Macroeconomics, the economy, inflation etc. *likely to be very dull*

Jezyboy

pblakeney said:

As I pointed out a few years ago we were borrowing not for investment, but just to keep our heads above water. It could never end well.

I'm not sure that the line between government day to day spending and "investment" is as clear as anyone would like it to be. If you're being cheeky a lot of it can be rephrased as investment. Day to day health spending...investment in the health of the population?

Sounds like I'm being awkward? Well maybe if we invested in the health of our population we wouldn't have so many claiming sickness benefits!

pblakeney

Jezyboy said:

pblakeney said:

As I pointed out a few years ago we were borrowing not for investment, but just to keep our heads above water. It could never end well.

I'm not sure that the line between government day to day spending and "investment" is as clear as anyone would like it to be. If you're being cheeky a lot of it can be rephrased as investment. Day to day health spending...investment in the health of the population?

Sounds like I'm being awkward? Well maybe if we invested in the health of our population we wouldn't have so many claiming sickness benefits!

To my mind investment (in this one example) would have been new hospitals, increase in surgeries, doctors, nurses etc.
I accept that investing in the health of our population is a good idea all round but there is not much the government can do* past giving advice, which the public ignore.

*A fat and sugar tax seems reasonable to me but is hugely unpopular.

rick_chasey

Another reminder:
https://www.newstatesman.com/long-reads/2020/05/top-economists-warn-uk-not-repeat-austerity-after-covid-19-crisis

Top economists warn the UK not to repeat austerity after the Covid-19 crisis
Mariana Mazzucato, Robert Skidelsky, Ann Pettifor, David Blanchflower and others on why the UK must not impose spending cuts in response to higher debt.

wallace_and_gromit

rick_chasey said:

But austerity cut a tonne of investment?

Undoubtedly, but cutting investment has no impact in the short term on the lives of those reliant on the state. The main political issue with austerity in the short term was the impact it was having on the "disadvantaged" e.g. the "Bedroom Tax", benefits freezes, cutting provision for childcare etc. Borrowing to invest would not have affected these in the short term.

So with regards to the short term impacts of austerity, the questions remain:

i) would it have been better to maintain borrowing at levels closer to its 2010 level (well north of 10% of GDP) to fund current expenditure?

ii) would it have been possible to borrow so cheaply if borrowing was to fund current expenditure? (The Kwazi budget fiasco was a pertinent reminder that the availability of sufficient gilt investors cannot always be relied on.)

The other point to keep in mind is that from the beginning of 2012 until early 2020, GDP growth averaged circa 2% pa, which compares well historically, so it's hard to argue that austerity adversely impacted economic growth, other than via theoretical arguments relating to borrowing to invest at low rates.

wallace_and_gromit

Jezyboy said:

pblakeney said:

As I pointed out a few years ago we were borrowing not for investment, but just to keep our heads above water. It could never end well.

I'm not sure that the line between government day to day spending and "investment" is as clear as anyone would like it to be. If you're being cheeky a lot of it can be rephrased as investment. Day to day health spending...investment in the health of the population?

Sounds like I'm being awkward? Well maybe if we invested in the health of our population we wouldn't have so many claiming sickness benefits!

Valid points! Sound government is never easy, even when undertaken by intelligent, rational folk who are committed to the betterment of society of a whole.

The pandemic has hopefully highlighted that investment in the dull aspects of healthcare such as early screening for easily fixable conditions is actually a remarkable "bang for your buck" when you factor in the indirect costs of not doing such things (i.e. materially more folk too ill to work).

wallace_and_gromit

rjsterry said:

wallace_and_gromit said:

rick_chasey said:

WHAT HAVE I BEEN SAYING

The McPherson quote is interesting as he refers to investment. That would have had no impact on the impact of "austerity" in the short term, as "austerity" was all about reducing current expenditure. Though investment 10+ years ago would doubtless have been useful if it could have got through the planning phase.

And as a completely unjustified thought, I'm not sure austerity would be the issue it is today had we had a functioning government, as opposed to a party that is permanently campaigning like it's the Opposition, for the last 7-8 years.

