Moody's lowers outlook on US debt to 'negative'
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Would you care to spell out the connection between our military and preserving the dollar as reserve currency? It's not like foreign governments decide not to pay and we threaten them with our military - in fact, we're the borrowers and we're not threatening not to pay. So I don't see the connection.
Doesn't make any sense.
I don't know much about it but quick introspection leads me to the conclusion that it is partially because the US military does a lot to ensure free trade continues smoothly around the world. Without military might, any transport ship would be at risk of piracy.
But there are other factors. Most notably, the US dollar was once pegged to gold such that you could redeem a fixed amount of gold for a dollar. The US used this to sell the world on exchanging in dollars instead of gold because it was just as stable while being more efficient to exchange. Once the world switched to it, primarily to trade oil, FDR (decidely the worst president of all time) then pulled the rug out from everyone and decoupled the US dollar from gold. But everyone already traded in dollars and basically gave up their gold since they had the dollar guarantee, so it was not so easy going back.
The US is living way above its means. Most counties have to export goods in exchange for imports. The US only has to export printed dollars for tangible goods, and they can do so while ignoring that those printed dollars decrease the value of all existing dollars precisely because there is still demand for dollars driven by petroleum trade (hence the common term, petrodollar).
The adjacent sibling's comment is correct. Gadafi tried to take Libya out of the dollar market and into a gold based market, seeking to trade internationally with gold. The US knows that if this happens, the country will implode. The US has no goods to export and doesn't make hardly anything. If other countries switch to the gold standard, the US will almost instantly run out of goods, and will go straight into hyperinflation and die. I'm of the firm belief that the US will start WW3 if that ever happens so that they can throw up their hands when the dust settles and "reset" global debt if BRICS manages to achieve enough momentum or if any other countries try to start a gold trade standard.
The US is way beyond default. Our politicans say that the US always pays it's debts, but then they openly don't! For example, our politicans say we need to keep increasing the debt limit because otherwise we would default on our debt obligations. That doesn't make any sense! By increasing the debt limit, we are definitionally defaulting. We are choosing not to pay. We could pay, but then how could we give away more unconstitutional welfare? Show me one credit card company that will let you borrow more to pay them back. Tell them it's fine, you'll pay last month's bill so long as they let you borrow another $5k.
Peter Shiff's most recent podcast did a great job of describing how our past politicans described how we would fund social security in the future: we would never not pay, we would instead print and deliver, even if the money was worthless.
And the US extending its self imposed credit limit is completely reasonable. In that the alternative, which would be actually defaulting on debt obligations, salaries, and other ways that we have already promised, which be absolutely catastrophic. The US has never defaulted on its debt. There was a politically motivated shutdown that caused a few debt payments to be a few days late, but that's the worst of it. and even that was very damaging to the financial reputation of the US.
People are talking in this thread about how the military is why we are the world reserve currency. But the military is only a part of that. Our stability, predictability, and safety is what makes us a world reserve currency. Our court system is one of the most important parts of that as well.
There is another option: the US could cut spending.
In a refinance, you either (1) keep the same principal and adjust the rate or (2) take out a new loan for a greater amount than the former, using the new loan to pay off the former.
The US is not doing (1). Maybe you could argue that it's doing (2). But there is a key difference: the US is the only debter that can print its own cash. Hence why I think it's more appropriate to compare it to a credit card borrower that just keeps increasing the limit, using the new money to pay the interest.
The gov doesn't produce anything. It can only tax. The more it taxes, the less capital the private sector retains to produce. The less money the private sector has to produce, the lower the gdp. The US is not only devaluing it's currency by increasing the debt and then not taxing to pay it off (though here the devaluation acts as an indirect tax), but it's actively dampening the value of the underlying collateral. These things typically don't happen with refinances. I do not understand why anyone is still buying US treasuries.
Speaking of refinances, it would have been wise of the US to actually refinance its existing debt while rates were at historic lows and the existing debt had short maturity timelines, but Yellen didn't do that. Instead she ignored refinancing it to 30 years and kept it on deck to mature, forcing it to be refinanced at rates more than double what it was.
I argue that the US has defacto defaulted on its debt by devaluing the underlying collateral. No other entity gets to decide to pay back its loan by willfully deciding to pay less. Though there is some benefit to private borrowers, as the devaluation also means that private principal balances are worth less in real terms.
> Our stability, predictability, and safety is what makes us a world reserve currency. Our court system is one of the most important parts of that as well.
I'm interested in a source or your reasoning here. We aren't the only country with a western court system, and our Supreme Court routinely refuses to strike down unconstitutional laws (Medicare, social security, etc.).
As for social security and such not being constitutional, that strikes me as sovereign citizen, "taxes are voluntary" nonsense.
