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Comment by MuffinFlavored | Hacker News Reader

I could be wrong but... if inflation was 8% year over year, doesn't that mean our national debt (nominated in dollars) got "eroded" by 8%? aka, inflation is good for the debt?

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Fun fact: the US has never (except for a short period during the Clinton admin) repaid any of its debt, it just made it insignificant through inflation and economic growth.

Edit for the pedantic: I obviously mean total debt.

The US has absolutely repaid its debts as anyone who’s held a treasury bond to maturity can attest to. I think you meant it has never decreased its debt load.

A different pedantic: The US repaid its debt under Andrew Jackson. All of it.

https://fred.stlouisfed.org/series/FYFSD

There are other times U.S. has paid down debt.

Sounds like something its lenders should consider.

Not really because it's not remotely true. The US has paid back every piece of debt it has ever issued that has come due.

Of course every debt has been paid, but by making a new greater debt.

Any individual who has a debt would like very much to also be able to continue to borrow money indefinitely and pay the old debt without worries.

Oh good lord that's not how this works at all. Like it takes like 2 minutes to see that this couldn't possibly be the case. If the US was servicing its debt exclusively through taking out more debt what would graph of national debt look like over time -- exponential! The exact same as if the gov't wasn't servicing its debt at all because that's how compound variable rate interest works.

Then just look at the graph of national debt both in nominal and real value.

log scale chart, looks pretty exponential to me: https://static.seekingalpha.com/uploads/2010/12/14/saupload_...

(from article, but not referencing content besides the chart https://seekingalpha.com/article/241751-visualizing-the-u-s-... )

If he's too big and scary for anyone in the neighborhood to beat up, he probably will.

That is correct. Inflation reduces existing debt.

The problem is we continue to issue new and more debt at higher rates so the total amount still only goes up.

Yes, the total amount may go up in nominal terms, but it's not going up in real terms if inflation is eroding it faster than new debt is being issued. If the value of the dollar halves in a decade but the debt only goes up to, say, $50T, then the total national debt in real terms has gone down significantly.

> if inflation is eroding it faster than new debt is being issued.

I would be interested to know of a time when inflation was higher than the rate of new debt being issues in the US. Maybe in the 70s when inflation hit record highs but interest rates also hit record highs at that time.

Is there a way to calculate like... the debt but in "inflation adjusted" dollars?

The debt level is reported accounting for inflation.

https://www.usdebtclock.org/

Which field? The $31t national debt dollar field? I thought that was un-inflation adjusted dollars?

The national debt field.

I believe it is inflation adjusted and if the US were to 'magically' create a coin worth 31 trillion dollars, that number would go to 0 and we would be able to pay off the entire thing. There would be no more interest payments because there's no more debt to pay interest on.

Except for the fact that we still run a deficit so itd start going back up again.

> I believe it is inflation adjusted

I believe it isn't.

Unfortunately we are constantly issuing new debt to pay back the old debt because the government spends far beyond its means. So it doesn’t help.

To the contrary, while the US can issue debt and people are willing to buy it it is living within its means.

Only a fool thinks the ability to get a loan is equivalent to living within one’s means

If you want to moralise, that's your trip, but borrowing power is an objective measure of your financial health.

The United States is not a person and you can't translate folk economics from your kitchen table to the nation.

That's what everyone says until the government defaults on its debt. The US is a special case because of our unique situation as the military superpower and reserve currency, but look at Argentina, Venezuela, and the UK for a counterpoint.

How do you imagine the US can default on its debt? It borrows in its own money.

I dunno, if you were willing to issue me unlimited borrowing i'm not sure i would care about repayment.

Isn't that exactly the reason repayment matters?

Yes, inflation is good for debt holders. Unfortunately higher inflation is usually accompanied by higher interest rates making for higher debt payments.

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