Not sure that's quite right. For example the BSF programme was cut (with a certain amount of glee) by Gove. Notwithstanding that, from my own experience things had rebounded pretty well as early as 2012. It's after 2016 that the government has stopped doing and focused on talking.

What's the BSF programme? Thanks.

focuszing723

The US has roughly 20 years to change course on the size of its debt, or else a default of some form will be unavoidable, a Penn Wharton Budget Model recently determined.

Analysts looked at the $26.3 trillion of US debt held by the public, which excludes money the federal government owes itself in the overall outstanding debt total of $33 trillion.

"Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation)," the report said. "Unlike technical defaults where payments are merely delayed, this default would be much larger and would reverberate across the US and world economies."

https://markets.businessinsider.com/news/bonds/us-debt-crisis-gdp-ratio-unsustainable-default-treasury-bond-crash-2023-10

There has to be a limit to the size and how far you can kick the can!

Thirty Three Trillion!!

focuszing723

https://twitter.com/BudgetModel
Look, it's got an X account and everything.

briantrumpet

wallace_and_gromit said:

rjsterry said:

wallace_and_gromit said:

rick_chasey said:

WHAT HAVE I BEEN SAYING

The McPherson quote is interesting as he refers to investment. That would have had no impact on the impact of "austerity" in the short term, as "austerity" was all about reducing current expenditure. Though investment 10+ years ago would doubtless have been useful if it could have got through the planning phase.

And as a completely unjustified thought, I'm not sure austerity would be the issue it is today had we had a functioning government, as opposed to a party that is permanently campaigning like it's the Opposition, for the last 7-8 years.

Not sure that's quite right. For example the BSF programme was cut (with a certain amount of glee) by Gove. Notwithstanding that, from my own experience things had rebounded pretty well as early as 2012. It's after 2016 that the government has stopped doing and focused on talking.

What's the BSF programme? Thanks.

https://www.buildingasaferfuture.org.uk/about-us/

wallace_and_gromit

briantrumpet said:

wallace_and_gromit said:

rjsterry said:

wallace_and_gromit said:

rick_chasey said:

WHAT HAVE I BEEN SAYING

The McPherson quote is interesting as he refers to investment. That would have had no impact on the impact of "austerity" in the short term, as "austerity" was all about reducing current expenditure. Though investment 10+ years ago would doubtless have been useful if it could have got through the planning phase.

And as a completely unjustified thought, I'm not sure austerity would be the issue it is today had we had a functioning government, as opposed to a party that is permanently campaigning like it's the Opposition, for the last 7-8 years.

Not sure that's quite right. For example the BSF programme was cut (with a certain amount of glee) by Gove. Notwithstanding that, from my own experience things had rebounded pretty well as early as 2012. It's after 2016 that the government has stopped doing and focused on talking.

What's the BSF programme? Thanks.

https://www.buildingasaferfuture.org.uk/about-us/

Thanks.

rjsterry

wallace_and_gromit said:

rjsterry said:

wallace_and_gromit said:

rick_chasey said:

WHAT HAVE I BEEN SAYING

The McPherson quote is interesting as he refers to investment. That would have had no impact on the impact of "austerity" in the short term, as "austerity" was all about reducing current expenditure. Though investment 10+ years ago would doubtless have been useful if it could have got through the planning phase.

And as a completely unjustified thought, I'm not sure austerity would be the issue it is today had we had a functioning government, as opposed to a party that is permanently campaigning like it's the Opposition, for the last 7-8 years.

Not sure that's quite right. For example the BSF programme was cut (with a certain amount of glee) by Gove. Notwithstanding that, from my own experience things had rebounded pretty well as early as 2012. It's after 2016 that the government has stopped doing and focused on talking.

What's the BSF programme? Thanks.

