability to create and destroy US dollars. Things you don't need to worry about:

- Default. If it happens, it would be a purely political move, not an economic or financial one. The US federal government can always afford payments. A check from the federal government never bounces. They can always just credit bank accounts. In fact, the government can abolish the debt instantly. They can simply redeem all Treasuries with bank reserves.

- Interest rates. The Federal reserve controls short-term interest rates. And the supply of long-term Treasuries doesn't impact interest rates: increased government deficits lead to an increase in the size of bank reserves which lead to an increase in demand in Treasury bonds that matches the increased supply, since banks want to swap low-paying reserves with higher-paying debt instruments.

- China. Treasuries are like a savings account, while bank reserves are like a checking account. If China or pension funds (or anyone) sell off their Treasuries, it's akin to transferring money from a savings account to a checking account. What's the harm in that? And why would they do that? That would decrease their interest income.

Here are real concerns about ballooning national debt:

- Inflation. This can happen since the government is stimulating aggregate demand, in a classical Keynesian way. But it hasn't happened for a while, and if it does, the government can raise taxes. That shrinks the debt and decreases aggregate demand.

- Foreign exchange. With all the new USD floating around (because government spending = money creation and taxation = money destruction), there's a risk of a weaker dollar. But that has its upsides. And China's currency peg at least keeps the prices of Chinese goods fixed.

- Spending it unwisely. The government can't buy everone a pony. There aren't enough ponies in the world, and it would wreck the pony market.

Fortunately we don't have an unsustainable quality of life.

It's pretty simple mathematically. Not so simple politically.

You slash $250 billion off the US military. You slash $100 billion in local+state+federal spending off of all the activities related to the war on drugs.

You very lightly cut entitlements.

You raise taxes on the top 10% by quite a bit. You raise taxes on the next quarter by a modest amount.

Your budget is now close to break-even. You haven't impacted the standard of living of ~95% of Americans at all.

Quite the opposite, you just dramatically boosted the long-term prospects of the quality of life for the average American. Hundreds of billions in wasted revenue can now flow into highly productive use over time, whether healthcare or transportation/infrastructure (or just not running up debt interest by exceeding the budget). Just by not running up that debt interest, you'll save trillions of dollars over time.

If you really wanted to dramatically boost the US standard of living, you'd squeeze the healthcare cost monster to death. The monetary benefit of that system overwhelmingly flows to the top quarter of Americans, who are already doing extraordinarily well. We have a ton of room to work with in that area, that could improve our situation by hundreds of billions of dollars per year. It's not even necessary to get creative, all we have to do is begin copying any number of several highly function systems from around the world.

Cutting the military etc. will harm the economy you might say? Except that's obviously wrong. It'll further unleash the economy, releasing that money to far superior productive, compounding use. Most US military spending is for soldiers, who are contributing very little to the US economy as is versus their peers, their labor is low productivity and low innovation. They make nothing, they're nearly strictly consumption engines. No other prosperous developed economies have the need to spend on such things at such a high rate, neither does the US. It merely requires that the US accept that it's not the world police and doesn't need to be.

A good measure is Debt to GDP to allow for economic growth etc.

https://tradingeconomics.com/united-states/government-debt-t...

A common rule of thumb is 120% means debt is in serious trouble.

Here is a comparison of the G20: https://tradingeconomics.com/country-list/government-debt-to...

The GOP offers tax cuts to the wealthy, inducing a higher debt-load for the US.

The wealthy turn around and buy US government bonds.

The rest of us pay the wealthy bond interest and pay taxes against the debt accrued by offering tax cuts to the wealthy so they could buy US bonds.

The government borrows by selling treasury bonds, then the Fed buys them and keeps them on their books, and the Treasury gets US currency in exchange.

The Fed can also buy other assets besides T-bills and use them to back new issuance of US currency notes.

You can read the federal reserve act at Frb.gov

You are absolutely right, and you have discovered Modern Money Theory. https://www.youtube.com/watch?v=tEiNLmg2tYA

Beyond providing employment for a few folks involved in implementation and systems maintenance, in what way does launching a government-backed cryptocurrency benefit over the existing state-backed currency?

Fun thought: they could lock it in value 1 to 1 to the USD, while not making it convertible.

They could even call it "tether".

It would be almost indistinguishable from the recent situation - except tether is a private company, and the govt does not like competition.

A digital cross of gold? No thanks.

Probably not because it puts into question the value of the existing monitary base.