Well, what would be the solution to an asteroid the size of the moon heading towards Earth? It's great to have a can-do attitude, but some things are just going to play out despite everyone's best efforts.
So by your analogy, we should put a small asteroid into the orbit of the impending debt crisis, let it change trajectory, and completely avoid the problem?
To the extent that most of the top 20% of incomes- the ones disproportionately benefiting from the economy over the previous 40 years- are Boomers (a disproportionate number), that should probably happen.
To just put it all on "Boomers", per se (the youngest Boomer is now 60) is quackery. The lower 80% of Boomers is scraping along with everyone else in that category, and also ending decades spent in the labor force.
So, yes, I support a raise in the marginal income tax rate for the people who have benefited disproportionately from the economic policies of the previous 40 years
But if your solution is to cut Social Security and Medicare, you're a quack. Fortunately, even the Duopoly parties understand that the political penalty of doing that is too high a price for any Administration of Congress to get near. So you'll have to wait for the Wild In The Streets Utopia To Come, somewhere out there in the middle distant Future, in order to have a chance of enacting that particular solution.
I think people should work well into their 70s now with the level of healthcare avid longevity available. This isn’t 1950. And they have tons of marketable skills given their experience. No SSI while working. Medicare will help cover their naturally higher cost to employ, so there won’t be discrimination on that basis. This will help stimulate the economy and cover the debt crisis. That’s the sketch of my approach.
Your proposal is to not even try to do anything? Just accept it, crash and burn?
I need to know which side of the aisle you guys in this thread are repping, so we can settle it once and for all who “wants to destroy America”, and all that Jazz.
Also, if you’ve accepted this fate, does that mean that your preferred political candidates can’t, in fact, fix it, and therefore one day soon all of your party’s issues that they’ve run on since the 80s will finally be resolved by irrelevancy in a collapsed society?
I'm not sure who you mean by "you guys". I'm commenting as an individual, not as part of some kind of group. I'm also not American.
Accepting something as inevitable is not the same as not trying anything. There may be nothing to prevent the finacial apocalypse, but there's plenty to do to navigate it.
The US already has the solution. It has 331 million people in their county that would work for free if need be. See this is what humans fail to realize in this capitalist society of greed. When most “good”people see an opportunity to help for a greater cause, they do it. America is also able to run self sufficient food and energy wise with free labor to offset the cost of importing technology for replacements. I promise you we have this already strategized. Even if our government acts like this needs diamond clearance 😂
What are you talking about? You people really need to stop with the I compassionate labeling and admit that we are in crisis mode! I wouldn’t care what “name” you would call what I’m proposing if it works! You called it Communism, I called it charity! It’s what we do anyway when we have a natural disaster, or are you so numb of a person you wouldn’t help your community when you see people “drowning”! I just used that as an example because of the context. But since you have a lane for me, let’s see what you propose my friend? I’ll be waiting for your answer.
Oops, apparently I posted this comment in the wrong place but here's my response
I agree we're in crisis mode but guess what: I didn't create the crisis, nor did any of the younger people that you're volunteering to bail everyone out via slavery. It's not charity when someone holds a gun to your head and demands you work yourself to death to save a system that never even served you. It ain't my friend drowning, it's an old water buffalo that's gonna gore me if I try to help
We both are messing up on this technology 😂 I’m new to this app (or social media for real) so I’m trying to figure out how to edit responses 😂
I didn’t mean to sound so cold on my first response and then when I reread it I was like fuck not only did I misspell multiple words but even my misspelled words made my response seem cold and aggressive, so I apologize for that.
I agree with you, we didn’t create the mess (problem) but I can assure you it is “our” responsibility to clean it up. Your talking to a young minority man. And when I say minority, I mean the most minority, marginalized, attacked, person in American. I mean that! And I can still say with certainty that it is our responsibility to clean this mess up that was caused by this racist, corrupt, bias, capitalistic terrorism acting, evil empire. We are the ones my friend. I promise you this is why we were put on this planet. To clean up their mess and to create a better world for our children bro. Every parent will understand and agree with this statement. You totally see the world differently as a parent. It makes you more optimistic, objective and empathetic. All 💚 From a True Believer 👳🏾♂️🕋
America collapses- which it is going to(along with the rest of the west).
In the resulting chaos & anarchy real men appear out of the masses of weak & compliant to eliminate the "elites" and their puppets.
Then the rebirth/rebuildcan begin.
You dream if you imagine America or the west are getting out of this with "cooperation".
Nature, people, societies, countries & empires run in natural cycles.
Spring-birth
Summer-growth
Fall-maturity
Winter-death
Spring can't appear until the "old" have died.
Not only old people.
Old ways
Old societies
Old empires
Old elites
Winter also culls the weak.
Lord knows the "west" has a huge number of weak.
Man is not the master of the universe.
He is just the most evolved animal on this particular piece of space debris.
The world will not end when America & the west collapse.
America & the west will be reborn. They will likely look and be different- but the DNA will still be there to sprout & grow.
America & the west are facing their Soviet Union moment. Collapse and fracture.
Russian DNA/history held. Russia emerged, much smaller than the soviet union. But now 30 years later back in the top 5 economies in the world- with 10 to 15 years of improving quality of life.