Sorry, Building Schools for the Future. https://en.m.wikipedia.org/wiki/Building_Schools_for_the_Future

There was also a lot of chat at the time about how 'wasteful' it was to not be procuring buildings at the absolute lowest possible price. I think it's fair to say that RAAC has highlighted the trade-offs of that approach to public buildings.

briantrumpet

wallace_and_gromit said:

briantrumpet said:

wallace_and_gromit said:

rjsterry said:

wallace_and_gromit said:

rick_chasey said:

WHAT HAVE I BEEN SAYING

The McPherson quote is interesting as he refers to investment. That would have had no impact on the impact of "austerity" in the short term, as "austerity" was all about reducing current expenditure. Though investment 10+ years ago would doubtless have been useful if it could have got through the planning phase.

And as a completely unjustified thought, I'm not sure austerity would be the issue it is today had we had a functioning government, as opposed to a party that is permanently campaigning like it's the Opposition, for the last 7-8 years.

Not sure that's quite right. For example the BSF programme was cut (with a certain amount of glee) by Gove. Notwithstanding that, from my own experience things had rebounded pretty well as early as 2012. It's after 2016 that the government has stopped doing and focused on talking.

What's the BSF programme? Thanks.

https://www.buildingasaferfuture.org.uk/about-us/

Thanks.

Ha. The danger of initialisms. I thought it must be building something, as it was RJS.

TheBigBean

wallace_and_gromit said:

rjsterry said:

wallace_and_gromit said:

rick_chasey said:

WHAT HAVE I BEEN SAYING

The McPherson quote is interesting as he refers to investment. That would have had no impact on the impact of "austerity" in the short term, as "austerity" was all about reducing current expenditure. Though investment 10+ years ago would doubtless have been useful if it could have got through the planning phase.

And as a completely unjustified thought, I'm not sure austerity would be the issue it is today had we had a functioning government, as opposed to a party that is permanently campaigning like it's the Opposition, for the last 7-8 years.

Not sure that's quite right. For example the BSF programme was cut (with a certain amount of glee) by Gove. Notwithstanding that, from my own experience things had rebounded pretty well as early as 2012. It's after 2016 that the government has stopped doing and focused on talking.

What's the BSF programme? Thanks.

BSF was essentially PFI, but the Labour model for schools. There were a number of differences though and a lot of it was about maximising quality for a fixed price. This compares with the early PFIs which were about minimising price for a service requirement. On this basis, BSF probably wasn't the right tool for the time, but they could and should have gone back to a more traditional PFI model and called it School Building for the Future or similar.

rjsterry

TheBigBean said:

wallace_and_gromit said:

rjsterry said:

wallace_and_gromit said:

rick_chasey said:

WHAT HAVE I BEEN SAYING

The McPherson quote is interesting as he refers to investment. That would have had no impact on the impact of "austerity" in the short term, as "austerity" was all about reducing current expenditure. Though investment 10+ years ago would doubtless have been useful if it could have got through the planning phase.

And as a completely unjustified thought, I'm not sure austerity would be the issue it is today had we had a functioning government, as opposed to a party that is permanently campaigning like it's the Opposition, for the last 7-8 years.

Not sure that's quite right. For example the BSF programme was cut (with a certain amount of glee) by Gove. Notwithstanding that, from my own experience things had rebounded pretty well as early as 2012. It's after 2016 that the government has stopped doing and focused on talking.

What's the BSF programme? Thanks.

BSF was essentially PFI, but the Labour model for schools. There were a number of differences though and a lot of it was about maximising quality for a fixed price. This compares with the early PFIs which were about minimising price for a service requirement. On this basis, BSF probably wasn't the right tool for the time, but they could and should have gone back to a more traditional PFI model and called it School Building for the Future or similar.

Not sure the procurement route is the issue.

TheBigBean

rjsterry said:

TheBigBean said:

wallace_and_gromit said:

rjsterry said:

wallace_and_gromit said:

rick_chasey said:

WHAT HAVE I BEEN SAYING

The McPherson quote is interesting as he refers to investment. That would have had no impact on the impact of "austerity" in the short term, as "austerity" was all about reducing current expenditure. Though investment 10+ years ago would doubtless have been useful if it could have got through the planning phase.

