Hacker News Reader

Comment by unmole | Hacker News Reader

Debt only makes sense if there are at least two entities involved. If you think of humanity as a single entity, there can't be any debt: You can't be in debt to yourself!

And that is not what Graber is talking about. The point was about US Treasuries. Everyone treats them as cash equivalents because nobody believes that the US Government will default. But Graber says and I quote:

> American imperial power is based on a debt that will never-can never-be repaid. Its national debt has become a promise, not just to its own people, but to the nations of the entire world, that everyone knows will not be kept.

And this is the kind of nonsense that is sprinkled all over the book.

View on HN

Of course you can be in debt to yourself, over the dimension of time

How? What would your balance sheet look like?

March: -100, took 100 from my savings for the house, because I wanted to go to this concert.

October: +100, finally paid back the 100 taken in March.

Anothet option: you have multiple personalities.

Btw. Semi joking

By not meeting requirements.

If you incur debts to your body, you'll pay for them in the future.

If we squander intergenerational assets, our children will pay.

Why is it nonsense? This debt is only ever re-financed, isn‘t it?

Treasury securities are routinely repaid, and by routinely I mean literally weekly.

With new debt, which is what re-financing is.

I guess this comes down to semantics. Paying off an old loan with a new one isn‘t ”paying off your debt“ in my eyes. You are still in debt afterwards.

The total amount of debt will never come down again without hyperinflation. Whether that is good, bad, or doesn‘t matter is up to economists. But that‘s how it is.

Musk, Bezos, and other billionaires have most of their cash in the form of loans taken out against their paper assets. This means they are actually producing more than enough new value to cover the interest on those loans, so essentially the loans they get are free money handed to them by someone who believes they'll pay it back, which those billionaires can then put into more productive or higher-yield enterprises and make even more money with it. When borrowing or refinancing is a good idea, you do it, because you'd be losing potential gains if you didn't. That's essentially the situation with America.

How does it matter to whoever is holding the treasuries? The claim is that the promise to pay the debt will not be kept.

Again, this comes down to how you define ”pay the debt“. To me, if you pay back your debt, you are dept-free. Re-financing (at the same interest rate) is debt-neutral, if you follow this logic.

> To me, if you pay back your debt, you are dept-free.

Graber's point is primarily about foreign holders of US debt and how this is the American empire extracting tribute from its vassals. Whether America is debt-free or not really relevant.

Capital itself is global and claims no Nation, so why should you and I?

You mean the real value of debt. By the way, it can't be paid off because negative interest rates, which represent the power of the debtor to refuse additional debt, are either ignored or people are trying to make them illegal. Germany has negative interest rates on its public debt and debt is going down.

> I guess this comes down to semantics. Paying off an old loan with a new one isn‘t ”paying off your debt“ in my eyes. You are still in debt afterwards.

In the context of meeting obligations to creditors, which is what is being discussed, it absolutely is.

> The total amount of debt will never come down again without hyperinflation.

What has fundamentally changed since the last time it did which was (checks) Q2 2019?

> Whether that is good, bad, or doesn‘t matter is up to economists. But that‘s how it is.

There is very little reason to believe that. In fact, to the extent that the debt and inflation are related, the same acts which drive the debt up drive inflation, not the other way around.

> This debt is only ever re-financed, isn‘t it?

so what? Have they missed an interest payment? Is their economy unproductive and cannot pay the interest?

Having the debt means you are entitled to a portion of the economic output of the machine behind that debt. Why is it a must for the debt to be repayable in one go? Esp. if the debt was not all issued in one go?

each time a particular treasury bond is due in full, the US treasury has been able to repay it. Whether they repay it by issuing new bonds, or increase their taxes and pay it off, makes no difference to the holder of that bond.

In absolute terms, the US is probably competitive as the most indebted entity in history. In relative terms, they are well past the threshold where countries pay back their debts in full. Their past performance isn't really a guide to what happens next, unless they've changed what is being measured the US is a financial basket case [0]. They aren't going to pay back what was lent to them in real terms, the idea is preposterous.

[0] https://www.longtermtrends.net/us-debt-to-gdp/

https://carnegieendowment.org/chinafinancialmarkets/86397 presents a reasonable argument for why you can't just compare debt-to-GDP between very different systems and expect it to make sense. (The US in particular is, of course, in many ways an outlier.)

In a fiat money system, the government simply prints more money to pay off the debt.