America and the west likely face the same- 10 to 20 years of very hard times with mass death because they populace is so weak & dependent on the "system"- then rebirth into a new 80 to 100 year cycle of spring, summer, fall & winter.
Ignore history.
Ignore nature.
Live in your fantasy of cooperation.
Nature does not care about your feelings or fantasies.
I respect your opinion. I don’t know if this reality can take another 6,000 years of barbaric actions anymore. I know we live in a polarized, holographic universe, but I just don’t see after all this time of written history killing each other that we could sustain this behavior any longer. I feel that considering all these crises’s acting together, that humans will finally see that we don’t have to act like this. But hey 🤷🏽♂️ what do I know, I just keep getting bombarded with these “signs” showing me a loving way to exemplify for the world to internalize and express themselves.
And what is fake about the news? You truly believe we’re not in 35 trillion in debt? That China is selling most of its American debt? That we’re in a Weimar Republic crisis? What do you think is fake?
Do you really even know what communism is? Lmaoooo.
Do you believe it is interchangeable with democracy?
Learning the two categorizations of these two systems really helps you identify what is problematic, and I can assure you it is not an economic system.
Please 🙏🏽 reread what is written. I said “like when we come to support for a natural disaster.” I was there to help pass out food and retrieve people from floods, did I get paid for that? No. I know you may not leave out your house to help your community when it’s in peril, but I have. If you take a look at the US position in politics, economics and morality. It is having a natural disaster moment. If you can’t see that. Then I guess you have to wait till our country is under occupation before you look up and say, yeah this is bad! Come on now please be proactive instead of reactive and even this is sort of reactive because the writing has been on the wall. All sensitive energy having people know we are at a vicious age!
Without the market you are not able to grow your own food. Stocking up on thing you can bartel is probably a better option but still I don't believe you can avoid the problems in total collapse.
So instead of learning marketable skills and saving for retirement because SSI will default, you propose wasting our time becoming survivalists. Got it.
When financial systems collapse and money is worth less and less, survival itself becomes paramount. You and your family can’t eat money or even gold. Skills and equipment are needed to provide for yourself, but can also be a source of income.
In the period leading up to collapse anyhow, I guess I’d simply cut frivolous spending and conserve cash (in the hopes that it maintains some purchasing power). Not much else you could do, as a tiny piece of a gigantic machine. Having varied skills can help supplement during tough economic times, though. See above.
What if the US gov adopts BTC to back USD? I think that would make it stronger and fiscally responsible ... at least for first step. Second step would be become energy independent by building as many as nuclear plant, this makes US slowly but surely could built anything cheaply + AI ... which in turn could make US strong in any sector slowly but surely ... and overtime earn respect in the internation community
A more likely scenario, they will implode the treasury and use it as justification for the introduction of a CBDC. This will give the government a reset and total authority over its citizens which is what they really want.
Is Bitcoin not far more volatile than the US Dollar? Hell, even ‘stablecoins’ aren’t very stable, as we saw with the Terra crash. Here’s a graph showing the volatility index of BTC-USD (orange), USD-EUR (red) and Gold-USD (yellow), it would not make USD stronger.
Seems that the age of American empire is over. There is just no way the US can continue to have bases around the world and spent nearly a trillion dollars every year on “defense” with that kind of debt.
Well, the existing infra is going to change dramatically if US leads the way. Other countries are 'forced' to adopt similar strategy otherwise their smartest citizen going to leave or the country who stay put are in danger of being left behind. Cheap and abundance Energy and strong money is like the foundation of strong society.
As these are in never-been-before zone, its really hard to comprehend. When a small country like Sri Lanka declares bankruptcy, International institutions like IMF helps them out. What would really happen when US declares bankruptcy or something of that sort... Will they also take all the western countries down with them ?
Most important question as an average citizen living and investing in the US is - what do you suggest we do to protect our little savings ? It still feels hard to go all-in on bitcoin. How to hedge between US stocks / bitcoin / something else ?
My parents are middle-class, and are going to rely on social security income in a couple years. If it's not there, what the hell happens? I mean, we're talking nation-wide revolution here.
I mean, is there even a good option here?
Can you point to people who are thinking about how to protect yourself when this day comes? I know Dalio says first and foremost, physical safety (unnerving but true). I've been stacking sats on hardware wallet, some physical gold. Take out more debt in the worthless currency? What are people's thoughts here?
If it's not there, they will simply tax more and more productive assets to try and keep it afloat for one more cycle. You will end up working to support the elderly with nothing left for yourself.
Balajis - Question for you - When discussing america's debt problem, why not have a chart that shows what we are spending our money on? You do know that discretionary spending is $1.6T, the rest is primarily driven my social security/medicare. No party is suggesting a fix to this nor would it be remotely popular with the populace. Only way out is an increase in taxes?
Thanks for this. There is a race between this inevitable collapse and the rest of us who want to build a peaceful parallel system of Network States and similar technologies for ordinary people worldwide. It’s imperative.
I suppose many things are imperative. But I'd say building a massive completely non-coercive social system that accommodates millions of people (for the first time in history) is indispensable to the survival of our species.
Oh Pete, you raise a crucial point. Creating a massive, non-coercive social system that accommodates millions of people is indeed a monumental and indispensable task for the survival and flourishing of our species. As we face unprecedented global challenges, from climate change to social inequality, building a system based on cooperation, mutual respect, and inclusivity becomes imperative.