And as a completely unjustified thought, I'm not sure austerity would be the issue it is today had we had a functioning government, as opposed to a party that is permanently campaigning like it's the Opposition, for the last 7-8 years.

Not sure that's quite right. For example the BSF programme was cut (with a certain amount of glee) by Gove. Notwithstanding that, from my own experience things had rebounded pretty well as early as 2012. It's after 2016 that the government has stopped doing and focused on talking.

What's the BSF programme? Thanks.

BSF was essentially PFI, but the Labour model for schools. There were a number of differences though and a lot of it was about maximising quality for a fixed price. This compares with the early PFIs which were about minimising price for a service requirement. On this basis, BSF probably wasn't the right tool for the time, but they could and should have gone back to a more traditional PFI model and called it School Building for the Future or similar.

Not sure the procurement route is the issue.

You can change the procurement approach, but the difference between BSF and earlier PFIs remains. BSFs were expensive due to their design.

surrey_commuter

focuszing723 said:

The US has roughly 20 years to change course on the size of its debt, or else a default of some form will be unavoidable, a Penn Wharton Budget Model recently determined.

Analysts looked at the $26.3 trillion of US debt held by the public, which excludes money the federal government owes itself in the overall outstanding debt total of $33 trillion.

"Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation)," the report said. "Unlike technical defaults where payments are merely delayed, this default would be much larger and would reverberate across the US and world economies."

https://markets.businessinsider.com/news/bonds/us-debt-crisis-gdp-ratio-unsustainable-default-treasury-bond-crash-2023-10

There has to be a limit to the size and how far you can kick the can!

Thirty Three Trillion!!

somebody will be along to explain why you can't go bust if you if you have your own currency

surrey_commuter

Can somebody explain something please.

If interest rates are at historically low levels then I get the argument that it makes sense to borrow more. What I don't get is why you would think it a good idea to borrow at a longer term than you can get those low rates.

Why does this not matter?

rjsterry

TheBigBean said:

rjsterry said:

TheBigBean said:

wallace_and_gromit said:

rjsterry said:

wallace_and_gromit said:

rick_chasey said:

WHAT HAVE I BEEN SAYING

The McPherson quote is interesting as he refers to investment. That would have had no impact on the impact of "austerity" in the short term, as "austerity" was all about reducing current expenditure. Though investment 10+ years ago would doubtless have been useful if it could have got through the planning phase.

And as a completely unjustified thought, I'm not sure austerity would be the issue it is today had we had a functioning government, as opposed to a party that is permanently campaigning like it's the Opposition, for the last 7-8 years.

Not sure that's quite right. For example the BSF programme was cut (with a certain amount of glee) by Gove. Notwithstanding that, from my own experience things had rebounded pretty well as early as 2012. It's after 2016 that the government has stopped doing and focused on talking.

What's the BSF programme? Thanks.

BSF was essentially PFI, but the Labour model for schools. There were a number of differences though and a lot of it was about maximising quality for a fixed price. This compares with the early PFIs which were about minimising price for a service requirement. On this basis, BSF probably wasn't the right tool for the time, but they could and should have gone back to a more traditional PFI model and called it School Building for the Future or similar.

Not sure the procurement route is the issue.

You can change the procurement approach, but the difference between BSF and earlier PFIs remains. BSFs were expensive due to their design.

Are you talking about the physical design of the buildings or the design of the procurement route?

TheBigBean

rjsterry said:

TheBigBean said:

rjsterry said:

TheBigBean said:

wallace_and_gromit said:

rjsterry said:

wallace_and_gromit said:

rick_chasey said:

WHAT HAVE I BEEN SAYING

The McPherson quote is interesting as he refers to investment. That would have had no impact on the impact of "austerity" in the short term, as "austerity" was all about reducing current expenditure. Though investment 10+ years ago would doubtless have been useful if it could have got through the planning phase.

And as a completely unjustified thought, I'm not sure austerity would be the issue it is today had we had a functioning government, as opposed to a party that is permanently campaigning like it's the Opposition, for the last 7-8 years.

