Milestone marks years of government spending that grew under both Donald Trump and Joe Biden
US debt reached $40tn for the first time on Wednesday, the US treasury department said, after the government deficit doubled over the last decade.
The treasury’s latest debt balance showed $40.047tn on Tuesday afternoon, the highest in US history.
The milestone marks years of government spending that grew under both Donald Trump and Joe Biden. During his first term, Trump approved $8.4tn worth of debt, with a huge chunk going to Covid-19 relief spending, while Biden approved $4.3tn worth of debt, according to the Committee for a Responsible Federal Budget.
I recently watched a very educational Gary’s Economics video about government debt, called ‘to lower taxes we need to raise taxes’
Basically since Reagan and Thatcher, the super rich have accumulated real assets that used to be owned by the government and the middle class.
Under capitalism, wealth creates wealth in an exponential manner. Now the wealthy own almost everything.
Government services cost more because governments sold most of their assets and have to pay the private sector to deliver services. At the same time, the required level of services is higher because more of the population is living in poverty.
The only way to reverse this and escape feudalism is to tax wealth. But even this would be slow. There needs be a lump sum transfer of the majority of assets back to the people. We would have to seize >50% if assets on death.
And the penalty for companies breaking the law should be mandatory acquisition by the govt at severe discount.
Big corp is way too infiltrated into American politics for any tax or inheritance law reform to the detriment of the 1% to even be spoken about in the house or senate. It’s far too late to make a change “for the people”.
So, what happens when we start defaulting on our loans?
It sort of depends on what you mean by defaulting on loans. That could mean a few bonds are late being paid out or that whole interest payments are missed.
Regardless a default would risk things like (even more) rampant inflation or skyrocketing interest rates and even in the best case scenarios would likely make it very expensive to borrow money going forward.
You can’t default when you can literally just print more
Good luck buying food with the hyperinflation that’ll cause
I had an Econ professor in grad school who walked us through the calculation for exactly how much inflation it would cause to print enough cash to completely wipe the national debt. Granted this was 10 years ago, so it’d probably be worse now, but it was shockingly only ~15% inflation. That’s high, but not hyperinflation high. Especially since there are national interests in there having outstanding debt, so we’d never actually want to pay it all off like that.
Granted this was 10 years ago, so it’d probably be worse now, but it was shockingly only ~15% inflation. That’s high, but not hyperinflation high.
Did the Econ professor also talk about the knock-on consequences if we did this? “Printing money” devalues the currency. Yes, we’d be honoring our debt holders by paying them back in the same number of dollars we borrowed, but our actions in doing this would be handing them back dollars worth significantly less than the dollars they handed us initially. We’d be financially burning every US Bond holder in the entire world (and many of those being US citizens holding government debt).
No one in the entire world would ever lend us money again at the cheap rates we get today. That would cost us trillions of dollars in additional interest we’d have to pay on future debt because the risk of us firing up the money printer would be priced into the very high interest rates investors would demand to buy US debt after that.
Even if you own the money printer, you can effectively default if you print too much money. The result of overprinting devalues your own currency so much that it reaches insolvency.
Exhibit A:
In 2008 the government of Zimbabwe experience hyperinflation when the country tried to print piles of money to pay back its debts. Each subsequent printing devalued the currency even more until they were printing 1 Billion dollar notes.
Exhibit B:
Germany’s Weimar Republic in 1923, saddled by WWI payback debt, ran the money printer full blast devaluing the Reichsmark currency to the point of it being worthless. It included them printing the 500 million mark notes:
I remember when it topped one trillion for the first time and being freaked out. That wasn’t very long ago
Edit: I’m wrong, it hit a trillion in the 80s. I thought it was much more recently
and the last 10+trillion was done by both trump terms.
The 80s wasn’t really that long ago though
USA using the credmaxing method of money generating.
Gross
Fire up the money printing presses. Sorry to all the bagholders hoarding US dollars for retirement. I’m afraid we need to make your savings worth a fraction of what it once was.
The entire notion that an entity, which holds the exclusive monopoly on the supply of the currency its budget is denominated in, can in any way be considered to be exposed to debt in that currency which can be framed a problematic is, at best, farcical.
That ‘national debt’ is merely the tally of the legitimate quantity of the currency in existence. If it’s too much, they hold the equal monopoly of removing it through taxation, and the easiest and most effective point to do that is where it its concentration has accumulated the most.
Yeah that’s not where they’ll take it from though.