This kind of social system would prioritize the well-being and dignity of every individual, ensuring that basic needs are met without coercion. It would require a fundamental shift in how we organize societies, placing a higher value on empathy, community, and sustainable practices.
Such a vision might seem utopian, but it is vital to strive towards it. Only by rethinking and reshaping our social structures can we hope to address the complex issues facing humanity and ensure a just and equitable future for all. Your thoughts?
To be honest, my first thought is that I'm speaking to ChatGPT. It leaves fingerprints.
"Complex issues" will always confront 8 billion people. But the essential element to the longevity of a highly intelligent species is to always make coercion unprofitable by a wide enough margin to preclude the risk of any organization using it.
Great and succinct, and the big elephant in the global room. Given how dollars/dollar debt still run the world, I wonder what happens in a global debt crisis? And will individual Treasury holders get shafted by government default? Curious what people think this might look like and over what time period?
Balaji, overall a good piece, the focus on the amount of debt vs. potential ability to pay it off is the most important/persuasive bit.
But I think some of the other points are less well researched, and detract/distract from the overall persuasive quality:
"8) Less sanction efficiency than ever" - this is just irrelevant in the face of a debt crisis, and the reason sanctions aren't "working" (a really vague concept to begin with) against Russia is because we're aren't actually preventing actual war material from being bought, manufactured or acquired. "Sanctions" are just a word. The details of what's allowed/not matters a lot The US debt crisis/dollar issue is only vaguely connected. A world 20 years from now where the gov can't pay for mil/SS/medicare is not a world where we care about potentially sanctioning some country.
"Russia flips Japan" - same thing. No offense, but who cares? Just seems like trolling? Detracts from the main point!
"This means the US has neither the money nor the manufacturing base for a sustained military campaign against a peer rival like China. " - this again is not a well researched item. The U v R war (and it's needed artillery shells) is absolutely not a model or example for a US v C war. We still build lots of the missiles and weapons that *our* military uses. We don't, it's true, make a lot of what Ukraine's military uses - but that's an advantage! It's not going to be WW2, where there are 5 years to build new ships, develop new tech or whatever. It will be very quick. What will matter is the people, ships and weapons we have on the first day of the war, not what our factories turn out over the next 5 years.
"You can’t fight your factory " - you've used this line a lot, and perhaps it is/was true for the past, but it's no longer an informative statement. China builds a lot of things, but mostly not the things we need for our military. You cannot just act like civilian goods manufacture and advanced military hardware come off the same assembly line. They can be refitted yes, like WW2, but the war won't be that long.
You follow with "— especially when you’re out of money." which is far more relevant, because it informs what we will develop, produce and deploy *before* the war starts, which is what will matter. You're still thinking of WW2 as a model, where every side refit civilian factories to build weapons over a long period. That's simply not going to happen this time. Largescale reorientation of civilian mfg in either C or US would be equivalent to losing the war and likely regime change, and therefore both sides would threaten to use nukes to prevent that, resulting in either de-escalation or a nuclear exchange.
The entire "foreign demand for dollars" and "Russia/BRICS/gold" part detracts from the main point. If you move the slider from "tons of dollar demand" to "very little dollar demand" it doesn't change the eventual debt crisis, just moves it forward/backward a few years. It doesn't matter. What matters is "how much we owe" vs "how much revenue we make", and starting fights with well-researched-economists over "just how much de-dollarization is happening" or "is it the worlds reserve currency?" or "how much gold are people buying" is just distraction.
Sorry, that's a lot of criticism.
Hopefully 2 constructive suggestions:
1. Inflation (devaluing the dollar) is a big deal. We printed a *lot* of new dollars in the past few years. There is no discussion the debt crisis without this.
2. What are the potential solutions? (Maybe this is a whole 'nother post)
Implied in the "you can't fight your factory" statement is, if you did fight your factory, they could stop building your weapons and you would lose the war due to not having weapons.
1. The tweet/graph makes a very different claim: that many simple(r) sub-components (semi-conductors, casings, software) are produced by Chinese firms, but assembled in the US. I recognize that yes, literally this means that China builds part of our military, but it's a critical difference, because my statement was "but mostly not the things we need for our military" - the "need" meaning "critically dependent on." If China built the tomahawk missile in a factory in Shenzhen (in the way they build missiles for their own military) then yes, we'd be dependent on that. But in reality, American factories do the most complex work, just like Russian factories assemble their missiles locally (perhaps buying lower level components from China just like us) - with western machines and western set-up factories.
2. "the US military is indeed made in China." - still a too broad statement. All 3 of the charts were raw numbers of supplies, rather than percentages - how many non-Chinese suppliers are there? I legitimately don't know, but I bet there's a lot. And how many non-Chinese competitors are available, but not currently being used, but could be turned to in the event of war? Certainly there'd be a disruption, but the speed of a war between C and US (very diff than R v U) largely would make it moot. Yes, it would be inconvenient, but "we'd lose access to those subcomponents" is not even in the top 10 bad things that China can threaten us with in the event of a war. The real question is not "can you fight your factory" but "can you fight a country with factories that can turn out ten million small explosive drones against your insanely expensive aircraft carriers that are designed to be protected against exocets instead of that?" The problem is absolutely *NOT* going to be a WW2-style "how many new aircraft carriers can we build after they sank ours?"