Not sure that's quite right. For example the BSF programme was cut (with a certain amount of glee) by Gove. Notwithstanding that, from my own experience things had rebounded pretty well as early as 2012. It's after 2016 that the government has stopped doing and focused on talking.

What's the BSF programme? Thanks.

BSF was essentially PFI, but the Labour model for schools. There were a number of differences though and a lot of it was about maximising quality for a fixed price. This compares with the early PFIs which were about minimising price for a service requirement. On this basis, BSF probably wasn't the right tool for the time, but they could and should have gone back to a more traditional PFI model and called it School Building for the Future or similar.

Not sure the procurement route is the issue.

You can change the procurement approach, but the difference between BSF and earlier PFIs remains. BSFs were expensive due to their design.

Are you talking about the physical design of the buildings or the design of the procurement route?

The buildings. The structure of BSF rewarded high quality building design over price.

Pross

rjsterry said:

wallace_and_gromit said:

rick_chasey said:

WHAT HAVE I BEEN SAYING

The McPherson quote is interesting as he refers to investment. That would have had no impact on the impact of "austerity" in the short term, as "austerity" was all about reducing current expenditure. Though investment 10+ years ago would doubtless have been useful if it could have got through the planning phase.

And as a completely unjustified thought, I'm not sure austerity would be the issue it is today had we had a functioning government, as opposed to a party that is permanently campaigning like it's the Opposition, for the last 7-8 years.

Not sure that's quite right. For example the BSF programme was cut (with a certain amount of glee) by Gove. Notwithstanding that, from my own experience things had rebounded pretty well as early as 2012. It's after 2016 that the government has stopped doing and focused on talking.

Yep, we were definitely on the up at a decent trajectory from early 2013 (having made a bizarre final set of redundancies in late 2012 that I suspect was more some kind of internal politics). Things started to slow down with the Brexit vote and its impact on confidence, had a brief pick up and has since been hit my actually leaving the EU, the pandemic (which I'm not going to blame the Government for) and then the prevarication / constant changing of policy that have been the trademark of this Government.

wallace_and_gromit

surrey_commuter said:

focuszing723 said:

The US has roughly 20 years to change course on the size of its debt, or else a default of some form will be unavoidable, a Penn Wharton Budget Model recently determined.

Analysts looked at the $26.3 trillion of US debt held by the public, which excludes money the federal government owes itself in the overall outstanding debt total of $33 trillion.

"Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation)," the report said. "Unlike technical defaults where payments are merely delayed, this default would be much larger and would reverberate across the US and world economies."

https://markets.businessinsider.com/news/bonds/us-debt-crisis-gdp-ratio-unsustainable-default-treasury-bond-crash-2023-10

There has to be a limit to the size and how far you can kick the can!

Thirty Three Trillion!!

somebody will be along to explain why you can't go bust if you if you have your own currency

You can't default if you have your own currency, so long as you don't do an Argentina and borrow in USD, as you can just print what you need to honour your commitments.

However, you can certainly **** your economy as if you print too much money then the exchange rate will fall, fuelling inflation and in extremis, hyper-inflation. Also in extremis, investors may decline to invest, forcing either extreme cutbacks, or borrowing in USD (or other "hard currencies").

With my cynical hat on, I think there was some "Leftieb*llox" (with credit to Stevo for the term) propagated when the Tories went for "austerity" in 2010 that sovereign issuers being free from default meant that there were no limits / downsides to borrowing.

rjsterry

TheBigBean said:

rjsterry said:

TheBigBean said:

rjsterry said:

TheBigBean said:

wallace_and_gromit said:

rjsterry said:

wallace_and_gromit said:

rick_chasey said:

WHAT HAVE I BEEN SAYING

The McPherson quote is interesting as he refers to investment. That would have had no impact on the impact of "austerity" in the short term, as "austerity" was all about reducing current expenditure. Though investment 10+ years ago would doubtless have been useful if it could have got through the planning phase.

And as a completely unjustified thought, I'm not sure austerity would be the issue it is today had we had a functioning government, as opposed to a party that is permanently campaigning like it's the Opposition, for the last 7-8 years.