Article 1 Section 8 clearly enumerates the powers of the federal government. Nowhere is it granted the power to provide welfare of any kind. Nowhere is it granted the power to provide medical goods and services. Nowhere is it enumerated the power to provide educational funding. Nowhere is it enumerated the power to set federal minimum wages.
Our system is corrupt to the core.
If education and welfare programs aren't "general welfare", I don't know what is.
Your comment reads like a trump legal filing. Literally citing cases that disprove your point.
If it was enough to say that taxes, duties, and excises could be levied and collected to pay for "common defense and general welfare", Section 8 would conclude with that sentence. There would be no need to follow that with explicit ennumerations.
Furthermore, we have a federalist government wherein we have a federal government with limited power. 10A wouldn't exist if this wasn't the case. Allowing the federal gov to tax for "general welfare" gives it unlimited power, which contradicts the very structure of the government.
Proper intro to S1A8:
"""
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;
To borrow money on the credit of the United States;
To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;
To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;
...
"""
Instantly all three countries were labeled “axis of evil” status, and our government became very threatening to all three countries (most obviously Venezuela where we did what we could to destabilize their government and parked our navy right off their shore).
I used to think that it was worth our tax payers’ money to enforce US hegemony, but now I don’t think it makes sense anymore for the benefit of the US tax payer. It does benefit the pro-war industries, and if you work in the “defense” industry then I don’t blame you at all if you support our current system.
Anyway, my perspective is that times change, and we should now push back against the continuous war lobby in Washington, and come up for a new plan going into the future that optimizes for prosperity and security. I believe we achieve security by have the best trained and supplied military on the planet, but keep them at home unless Congress agrees to formally declare war, and going to war has some form of public consensus. I want to go back to being a representative democracy.
Russia was just beginning to be run by PutIn, but he wasn’t seen as antagonist to the USA yet. Ortega didn’t take power in Venezuela until 2007.
Another more recent example might be the US throwing its weight around in the South China Sea - thus trying to protect it interests (and the dollar).
https://www.forbes.com/sites/stuartanderson/2021/05/20/trump...
https://taxfoundation.org/research/all/federal/tariffs-trump...
> They have the largest world population and along with the BRICs could freeze out the US.
This is a very real possibility and what I believe is the most likely catalyst for ww3.
The current state of affairs is just a escalation beyond the status quo. Who knows, the next election might be another step above what has already happened.
Hillary conceded late that very night of her election. (Even though there was Russian interference in the election and a Republican head of the FBI spoke out against policy that they were reopening the emails investigation.)
Trump never conceded and continues to openly state that the election was totally rigged and stolen and illegitimate.
There is no comparison. Everyone has the right to claim it wasn't fair or that the other side cheated. But when the courts have decided, you accept the decision and you concede and you say you support the candidate that beat you and you wish for their success.
Then came Obama vs Romney. Obama won by a landslide, so people who opposed him said, "not my president".
When Trump won, his opposers did the same. People acted like foreign interference in elections was something new.
I'm not comparing as mucha as pointing out the logical escalation in rhetoric. How people communicate and act sets a precedent for future communications and action.
It would be good if the next election was as clean as Bush vs Clinton.
Only an insane country would use China as their reserve country. And Euros have their own problems.
So it’s kind of like countries can use dollars or nothing.
I remember taking economics classes in the 90s and the professor said the same think you did. About how not sure how much longer the US will be able to have such a privileged position. But still 25 years later we’re in the same boat.
There is zero chance that this debt gets paid off without massive inflation. Zero.
I mean, yeah.
It means either means that the government has done some shenanigans to get it there, devaluing the money supply, or our credit is so worthless that no one will even buy government bonds or do any work without up front payment.
There is a difference between having zero debt (which is not necessary nor a good idea) and balancing the budget while having a surplus (more money in than going out), which happened under Clinton and was squandered by Bush Jr.
It is possible to get there again with the right economy and a President and Congress that isn't starting endless wars or passing more tax cuts or dealing with a bank caused or a pandemic caused financial crisis.
We don't necessarily need to prevent tax cuts so long as spending cuts outpace them. The US tax rate is already absolutely absurd. I don't keep one cent I earn until Easter on an annualized basis.
All we need to do is radically cut federal (and hopefully state) spending.
But that is never going to happen so let's keep spending trillions of dollars keeping old people alive against their will and cutting taxes for people who don't need it. Most middle class families would benefit more from massively subsidized tuition to secondary educational institutes or loan forgiveness than the tax cuts which would pass.
We could also fund the IRS more so they can actually go after people who avoid taxes with convoluted schemes and attorneys because right now they don't bother and rely on taking most of the income from the middle class who pay the most and don't fight back.