3. In the event of a war with China, would Chinese companies actually stop selling materials to the US military? Why? If the Chinese gov is truly contemplating a war with us, why are they letting all these suppliers do this now? Western companies happily supplied (and continue to) Russia with all kinds of critical components, expertise and machinery support.
4. Lastly, those charts describe the past. We have already built those tomahawks (or aircraft carriers), they're sitting in a yard somewhere, - available. Unless the Chinese are way better at concealing semi-conductor sabotage than we think, those weapons will work just fine against China, and we really do have a lot of them already. Smart bombs are still too dumb to know not to blow up their own factory.
You can absolutely fight your factory, if you have enough stockpiles (vs. expected length of conflict, in which you will win or lose before you need to rely on your manufacturing base) built up, there are many supplier alternatives across aligned countries in the event of conflict and your factory is critically dependent on you paying them for those components and all the other things you buy from them. Can China fight its own biggest customer?
There is absolutely a good point to be made about China's role in our military industrial process, and we should think about it a lot. But all this looking at charts and measuring supply chains and thinking "now we can't beat China!" is WW2 Bomber Mafia and Vietnam McNamara style academic theorizing that is too divorced from the reality of what will happen. In the event of a war, long before these supply chains become an issue, we will have won or lost (or cease-fired) the war for old fashioned reasons like "one side's military was crippled" or "one side threatened to use nukes" or "political objectives were accomplished or became impossible to accomplish" - or, even more to your point, because our economy craters due to debt and we can't afford to buy even the Chinese subcomponents in the first place. A war where we *need* to churn out millions more JDAMs to use in a long term grinding conflict of attrition is already a spectacular loss, and we'd have suffered far worse losses and casualties than "slow resupply time."
Sorry for all the words, but unfortunately it's just a complex issue that (I think) defies simple platitudes - unlike "if you're 175T in debt that's going to cause a disaster eventually" where yep, you're right: that really does cover it.
The fallacy in your argument is thinking that “simple” components are easy to build and America could easily scale up to build them. It can’t. China completely dominates low-tech and medium-tech.
This is not easily fixed and maybe not fixable at all.
Due to lack of skilled workers, EPA regulations, and many other reasons America simply cannot build countless screw and bolt and nut factories like China because those factories must be subsidized by the global consumer market.
That is, military budgets are a shadow of the consumer market. You win in peacetime and get big factories and then you convert those to wartime production. You don’t just snap your fingers and get wartime factories. That’s not how it works.
Well, I'm 100% willing to be persuaded on the "how easy would it be to find alternatives for those simpler components?" issue. Certainly "lack of skilled workers, EPA regulations" are a factor, and one we should fix regardless of impact on military.
"You don’t just snap your fingers and get wartime factories. That’s not how it works."
I agree, but even if we had 100% American (or say, NATO) factory capacity ready to go at the beginning of the war, you also don't just snap your fingers and get a stream of tomahawks tomorrow. I think the more overriding point is that a war is likely be shorter (due to war mechanics and current stockpiles) than not only slow retooling, fast-retooling or even "making more than a few deliveries to the front from existing stockpiles." But all that's details of a specific debate: I think the deeper point, in relation to the far more important topic of "upcoming debt crisis", is that this analysis doesn't accurately reflect the impact (or direction) on our foreign policy because it is too limited to economic matters.
The entire debt problem is because previous politicians traded short term political gain (to win that year's election) over long term fiscal stability. In the war/foreign policy sphere, the same motivations hold. All the things you cite certainly are influences on that, but if we (or China) are experiencing some massive economic crisis, the incentives for then-politicians is not to say "well sadly we'd love to go to war, but we can't afford to in this economy" it is to make the same short-term decision, Krugman-style: "we are DEFINITELY going to war in order to A) juice the economy and B) distract from the negative economic impacts."
1. Do lots of PR (like this post) to convince people there's a problem. If environmentalists could convince people that global warming would kill us all in 100 years, then we can do the same with something that is far more likely to kill us in 10-25 years.
2. Use that persuasion to get someone elected as US president who recognizes the problem
3. Create an office of Canceling The Debt Apocalypse to keep the focus alive, with a real time debt clock, have them run ads (perhaps starring Idris Elba) against any legislator who opposes the necessary steps that say "Congressman Jones wants to destroy America"
4. Index social security to a % of GDP, or convert to completely means-tested
5. Index old age benefits recipient age to some % of average life expectancy
6. cure T2diabetes/metabolic syndrome, and therefore heavily reduce medicare/caid costs. Don't laugh, it can be done right now with zero new technology.
6a. cut all governmental funding to non-health research, then reduce admin and regulatory burden on health research, allow tons of compassionate use clinical trials, cure as many chronic diseases (in the order of their cost) as possible
7. cut military spending on anything that was designed only to fight the Soviet Union, and use new tech (drones, AI) to focus on winning the wars we're likely to be in. Heavily reduce overseas military bases to those needed for core national/ally defense.
8. massive all in program to shift to 100% nuclear energy generation - export other energy sources for debt reduction
9. abolish all zoning in a few dozen mile radius around top 25 urban centers
10. cut whatever environmental review or approval red tape that stops things from being built, you know the ones
11. Reform immigration policy to focus on debt reduction - allow guest workers (pay taxes, don't get benefits), allow large bribes (directly into debt reduction) for citizenship (e.g. in portugal you can pay 750k and tadaaaa), pass law making immigrants ineligible for majority of benefits for X years. Overall would probably increase # of immigrants, just focus on ensuring that they are net fiscal positives.