Not sure that's quite right. For example the BSF programme was cut (with a certain amount of glee) by Gove. Notwithstanding that, from my own experience things had rebounded pretty well as early as 2012. It's after 2016 that the government has stopped doing and focused on talking.

What's the BSF programme? Thanks.

BSF was essentially PFI, but the Labour model for schools. There were a number of differences though and a lot of it was about maximising quality for a fixed price. This compares with the early PFIs which were about minimising price for a service requirement. On this basis, BSF probably wasn't the right tool for the time, but they could and should have gone back to a more traditional PFI model and called it School Building for the Future or similar.

Not sure the procurement route is the issue.

You can change the procurement approach, but the difference between BSF and earlier PFIs remains. BSFs were expensive due to their design.

Are you talking about the physical design of the buildings or the design of the procurement route?

The buildings.

Generally speaking, with construction you get what you pay for. Given the current fun with RAAC, I think it's fairly clear what the risk is of pursuing the lowest possible cost for long term capital projects. Compare the cost of building a school with a 60- or even 120-year design life with a school with a 30-year design life. It's unlikely the latter will be half the price of the former.

pblakeney

wallace_and_gromit said:

surrey_commuter said:

focuszing723 said:

The US has roughly 20 years to change course on the size of its debt, or else a default of some form will be unavoidable, a Penn Wharton Budget Model recently determined.

Analysts looked at the $26.3 trillion of US debt held by the public, which excludes money the federal government owes itself in the overall outstanding debt total of $33 trillion.

"Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation)," the report said. "Unlike technical defaults where payments are merely delayed, this default would be much larger and would reverberate across the US and world economies."

https://markets.businessinsider.com/news/bonds/us-debt-crisis-gdp-ratio-unsustainable-default-treasury-bond-crash-2023-10

There has to be a limit to the size and how far you can kick the can!

Thirty Three Trillion!!

somebody will be along to explain why you can't go bust if you if you have your own currency

You can't default if you have your own currency, so long as you don't do an Argentina and borrow in USD, as you can just print what you need to honour your commitments.

However, you can certainly **** your economy as if you print too much money then the exchange rate will fall, fuelling inflation and in extremis, hyper-inflation. Also in extremis, investors may decline to invest, forcing either extreme cutbacks, or borrowing in USD (or other "hard currencies").

Curious as to how this applies to the USA? 😉
Theoretically they can carry or regardless? I suspect there must be a breaking point.

TheBigBean

rjsterry said:

TheBigBean said:

rjsterry said:

TheBigBean said:

rjsterry said:

TheBigBean said:

wallace_and_gromit said:

rjsterry said:

wallace_and_gromit said:

rick_chasey said:

WHAT HAVE I BEEN SAYING

The McPherson quote is interesting as he refers to investment. That would have had no impact on the impact of "austerity" in the short term, as "austerity" was all about reducing current expenditure. Though investment 10+ years ago would doubtless have been useful if it could have got through the planning phase.

And as a completely unjustified thought, I'm not sure austerity would be the issue it is today had we had a functioning government, as opposed to a party that is permanently campaigning like it's the Opposition, for the last 7-8 years.

Not sure that's quite right. For example the BSF programme was cut (with a certain amount of glee) by Gove. Notwithstanding that, from my own experience things had rebounded pretty well as early as 2012. It's after 2016 that the government has stopped doing and focused on talking.

What's the BSF programme? Thanks.

BSF was essentially PFI, but the Labour model for schools. There were a number of differences though and a lot of it was about maximising quality for a fixed price. This compares with the early PFIs which were about minimising price for a service requirement. On this basis, BSF probably wasn't the right tool for the time, but they could and should have gone back to a more traditional PFI model and called it School Building for the Future or similar.

Not sure the procurement route is the issue.

You can change the procurement approach, but the difference between BSF and earlier PFIs remains. BSFs were expensive due to their design.

Are you talking about the physical design of the buildings or the design of the procurement route?

The buildings.

