Modern Monetary Theory has stated that high public debt loads isn't a problem, and frankly so far it doesn't seem like the markets will ever care. Until it does, and then it will be a disaster but both Japan and the US will never pay off its debts.
You mean beside a lost 30 years, one of the lowest rates of family formation, and a high rate of suicide among young people?
Sure.
Anyway lets be real, the reason why sudden think pieces on the debt are coming out is that it's going to be election season soon, and a Democrat is the incumbent.
Which is comparable with South Korea.
And looks to be tied to poor work-life balance, lack of workplace flexibility, lack of parental leave, high cost of living etc rather that macro-enonomic issues like debt levels.
https://fictitiouscapital.substack.com/p/money-myths-and-deb...
https://fictitiouscapital.substack.com/p/5
https://fictitiouscapital.substack.com/p/8-the-global-reserv...
Instead, everyone pays equally through inflation, and retirees get screwed as their savings get inflated to dust and they have no income to make it up.
Maybe that's what you want.
But if you think you can just magically fund the government on unicorns because the market is dumb, I have some 1000 year T-bills at -10% yield to sell you.
No, its not. MMT proponents tend to support progressive income tax and wealth taxes more than currently exists. The MMT observation that the only real constraint on fiscal policy is the monetary impacts, not fiscal balance, also means that fiscal policy tools are appropriate responses to the traditional triggers for monetary action. Need to suck money out of the economy to kill inflation: instead of raising interest rates, add supplemental high-end income taxes (without added spending.) Need to pump money into the economy because of sluggish activity? Adopt immediate low-end benefits (without additional taxes).
> But if you think you can just magically fund the government on unicorns because the market is dumb
That’s not what MMT believes.
MMT believes that the response of the market (monetary effects) are the only constraint on government tax and spending balance, that the idea of a fixed purse (the “fisc” in “fiscal”) that must be filled by taxes or borrowing is only true with commodity, not fiat, money, and that cosplaying commodity money when you are working with fiat just results in an inaccurate view of the policy landscape.
1 - The Risk rate. (How do avoid you simply defaulting on me)
2 - The opportunity cost. (How much more is Person A willing to pay me than Person B)
3 - The time value. (How much do I need to make on this loan to make it worth the payoff time).
While you can argue that an efficient financial system with robust liquidity should drive 1 & 3 to 0. It does not make sense for 2 to be non-zero. When the opportunity cost is zero, it directly implies that capital holders have vastly more dollars than there are viable loans, or that the cost of changing a human beings task from their current task to a different task has gone to zero.
Neither of these statements should be true, capital should be distributed such that capital holders do not have more money than they can lend - and there should always be a non-zero opportunity cost from picking up someone from their current task. The latter point directly ties to the potential for wage growth in the economy.
Modern Monetary Theory basically enshrines the fact that scamming the general public of its wealth is a perfectly fine practice, especially when they don't notice it's happening, boiling frog style.
It also only works if - like in the case of Japan - the debt is held internally to a country, a captive audience if you will, which has no choice but to be ridden roughshod by its rulers.
Is the US sovereign debt held internally? I don't know, but my bet would be that a large chunk isn't.
Although that may no matter as long as they are the planet's hegemon, which sort of makes any debt holder internal.
But that latter status quo may not last very much longer.
2. Will the people who are owed the money have the political power/influence to be able to force the issue?
3. The issue forced, will there be any feasible mechanism of paying it back other than raising taxes rapidly and horrifically?
4. Given that this is a public (United States) that is massively in debt (to the tune of nearly twice our annual GDP), will they be able to absorb that hit on top of everything else?
I'm not sure I subscribe to the school of economics that says money is magical and debt never has to be paid back, but if I'm wrong in that, I'd love to here what part of this I misunderstand.
Well...debt generally has to be paid back, but unlike people countries don't get old and retire.
Countries have an unending supply of new taxpayers being born every year.
There's no hard limit to how much a country can renew and restructure its debts.
Only the market's belief in a country's future economic prospects affect the price of rolling the debts forward, through the issuing of new state-backed bonds.
They actually do. Japan is currently starting to retire now... to the point that there are fewer of them today than there were last year. The demographic implosion.
We're not that far behind them.
> Countries have an unending supply of new taxpayers being born every year.
This seems unlikely. In every western nation on Planet Earth, the fertility rate is going down, quite quickly, with no indication that it will plateau. There is no indication of how circumstances would have to change for it to rebound. There may be none, but if they are, they're likely the sort of circumstances unlikely to be found within the conditions we're discussing (improving economy, higher wages, etc).
There is a finite supply of new taxpayers, a relatively small one, and there is no evidence that it is unending.
> There's no hard limit to how much a country can renew and restructure its debts.
Like when Zimbabwe just prints new money with more zeroes on it? We'll all be starving quadrillionaires?
Sure, games can be played. But eventually people catch on that it's all a game, and they weren't ever going to win it. And then they stop playing... not because they don't want to, but because they can't anymore.
> Only the market's belief
You're using the word "belief". Is this a joke?
Belief is an important part of scams and cons. Is this a big con game?
> through the issuing of new state-backed bonds.
Who would ever buy another treasury in the circumstances we are talking about? I just asked what would happen when the government can't make good on the already extant treasury notes.
Saying "they'll sell more treasuries to pay those back"... am I just too dumb to get the joke and everyone here on Hackernews is laughing at me?