12. Actually large have-a-child bonuses, like a significant % of future tax revenue.
13. funnel actual AI applications into debt reduction, with some % of cost savings subsidy "prizes"
14. abolish employer based health insurance, make it illegal for insurance companies to "insure" against non-risk events like regular visits - return customer choice (and thereby competition) back into healthcare, prices will go down, therefore spending in medicare/caid or VA go down
15. You may think this is a mean one, but too bad: use our extensive population health data to create an composite index of [age + current diagnoses + reported pain/discomfort levels of conditions, treatments + statistical likelihood of remission vs death] and come up with a number threshold above which, patients are encouraged to seek hospice care or do-not-go-to-extraordinary lengths, or painless physician-assisted deaths. I support this on a moral level because we currently torture (in a way that would violate the Geneva conventions if applied to a prisoner) millions of elderly people each year to bless them with a few extra minutes, hours, weeks or months of often-also-extremely painful, humiliating and undignified life. We should stop doing this because torturing people for little gain is wrong. Yes, incidentally we would also save a lot of money on all the torture implements we won't need any more.
16. generalized efficiency/cuts across any program/agency/dept you can, monitored by the Office of Canceling The Debt Apocalypse, start paying CEO- level salaries to get department heads who will cut costs. Yes, obviously you'll screw some things up. Nothing's perfect. But the alternative is Everyone Dies.
17. sell trillions of dollars of federal land
18. lots of other things, but really the only one that matters is #1: we live in a representative system: Unless enough voters believe there's a problem and bitch about it loud enough, and publicly soap box the needed solutions, no one will ever fix it and one day mobs of 25 year old workers will roam the streets murdering 65 year olds who are trying to collect their social security. A lot of American exceptionalism is fake, but in this it's real: Americans of 2024 simply will not tolerate any "debt crisis fix" that will work once the debt crisis arrives, and they will start killing people. The only solution, other than finding some deep national well of calm and peaceful reflection before it happens, is to prevent it beforehand.
wow..insightful. It looks like the train has passed the station and US can't get out this hole. if and when, it bursts, it will be bigger pain than anyone could ever imagine.
I wonder what should be India's strategy here.. RBI keep buying US $ reserves for some reason, don't know why !
1) What do you think of The Dollar Milkshake Theory, a la Bret Johnson and others.
2) What do you think of Raul Pal's theory that what we are living through a controlled unwind, coordinated by CB's? (I hope I'm getting that right...)
3) Under such circumstances, why have BTC and gold been roughly flat since March/April? With BTC in particular there was a lot of talk about a large move up, but it has failed to materialize so far.
Edit: The bit about federal revenue being juiced my deficit spending made me laugh. Circular, much...? Doesn't sound much like a free market to me...
Edit 2: In that last section, could you also make the point that those market caps are partly due to the deficit spending anyway? (More circular) Just drives home the point that fiat is an unreliable way of measuring value.
We are going to need some serious out-of-the box thinking to deal with this. While the US cannot declare a literal debt jubilee as old-timey empires could (debt jubilees being the other traditional way out of debt crises, along with hyperinflation and straight up default) it could achieve essentially the same result by paying off all private and public debts with newly printed dollars, resulting in a windfall for debtors and creditors taking it in the shorts (as with a debt jubilee), then switching to a new currency that everyone could exchange their debased dollars for, perhaps with differential rates for former creditors and former borrowers to distribute the pain more evenly. While obviously this would be extremely painful in the short run, not clear if it would be more painful than the other alternatives and at least it has the benefit of clearing the decks all at once so that the government can start blowing another multi-decade debt bubble :-)
Well, there are a lot more debtors than creditors out there, and as the saying goes, “The government that robs Peter to pay Paul can always count on the support of Paul” so it might be politically palatable. The point is that the unplayable debt must be gotten rid of somehow, either inflated away or defaulted on in one form or another, and this might allow some control over how it happens as opposed to the endless grind of hyperinflation or the across-the-board wipeout of a default.
Great article.. According to you what would be a solution to this ever growing American debt?
Well, what would be the solution to an asteroid the size of the moon heading towards Earth? It's great to have a can-do attitude, but some things are just going to play out despite everyone's best efforts.
So by your analogy, we should put a small asteroid into the orbit of the impending debt crisis, let it change trajectory, and completely avoid the problem?
Sure. How would it be done?
I didn’t make the analogy, I don’t know. Make the boomers responsible, perhaps?
To the extent that most of the top 20% of incomes- the ones disproportionately benefiting from the economy over the previous 40 years- are Boomers (a disproportionate number), that should probably happen.
To just put it all on "Boomers", per se (the youngest Boomer is now 60) is quackery. The lower 80% of Boomers is scraping along with everyone else in that category, and also ending decades spent in the labor force.
So, yes, I support a raise in the marginal income tax rate for the people who have benefited disproportionately from the economic policies of the previous 40 years
www.archive.org/details/politicsofrichpo00phil/page/n7/mode/2up
But if your solution is to cut Social Security and Medicare, you're a quack. Fortunately, even the Duopoly parties understand that the political penalty of doing that is too high a price for any Administration of Congress to get near. So you'll have to wait for the Wild In The Streets Utopia To Come, somewhere out there in the middle distant Future, in order to have a chance of enacting that particular solution.