Generally speaking, with construction you get what you pay for. Given the current fun with RAAC, I think it's fairly clear what the risk is of pursuing the lowest possible cost for long term capital projects. Compare the cost of building a school with a 60- or even 120-year design life with a school with a 30-year design life. It's unlikely the latter will be half the price of the former.

That's not the trade off. It's not about design life or integrity of the building, but about the bells and whistles. Some of those could be purely cosmetic (is the building ugly?). Some might give slightly improved learning outcomes, but at too high a cost. For example, requirements for the level of natural lighting in a corridor. I am not an architect, so my examples may be flawed, but I'm sure you can imagine examples better than me.

wallace_and_gromit

pblakeney said:

wallace_and_gromit said:

surrey_commuter said:

focuszing723 said:

The US has roughly 20 years to change course on the size of its debt, or else a default of some form will be unavoidable, a Penn Wharton Budget Model recently determined.

Analysts looked at the $26.3 trillion of US debt held by the public, which excludes money the federal government owes itself in the overall outstanding debt total of $33 trillion.

"Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation)," the report said. "Unlike technical defaults where payments are merely delayed, this default would be much larger and would reverberate across the US and world economies."

https://markets.businessinsider.com/news/bonds/us-debt-crisis-gdp-ratio-unsustainable-default-treasury-bond-crash-2023-10

There has to be a limit to the size and how far you can kick the can!

Thirty Three Trillion!!

somebody will be along to explain why you can't go bust if you if you have your own currency

You can't default if you have your own currency, so long as you don't do an Argentina and borrow in USD, as you can just print what you need to honour your commitments.

However, you can certainly **** your economy as if you print too much money then the exchange rate will fall, fuelling inflation and in extremis, hyper-inflation. Also in extremis, investors may decline to invest, forcing either extreme cutbacks, or borrowing in USD (or other "hard currencies").

Curious as to how this applies to the USA? 😉
Theoretically they can carry or regardless? I suspect there must be a breaking point.

I only skimmed the article but I think the argument was that if the US doesn't sort itself out it will face an inevitable decline in exchange rate and rise in inflation, which the authors imply as a default. It's largely semantic tbh. A country that has defaulted on its foreign currency debts is up Sh*t Creek, as is a country subject to a constantly declining currency and high inflation, even if it hasn't defaulted.

pblakeney

wallace_and_gromit said:

pblakeney said:

wallace_and_gromit said:

surrey_commuter said:

focuszing723 said:

The US has roughly 20 years to change course on the size of its debt, or else a default of some form will be unavoidable, a Penn Wharton Budget Model recently determined.

Analysts looked at the $26.3 trillion of US debt held by the public, which excludes money the federal government owes itself in the overall outstanding debt total of $33 trillion.

"Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation)," the report said. "Unlike technical defaults where payments are merely delayed, this default would be much larger and would reverberate across the US and world economies."

https://markets.businessinsider.com/news/bonds/us-debt-crisis-gdp-ratio-unsustainable-default-treasury-bond-crash-2023-10

There has to be a limit to the size and how far you can kick the can!

Thirty Three Trillion!!

somebody will be along to explain why you can't go bust if you if you have your own currency

You can't default if you have your own currency, so long as you don't do an Argentina and borrow in USD, as you can just print what you need to honour your commitments.

However, you can certainly **** your economy as if you print too much money then the exchange rate will fall, fuelling inflation and in extremis, hyper-inflation. Also in extremis, investors may decline to invest, forcing either extreme cutbacks, or borrowing in USD (or other "hard currencies").

Curious as to how this applies to the USA? 😉
Theoretically they can carry or regardless? I suspect there must be a breaking point.

I only skimmed the article but I think the argument was that if the US doesn't sort itself out it will face an inevitable decline in exchange rate and rise in inflation, which the authors imply as a default. It's largely semantic tbh. A country that has defaulted on its foreign currency debts is up Sh*t Creek, as is a country subject to a constantly declining currency and high inflation, even if it hasn't defaulted.

