The US can service essentially any level of debt, and has far lower levels of debt than, most notably, Japan, which continues to function entirely normally.
Historically, governments have been prone to currency crises when their debt-to-GDP ratio exceeds 100%. The USA is just slightly above that now, and interest rates have remained low here (and in other countries) because central banks are monetizing the debt. But that can't be sustained forever.
The problem is this: once you have a high level of debt, you become sensitive to interest rate changes. Your debt rises, so you have to increase interest rates to lure investors to buy the bonds. The high interest rate forces to you run a bigger deficit, do you have to borrow even more money. Then investors demand an even high risk premium. That's the cycle.
Once that process takes hold, the only way out is some combination of lower living standards, higher taxes, higher inflation and currency devaluation.
You're right that it hasn't happened yet in the modern era. But it will. Remember where you heard it first.
I first heard it in a book written in 1986. It showed debt growing exponentially and forecast hyperinflation and economic collapse. People have been crying about that particular wolf for quite a long time.
That $1M nestegg will feel like $250k in a few years.
USD inflation, no idea but like +8-12% depending on what you are trying to buy? VOO -20%.
Ouch. Personally this year I have had better results holding cash than investing it to hedge.
Fundamentally, when both prices and wages go up, there’s no reason to expect companies to lose real value.
AFAIK in 2022 we’re seeing cost-push inflation and wages haven’t really gone up, which could partially explain why companies are having difficulties producing and selling.
Jun 22: 9.1% Jul 22: 8.5% Aug 22: 8.3% Sep 22: 8.2% Oct 22: 7.7% Nov 22: 7.1%
The only way I can understand your comment is if you are confusing inflation (change in price level) with price level itself.
Inflation is slowing down and has been for months.
[0] https://www.statista.com/statistics/273418/unadjusted-monthl...
$1m in the right assets could become $4m in youre scenario with the same purchasing power of the $1m before inflation.
In reality, you’ll probably lose some value though because the people holding cash that now have far less purchasing power, which torpedoes demand. Still better to be in assets than cash though.
Yes, the "place bets in a rigged casino to beat inflation" strategy.
A terrible idea for people over 50 that are looking for a rock solid retirement solution but when the government is robbing savers, one of the only options.
I think you mean creditors. Debtors is the opposite.