I think people should work well into their 70s now with the level of healthcare avid longevity available. This isn’t 1950. And they have tons of marketable skills given their experience. No SSI while working. Medicare will help cover their naturally higher cost to employ, so there won’t be discrimination on that basis. This will help stimulate the economy and cover the debt crisis. That’s the sketch of my approach.
Your proposal is to not even try to do anything? Just accept it, crash and burn?
I need to know which side of the aisle you guys in this thread are repping, so we can settle it once and for all who “wants to destroy America”, and all that Jazz.
Also, if you’ve accepted this fate, does that mean that your preferred political candidates can’t, in fact, fix it, and therefore one day soon all of your party’s issues that they’ve run on since the 80s will finally be resolved by irrelevancy in a collapsed society?
I'm not sure who you mean by "you guys". I'm commenting as an individual, not as part of some kind of group. I'm also not American.
Accepting something as inevitable is not the same as not trying anything. There may be nothing to prevent the finacial apocalypse, but there's plenty to do to navigate it.
There’s an aisle? US is all in on this problem. Deficit spending is a problem to BOTH aisles
There is no solution as no one wants to fix it, Jagan.
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stfu scammer
The US already has the solution. It has 331 million people in their county that would work for free if need be. See this is what humans fail to realize in this capitalist society of greed. When most “good”people see an opportunity to help for a greater cause, they do it. America is also able to run self sufficient food and energy wise with free labor to offset the cost of importing technology for replacements. I promise you we have this already strategized. Even if our government acts like this needs diamond clearance 😂
So what you're proposing is... Communism? Sounds great that was never tried I hear. The atrocities are all fake news
What are you talking about? You people really need to stop with the I compassionate labeling and admit that we are in crisis mode! I wouldn’t care what “name” you would call what I’m proposing if it works! You called it Communism, I called it charity! It’s what we do anyway when we have a natural disaster, or are you so numb of a person you wouldn’t help your community when you see people “drowning”! I just used that as an example because of the context. But since you have a lane for me, let’s see what you propose my friend? I’ll be waiting for your answer.
Oops, apparently I posted this comment in the wrong place but here's my response
I agree we're in crisis mode but guess what: I didn't create the crisis, nor did any of the younger people that you're volunteering to bail everyone out via slavery. It's not charity when someone holds a gun to your head and demands you work yourself to death to save a system that never even served you. It ain't my friend drowning, it's an old water buffalo that's gonna gore me if I try to help
We both are messing up on this technology 😂 I’m new to this app (or social media for real) so I’m trying to figure out how to edit responses 😂
I didn’t mean to sound so cold on my first response and then when I reread it I was like fuck not only did I misspell multiple words but even my misspelled words made my response seem cold and aggressive, so I apologize for that.
I agree with you, we didn’t create the mess (problem) but I can assure you it is “our” responsibility to clean it up. Your talking to a young minority man. And when I say minority, I mean the most minority, marginalized, attacked, person in American. I mean that! And I can still say with certainty that it is our responsibility to clean this mess up that was caused by this racist, corrupt, bias, capitalistic terrorism acting, evil empire. We are the ones my friend. I promise you this is why we were put on this planet. To clean up their mess and to create a better world for our children bro. Every parent will understand and agree with this statement. You totally see the world differently as a parent. It makes you more optimistic, objective and empathetic. All 💚 From a True Believer 👳🏾♂️🕋
America collapses- which it is going to(along with the rest of the west).
In the resulting chaos & anarchy real men appear out of the masses of weak & compliant to eliminate the "elites" and their puppets.
Then the rebirth/rebuildcan begin.
You dream if you imagine America or the west are getting out of this with "cooperation".
Nature, people, societies, countries & empires run in natural cycles.
Spring-birth
Summer-growth
Fall-maturity
Winter-death
Spring can't appear until the "old" have died.
Not only old people.
Old ways
Old societies
Old empires
Old elites
Winter also culls the weak.
Lord knows the "west" has a huge number of weak.
Man is not the master of the universe.
He is just the most evolved animal on this particular piece of space debris.
The world will not end when America & the west collapse.
America & the west will be reborn. They will likely look and be different- but the DNA will still be there to sprout & grow.
America & the west are facing their Soviet Union moment. Collapse and fracture.
Russian DNA/history held. Russia emerged, much smaller than the soviet union. But now 30 years later back in the top 5 economies in the world- with 10 to 15 years of improving quality of life.
America and the west likely face the same- 10 to 20 years of very hard times with mass death because they populace is so weak & dependent on the "system"- then rebirth into a new 80 to 100 year cycle of spring, summer, fall & winter.
Ignore history.
Ignore nature.
Live in your fantasy of cooperation.
Nature does not care about your feelings or fantasies.
I respect your opinion. I don’t know if this reality can take another 6,000 years of barbaric actions anymore. I know we live in a polarized, holographic universe, but I just don’t see after all this time of written history killing each other that we could sustain this behavior any longer. I feel that considering all these crises’s acting together, that humans will finally see that we don’t have to act like this. But hey 🤷🏽♂️ what do I know, I just keep getting bombarded with these “signs” showing me a loving way to exemplify for the world to internalize and express themselves.