Right then. At least someone agrees with my theory that America has been papering over the cracks for decades and it could all come tumbling down. The question is when?

rick_chasey

pblakeney said:

wallace_and_gromit said:

pblakeney said:

wallace_and_gromit said:

surrey_commuter said:

focuszing723 said:

The US has roughly 20 years to change course on the size of its debt, or else a default of some form will be unavoidable, a Penn Wharton Budget Model recently determined.

Analysts looked at the $26.3 trillion of US debt held by the public, which excludes money the federal government owes itself in the overall outstanding debt total of $33 trillion.

"Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation)," the report said. "Unlike technical defaults where payments are merely delayed, this default would be much larger and would reverberate across the US and world economies."

https://markets.businessinsider.com/news/bonds/us-debt-crisis-gdp-ratio-unsustainable-default-treasury-bond-crash-2023-10

There has to be a limit to the size and how far you can kick the can!

Thirty Three Trillion!!

somebody will be along to explain why you can't go bust if you if you have your own currency

You can't default if you have your own currency, so long as you don't do an Argentina and borrow in USD, as you can just print what you need to honour your commitments.

However, you can certainly **** your economy as if you print too much money then the exchange rate will fall, fuelling inflation and in extremis, hyper-inflation. Also in extremis, investors may decline to invest, forcing either extreme cutbacks, or borrowing in USD (or other "hard currencies").

Curious as to how this applies to the USA? 😉
Theoretically they can carry or regardless? I suspect there must be a breaking point.

I only skimmed the article but I think the argument was that if the US doesn't sort itself out it will face an inevitable decline in exchange rate and rise in inflation, which the authors imply as a default. It's largely semantic tbh. A country that has defaulted on its foreign currency debts is up Sh*t Creek, as is a country subject to a constantly declining currency and high inflation, even if it hasn't defaulted.

Right then. At least someone agrees with my theory that America has been papering over the cracks for decades and it could all come tumbling down. The question is when?

US economy still growing at 2% a year.

pblakeney

rick_chasey said:

pblakeney said:

wallace_and_gromit said:

pblakeney said:

wallace_and_gromit said:

surrey_commuter said:

focuszing723 said:

The US has roughly 20 years to change course on the size of its debt, or else a default of some form will be unavoidable, a Penn Wharton Budget Model recently determined.

Analysts looked at the $26.3 trillion of US debt held by the public, which excludes money the federal government owes itself in the overall outstanding debt total of $33 trillion.

"Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation)," the report said. "Unlike technical defaults where payments are merely delayed, this default would be much larger and would reverberate across the US and world economies."

https://markets.businessinsider.com/news/bonds/us-debt-crisis-gdp-ratio-unsustainable-default-treasury-bond-crash-2023-10

There has to be a limit to the size and how far you can kick the can!

Thirty Three Trillion!!

somebody will be along to explain why you can't go bust if you if you have your own currency

You can't default if you have your own currency, so long as you don't do an Argentina and borrow in USD, as you can just print what you need to honour your commitments.

However, you can certainly **** your economy as if you print too much money then the exchange rate will fall, fuelling inflation and in extremis, hyper-inflation. Also in extremis, investors may decline to invest, forcing either extreme cutbacks, or borrowing in USD (or other "hard currencies").

Curious as to how this applies to the USA? 😉
Theoretically they can carry or regardless? I suspect there must be a breaking point.

I only skimmed the article but I think the argument was that if the US doesn't sort itself out it will face an inevitable decline in exchange rate and rise in inflation, which the authors imply as a default. It's largely semantic tbh. A country that has defaulted on its foreign currency debts is up Sh*t Creek, as is a country subject to a constantly declining currency and high inflation, even if it hasn't defaulted.

Right then. At least someone agrees with my theory that America has been papering over the cracks for decades and it could all come tumbling down. The question is when?

US economy still growing at 2% a year.

By borrowing and papering over the cracks though.
I could be wrong, and from a practical perspective hope I am, but maybe not.

rick_chasey

What are the cracks?

focuszing723

rick_chasey said:

What are the cracks?

Printing money, asset bubble?