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Comment by CygnusX-1 | Hacker News Reader

Why compare debt against GDP? For a person, debt to income ratio is important, but I think debt to assets is a better indicator of how likely the debt is likely to be paid off (vs being defaulted.) For the US, if you divide debt ($33T) by assets ($270T), that ratio is just 12%. This ratio will grow into a big problem only in a massively deflationary scenario when the value of all assets goes down a lot while debt stays constant. In an inflationary scenario, 12% is not a problem.

I like Taleb's writings and agree with him on most things, but seems to me that the sky is not falling.

(Obtained the debt and asset values from Google Bard)

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Your asset base is in truth meaningless (and often very inflated). The true measure is your ability to pay this debt and in order to pay this debt you need to generate revenue, at a country scale this revenue is GDP.

A bank's first think to look at is affordability, are you able to actually pay the installments on this. Recoverability of initial capital is secondary and only matters in a liquidation event, you don't want to have to worry about a country-wide liquidation event (in truth they can print money, so long as your debts denominated in your currency and they accept this).

> Your asset base is in truth meaningless

If you believe this, do you also believe that debt is meaningless, because you can print money to pay it?

Perhaps my statement is an exaggeration but it is a secondary concern. An asset doesn't mean much if isn't productive in some way.

The very best metric is what % of the budget is spent servicing debt, for the US it is around 15%.

On top of that the US government debt is mostly owned by US organizations and citizens; it is assets owned by US taxpayers.

A very different situation from the typical debt/inflationary crisis in developed countries where you have a foreign-owned debt and limited tax base; these cause serious credibility issues for governments, which in turn further push up rates.

Doesn't this mean also you need to get an estimate on a more complex number, which is how much of US assets can be liquidated in a way that would help you pay the dept?

I know that this is true in case of companies and individuals but how this will play our with governments? I don't know. It does not own the majority of these assets but we are talking about government dept as liabilities. Yes, they will not default as they can keep printing money (and compete with cosmic inflation rate /s) but it wouldn't help the economy and will make matter worse with time.

But you will need to fight inflation which in part means you raise interest rate which in turn increase dept service and that would make you more dept. I probably wrong but I don't feel like this is a black and white situation.

No, it wouldn't. Like most companies, the US "is" what it's people do. That's where the actual value is. From plumbers fixing pipes to soldiers fighting in Africa to carrier groups in the pacific. The buildings and assets inside the US support that, but actually represent zero of the value.

So essentially nothing can be liquidated. There's exceptions, like raw materials (from gold to oil), but not many.

The problem is that the other side, valuing the US as the total value of oil in US soil, plus all other assets, is also bullshit.

You also can't sell it or buy it. For example, the natural resources of North Korea far exceed it's GDP. And yet, if I go to 10 banks, and offer kim 10 times North Korean GDP, could I buy North Korea? No ... they would not sell, nor would North Koreans honor the sale if it was made. So the value of all state organisation ... is zero. But for most countries that is the only thing valuable about them.

I have no idea why you would ask Google Bard about the financial position of the US government. The Treasury department publishes financial statements for public consumption just as law requires. Here you go: https://www.fiscal.treasury.gov/reports-statements/financial...

The last reporting year is 2022 and assets were ~$4.9 trillion and liabilities ~$39 trillion.

$27 trillion compares to a GNP of $26 trillion.

If we owe a year's income, we are in trouble.

You are comparing the debt of the government to the assets of the country...

For USA debts, it is falling. The last 3 years Fed need to buy the left over new bills unsold. In the past, 100% being sold to public and sovereign. But the last 3 years spooked US Treasury as routinely only half sold. Janet even had to fly over to China to "kowtow" to Xi to not sell but buy. It wasn't reported much in the west, but widely in the east and exceedingly humiliating if you able to read the chinese reporting. Essentially now, Fed is directly printing money to American public without going through hoops. Coincidentally the last 3 years inflation exceed way higher than 2% even though interest has been increased from 0% to 4+%.

> exceedingly humiliating if you able to read the chinese reporting

Given that what passes for “exceedingly humiliating” is extremely different between the two cultures, this seems more like packaging the transaction to be more palatable for a domestic Chinese audience that dislikes the idea of their leadership doing business with America.

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