And what is fake about the news? You truly believe we’re not in 35 trillion in debt? That China is selling most of its American debt? That we’re in a Weimar Republic crisis? What do you think is fake?
Do you really even know what communism is? Lmaoooo.
Do you believe it is interchangeable with democracy?
Learning the two categorizations of these two systems really helps you identify what is problematic, and I can assure you it is not an economic system.
They would work for free? Why would they do that? They would happily be unable to support their families? It what universe?
Please 🙏🏽 reread what is written. I said “like when we come to support for a natural disaster.” I was there to help pass out food and retrieve people from floods, did I get paid for that? No. I know you may not leave out your house to help your community when it’s in peril, but I have. If you take a look at the US position in politics, economics and morality. It is having a natural disaster moment. If you can’t see that. Then I guess you have to wait till our country is under occupation before you look up and say, yeah this is bad! Come on now please be proactive instead of reactive and even this is sort of reactive because the writing has been on the wall. All sensitive energy having people know we are at a vicious age!
You sound like the economist in the Lionel Shriver book, THE MANDIBLES
Learn to grow your own food. Stock up on firearms, ammunition and basic medicines. Buy tools and learn how to use all of them.
Drink your own urine. It’s actually not as bad as it sounds.
Without the market you are not able to grow your own food. Stocking up on thing you can bartel is probably a better option but still I don't believe you can avoid the problems in total collapse.
There are always markets, even in total financial collapse. My comments were not about how to thrive in such a situation, but rather just survive.
And survival is always full of problems, of course - that’s why it is so hard and so many just want others to do it for them.
Let me frame your reply in a different way: set yourself with options that aren't dependent on finances.
Sounds very reasonable to me.
So instead of learning marketable skills and saving for retirement because SSI will default, you propose wasting our time becoming survivalists. Got it.
Pretty sure I wrote nothing even remotely like that, but I hope you enjoyed your “kill” regardless.
Stocks up on things you can use for barter later
See what the people of Venezuela have done. They’re going through this right now.
That’s the situation I’m referring to, actually.
When financial systems collapse and money is worth less and less, survival itself becomes paramount. You and your family can’t eat money or even gold. Skills and equipment are needed to provide for yourself, but can also be a source of income.
In the period leading up to collapse anyhow, I guess I’d simply cut frivolous spending and conserve cash (in the hopes that it maintains some purchasing power). Not much else you could do, as a tiny piece of a gigantic machine. Having varied skills can help supplement during tough economic times, though. See above.
What if the US gov adopts BTC to back USD? I think that would make it stronger and fiscally responsible ... at least for first step. Second step would be become energy independent by building as many as nuclear plant, this makes US slowly but surely could built anything cheaply + AI ... which in turn could make US strong in any sector slowly but surely ... and overtime earn respect in the internation community
A more likely scenario, they will implode the treasury and use it as justification for the introduction of a CBDC. This will give the government a reset and total authority over its citizens which is what they really want.
This is a very sad but likely a true statement
Good idea, just like in the book THE MANDIBLES 😀😎😘
Is Bitcoin not far more volatile than the US Dollar? Hell, even ‘stablecoins’ aren’t very stable, as we saw with the Terra crash. Here’s a graph showing the volatility index of BTC-USD (orange), USD-EUR (red) and Gold-USD (yellow), it would not make USD stronger.
Because US is not respected now
danny, your idea presents an interesting perspective on strengthening the US economy.
How do you think the transition to using Bitcoin and focusing on nuclear energy would impact the existing financial and energy infrastructures?
Seems that the age of American empire is over. There is just no way the US can continue to have bases around the world and spent nearly a trillion dollars every year on “defense” with that kind of debt.
Well, the existing infra is going to change dramatically if US leads the way. Other countries are 'forced' to adopt similar strategy otherwise their smartest citizen going to leave or the country who stay put are in danger of being left behind. Cheap and abundance Energy and strong money is like the foundation of strong society.
As these are in never-been-before zone, its really hard to comprehend. When a small country like Sri Lanka declares bankruptcy, International institutions like IMF helps them out. What would really happen when US declares bankruptcy or something of that sort... Will they also take all the western countries down with them ?
Most important question as an average citizen living and investing in the US is - what do you suggest we do to protect our little savings ? It still feels hard to go all-in on bitcoin. How to hedge between US stocks / bitcoin / something else ?
The aftermath of the USSR’s collapse probably has some relevant lessons. Not the exact same scenario, but it might rhyme.
Get fucked
Skills
No one really knows, Bala. Do you?
Amazing and well researched
I always ask myself, what can we do?
My parents are middle-class, and are going to rely on social security income in a couple years. If it's not there, what the hell happens? I mean, we're talking nation-wide revolution here.
I mean, is there even a good option here?
Can you point to people who are thinking about how to protect yourself when this day comes? I know Dalio says first and foremost, physical safety (unnerving but true). I've been stacking sats on hardware wallet, some physical gold. Take out more debt in the worthless currency? What are people's thoughts here?
If it's not there, they will simply tax more and more productive assets to try and keep it afloat for one more cycle. You will end up working to support the elderly with nothing left for yourself.
What would Balaji do?