1. Cut military spending
Fine by me. That's an easy spending reduction.
2. Reduce end of life medical spending
In a public sense, sure. But I see no reason to force privately insured or paying patients to die prematurely if it's against their wishes.
> and allow old people to place irrevocable 'when I can't decide for myself anymore off me' status on their medical directives
We already have legal basis for this; no constitutional amendment required. They are called Advance Directives, and a lawyer can help set it up. You get to describe in detail your wishes for care and nominate someone to execute them on your behalf.
3. Tax more
This needs to happen across the board now that we've firmly extended ourselves beyond our means. It should never have been allowed to get so bad.
> and cutting taxes for people who don't need it > rely on taking most of the income from the middle class who pay the most and don't fight back
Higher income earners will always pay more under the current schedule, but I see no reason to steal all of their money.
> Most middle class families would benefit more from massively subsidized tuition to secondary educational institutes or loan forgiveness than the tax cuts which would pass
We're trying to save money. This talks about spending more by providing education. Thankfully it is unconstitutional for the federal gov to provide education (not that it is currently stopping them).
Additionally, loan forgiveness is massively biased towards the wealthy. Only folks that thought a college degree had more reward than risk pursued them, and forgiving loans only helps those that delay repaying their debt or cannot afford to do so.
The real way to fix education expenses is to remove gov guaranteed loans and push them back to the private sector. Only then will costs come down as students will not be able to get a loan if there is no reasonable chance of repayment.
> We could also fund the IRS more so they can actually go after people who avoid taxes with convoluted schemes and attorneys
If you want to change laws, this is where your focus should be. If it's legal to reduce one's tax burden, then one should. I would argue it's their duty as a taxpayer to do so. Anyone is welcome to donate extra to the IRS. They'll never turn you down.
When did I ever even imply that? Please read thoughtfully.
> We already have legal basis for this; no constitutional amendment required. They are called Advance Directives, and a lawyer can help set it up.
Sorry, doesn't work. At all. I recommend asking a nurse working in a critical care unit how much those directives actually mean. In practice they are completely worthless because the hospital and doctors will do whatever will have the least chance of getting them sued -- which means they will listen to the family, and the family is not know for making good decisions in this regard.
Also, you are not allowed to kill yourself and doctors are not allowed to kill you. Remember Kevorkian? He was not killing mentally unwell people -- he was killing terminally ill people who looked forward to agony and despair in the time they had left, and they wanted to go with dignity on their own terms and he got put through the ringer in the courts and the press.
> Higher income earners will always pay more under the current schedule, but I see no reason to steal all of their money.
Is it stealing if the only reason they are able to make money and keep that money and use that money is because they have the protection of law, an infrastructure which works, and a stable monetary system and regulated economy, as well as an army to prevent anyone coming and taking everything from them? If they own a business and someone steals their IP and sells it under a different name, do they not get to utilize the courts and the government to shut that down ? Why should they not have to pay for that, it isn't free?
> Additionally, loan forgiveness is massively biased towards the wealthy. Only folks that thought a college degree had more reward than risk pursued them, and forgiving loans only helps those that delay repaying their debt or cannot afford to do so.
The problem is that every white collar job wants a 4 year degree for entry level work. We either need to bring back an apprenticeship system or we need to walk back the degree inflation or we need to give people options for cheap schools so they don't end up in debt for life. It is completely possible to publicly fund schools and have them be incredibly high quality and cost effective. Ask a European about that.
> If you want to change laws, this is where your focus should be. If it's legal to reduce one's tax burden, then one should. I would argue it's their duty as a taxpayer to do so. Anyone is welcome to donate extra to the IRS. They'll never turn you down.
I never said what they did was legal. I said they hide behind attorneys. If you are repo-ing a vehicle and one of them is on the street and the other is behind a fence with razor wire on it and a guard dog nearby which one will you take first? If you your employer runs of money to pay you to get the other one, then they won by intimidating you, not by having a paid off car.
[1] https://en.m.wikipedia.org/wiki/National_debt_of_the_United_... [2] https://en.m.wikipedia.org/wiki/Demographics_of_the_United_S...
The word ‘taxpayer’ refers to a different set of humans than the word ‘people’ does. Not all people are taxpayers. The point of breaking down taxes into a per-person metric is to understand how much each person will need to pay in net taxes in order to retire the debt. Why would you include people who are not net taxpayers?
Paying off this debt would be deflationary.
However the US doesn't seem to have the appetite for taxation and is instead printing new money to pay its debt. That is inflationary by definition: they are litetally inflating the money supply. This is what I see as the more likely case.
In practice, though, I suppose this would immediately be followed by a spending spree of new debt, like a boomer that just paid off their seadoo, so on the whole I suppose youre probably right.