Its modern monetary theory now. The glorious idea that you can print as long as there is no store of value to flee into

I don't get it. What you are describing isn't even close to MMT because MMT is not a policy. Secondly, MMT predicts that inflation happens the moment your economy is running at full capacity and that deflation happens when you pay off debt to make the economy run below capacity. Those two things aren't disputed at all and no government has adopted policies based on MMT.

I have not come across any solid resources that actually lay out the theory of MMT. DO you have any recommendations?

MMT is the idea that the constraint on tax/spending in a fiat money system is monetary effects (inflation/deflation), not the need to tax or borrow money that you could just print to fuel spending.

Ironically, the people that are most opposed to MMT on the basis of outright lies about its content are the people that are most likely to argue against large deficits on inflation grounds even when there is no problem borrowing enough money to fuel it.

I have not come across any solid resources that actually lay out the theory of MMT. DO you have any recommendations?

By the same token, in a fiat money system, there's no reason for debt in the first place. Government debt denominated in its own fiat is a side effect of cosplaying a commodity money system.

It's true by definition. The savers will never give up their savings, the savings which are necessary to pay off the debt as public sector debt is private sector savings. It is quite simple.

The US government can issue more fiat to repay bonds if necessary. It can literally print itself out of debt. Yes, this could potentially cause some devaluation, but it's still a powerful backstop. The US would only default by choice, rather than being forced to. This is the privilege of having the USD be the world's reserve currency.

At the level of the world's biggest economies, the concepts of debt (bonds), money, and interest rates are more abstract economic levers that central banks pull in order to keep economies chugging. They're not really the same things they are to individual people and corporations, e.g. in the way debt can cripple someone's finances.

The central banks and governments are the game masters who set the rules and issue tokens, and we're the players interacting within the game and responding to the environments that they create.

Wait, you mean they could go deeper into debt to pay off their debt? I'm not sure that helps.

No, the US can simply create more USD and use it to pay off bond debt. Creation of USD doesn't incur more debt, but does expand the USD monetary base and inject more USD liquidity into global markets. The US doesn't actually need to borrow more to pay off old debt.

To restate: bonds and other loans are literally a policy tool to take in USD from or inject USD into circulation, in order to intentionally change the size of the money supply: "Open market operations (OMO) refers to a central bank buying or selling short-term Treasuries and other securities in the open market in order to influence the money supply." It's not like the central bank actually needs to borrow USD from the money supply; it's literally the issuer of USD and could create more at any time (or take it in and destroy it).

Why can the US do this? Because its bonds are denominated in its own currency, which world investors use. The demand for USD-denominated debt is a major benefit of the USD being the world's main reserve currency.

We'll see how that plays out after Ukraine.

So then there's a plan to pay it all back?

Yes, it goes like this: collect taxes to spend on payments. Easy.

The last time the federal government had a surplus was 2001. So it is historically not the plan to pay off debt with taxes: The debt is increasing, not decreasing.

And if I Google "united states per capita debt", I see a box:

    According to the last data point published, United States per capita debt in 2020 was 84,850 dollars per inhabitant. In 2019 it was 70,557 dollars, afterwards rising by 14,293 dollars, and if we again check 2010 we can see that then the debt per person was 46,284 dollars.

So, one theoretically could reduce debt with tax payments. But it doesn't appear to be the current or historical plan.

Everyone knows the debt will never be fully repaid. Just the interests and that has to do with how there is a little parasite between the country and the money.

The US already defaulted on their gold promises.

>> Its national debt has become a promise

Right. So this supposed "revelation" that fiat money is debt created by elites out of thin air, has been the hocus-pocus story that every goldbug, sovereign citizen's movement and crypto-coin huckster has memorized to absolutely wow the gullible with conspiracy theories for the last 100 years. It's a guaranteed way to make a (fiat) buck if you sell a book along these lines.

But the ridiculous thing is, in every situation other than US dollars, all people understand that buying debt is gambling on the risk of not being paid back. Whether you're buying some Argentine note that pays 30% or a municipal bond (or a war bond) or a ticket to see a movie in a theater that might close next week, you understand that the paper is worth more at maturity but it comes with risk. Everyone outside America who actually buys US debt fully understands this and makes the risk calculation, so how is it that average slackjawed Americans are just dumbstruck, generation after generation, year after year, by the notion that their evil government or central banks together are pulling off some sort of fast one on the rest of the world? No one buys this shit who doesn't weigh the risk. To whatever extent it's a house of cards, that's on the investors anyway, so there's no reason the average American should trouble themselves about it until/unless they need to learn what a national default looks like.

Reply on news.ycombinator.com