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Comment by snidane | Hacker News Reader

Or something unexpected happens and you get stuck with low interest rates and a war of some sort.

High debt and low interest rate environment don't guarantee your more stable amd secure society. Only for short term while you keep printing money. While experiencing all kinds of weird societal phenomena, such as markets decoupled from fundamentals, extremely expensive real estate or low birth rates. The low birth rates will actually implode this entire debt and money printing based scheme or some war or similar conflict even sooner.

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This is all wrong, though. We're talking about global debt. There's no external buffer from which funds are being drawn, nor money "printed" to refill. It's all our money. Every debt borrowed is held by someone else. Debt, on this scale, is effectively the engine that turns "wealth" (static resources) into "economy" (doing stuff).

All the stuff you're talking about is true only on micro scales, assuming that that debt is "owed" to some third party.

In fact this can keep going on forever, really. If the money printers are going Brrr... and no inflation is happening nor buildups of saved wealth, then by definition the economy is increasing in size.

More debt generally leads to more economic growth. More trade leads to more economic growth. Those are true statements.

They also lead to brittle economic systems.

In 1900, if everyone was asked to stay home for 3 months, they'd go home for 3 months, and come out not-too-much-worse for the wear. In 2020, when the same happened, crippling mortgage payments, leases, and similar caused a near-total implosion.

Likewise, in 2020, we nearly saw global supply chain break down. In 1800, a global economic crisis couldn't do too much to a town in the midwest growing its own food. In 2020, if, for example, TSMC were to go wonky due to China taking Taiwan, we'd lose over half of our IC manufacturing capacity, including critical components for virtual every other electronic device made.

We're wound really tight. The danger is systemic collapse.

> if, for example, TSMC were to go wonky due to China taking Taiwan

That's not an argument about debt, though.

It's a comment about the other piece: Trade and specialization.

It's more efficient to have specialized countries. If Germany and Japan focus on optics, that's more efficient than having an optics industry in each country. Everyone is wealthier.

It's also more brittle; if WWII breaks out again (as a hypothetical), the allies don't have access to optics, and can't repair step-and-repeats. That, in turn, means they can't manufacture ICs. And so on, down the line.

All of your examples occur in the context of a much less developed and less connected world. Industrialization massively increased its footprint, the computing era began and then the internet era began. These are phase changes to human civilization.

Of course it has a different impact vs essentially subsistence agriculture, as per your midwest yardstick.

That begs the question: is there a middle ground between fully interconnected and off-the-grid subsustence?

Silos. Europe is independent. North America is independent. South East Asia is independent. Africa is independent.

There are scientific exchanges, humanitarian aide, artistic exchange, coordination on climate change, and similar, grounded in mutual benefit, but not in mutual interdependence.

These can be big or small silos. Aside from off-grid living, villages, towns, or countries can be independent.

These can also be complete or incomplete. If the tech tree needed for food and transport is local, it's okay if many luxury goods are global.

We don't have an infinite pool of human states. We have one history. We don't have examples of modern and unconnected.

We do have examples of collapses from too much interconnection and trade. A good example of systemic collapse of this sort, from another point in human history, is Late Bronze Age collapse circe 1150BC. There were complex, structured societies which were pretty efficient for the time, due to trade and specialization.

All of the major cultures were wiped out, all at about the same time, when those structures broke down.

"In 1900, if everyone was asked to stay home for 3 months, they'd go home for 3 months, and come out not-too-much-worse"

Considering that back then most households spent close to 50% of their income on food and there were basically no social safety nets it's much more likely they would have starved to death by then end of those 3 months...

Maybe in the few industrialized areas from that time, such as the UK, Belgium, the Rurh basin or the US North-East, the rest of the world was pretty much still agricultural and as such didn’t depend on a factory job/income in order to live.

Global debt is really a measure of the complexity & interconnectedness of the economy. Like you say, all debt is somebody else's asset. When total debt loads rise it just means that there are more links between firms in the economy, where somebody else's financial picture can affect yours.

The downside, like the sibling comment mentions, is that complex systems have complex failure modes. Additional links between firms raises the chance that you could get a cascading solvency crisis.

I'd really like to see who holds the debt. Is it widely dispersed - say lots of individual retirees owning government bonds? Or is it a few big financial firms who own all the assets with lots of little debtors? That has big implications for what inflation incentives are.

It seems to me that as interest rates go down people take on more debt because their interest payment is the same. This is true of households, companies, and governments. At the same time, the price of assets goes up. As long as interest rates are going down it all works. At some point, however, you reach an interest rate of zero and a zombie economy (insolvent companies, governments and households refinancing to repay debt) or interest rates go up and everything collapses.

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