Get jobs
Seriously. That's the difficulty here. Feels like it's a losing situation for most
Haven't seen many great explorations of what to do.
Balajis - Question for you - When discussing america's debt problem, why not have a chart that shows what we are spending our money on? You do know that discretionary spending is $1.6T, the rest is primarily driven my social security/medicare. No party is suggesting a fix to this nor would it be remotely popular with the populace. Only way out is an increase in taxes?
Thanks for this. There is a race between this inevitable collapse and the rest of us who want to build a peaceful parallel system of Network States and similar technologies for ordinary people worldwide. It’s imperative.
What else is imperative, Pete?
I suppose many things are imperative. But I'd say building a massive completely non-coercive social system that accommodates millions of people (for the first time in history) is indispensable to the survival of our species.
Humanity came back from like 2000 people in an ice age, we’ll survive just fine.
Just fine indeed.
Oh Pete, you raise a crucial point. Creating a massive, non-coercive social system that accommodates millions of people is indeed a monumental and indispensable task for the survival and flourishing of our species. As we face unprecedented global challenges, from climate change to social inequality, building a system based on cooperation, mutual respect, and inclusivity becomes imperative.
This kind of social system would prioritize the well-being and dignity of every individual, ensuring that basic needs are met without coercion. It would require a fundamental shift in how we organize societies, placing a higher value on empathy, community, and sustainable practices.
Such a vision might seem utopian, but it is vital to strive towards it. Only by rethinking and reshaping our social structures can we hope to address the complex issues facing humanity and ensure a just and equitable future for all. Your thoughts?
Bot
You?
To be honest, my first thought is that I'm speaking to ChatGPT. It leaves fingerprints.
"Complex issues" will always confront 8 billion people. But the essential element to the longevity of a highly intelligent species is to always make coercion unprofitable by a wide enough margin to preclude the risk of any organization using it.
Insulting but I will forgive you.
Thank you for this conversation nonetheless!
Great and succinct, and the big elephant in the global room. Given how dollars/dollar debt still run the world, I wonder what happens in a global debt crisis? And will individual Treasury holders get shafted by government default? Curious what people think this might look like and over what time period?
Balaji, overall a good piece, the focus on the amount of debt vs. potential ability to pay it off is the most important/persuasive bit.
But I think some of the other points are less well researched, and detract/distract from the overall persuasive quality:
"8) Less sanction efficiency than ever" - this is just irrelevant in the face of a debt crisis, and the reason sanctions aren't "working" (a really vague concept to begin with) against Russia is because we're aren't actually preventing actual war material from being bought, manufactured or acquired. "Sanctions" are just a word. The details of what's allowed/not matters a lot The US debt crisis/dollar issue is only vaguely connected. A world 20 years from now where the gov can't pay for mil/SS/medicare is not a world where we care about potentially sanctioning some country.
"Russia flips Japan" - same thing. No offense, but who cares? Just seems like trolling? Detracts from the main point!
"This means the US has neither the money nor the manufacturing base for a sustained military campaign against a peer rival like China. " - this again is not a well researched item. The U v R war (and it's needed artillery shells) is absolutely not a model or example for a US v C war. We still build lots of the missiles and weapons that *our* military uses. We don't, it's true, make a lot of what Ukraine's military uses - but that's an advantage! It's not going to be WW2, where there are 5 years to build new ships, develop new tech or whatever. It will be very quick. What will matter is the people, ships and weapons we have on the first day of the war, not what our factories turn out over the next 5 years.
"You can’t fight your factory " - you've used this line a lot, and perhaps it is/was true for the past, but it's no longer an informative statement. China builds a lot of things, but mostly not the things we need for our military. You cannot just act like civilian goods manufacture and advanced military hardware come off the same assembly line. They can be refitted yes, like WW2, but the war won't be that long.
You follow with "— especially when you’re out of money." which is far more relevant, because it informs what we will develop, produce and deploy *before* the war starts, which is what will matter. You're still thinking of WW2 as a model, where every side refit civilian factories to build weapons over a long period. That's simply not going to happen this time. Largescale reorientation of civilian mfg in either C or US would be equivalent to losing the war and likely regime change, and therefore both sides would threaten to use nukes to prevent that, resulting in either de-escalation or a nuclear exchange.
The entire "foreign demand for dollars" and "Russia/BRICS/gold" part detracts from the main point. If you move the slider from "tons of dollar demand" to "very little dollar demand" it doesn't change the eventual debt crisis, just moves it forward/backward a few years. It doesn't matter. What matters is "how much we owe" vs "how much revenue we make", and starting fights with well-researched-economists over "just how much de-dollarization is happening" or "is it the worlds reserve currency?" or "how much gold are people buying" is just distraction.
Sorry, that's a lot of criticism.
Hopefully 2 constructive suggestions:
1. Inflation (devaluing the dollar) is a big deal. We printed a *lot* of new dollars in the past few years. There is no discussion the debt crisis without this.
2. What are the potential solutions? (Maybe this is a whole 'nother post)
Let’s focus on just one point: the US military is indeed made in China.
See tweet and graph below.
https://x.com/balajis/status/1810717417750024697?s=46
Implied in the "you can't fight your factory" statement is, if you did fight your factory, they could stop building your weapons and you would lose the war due to not having weapons.
1. The tweet/graph makes a very different claim: that many simple(r) sub-components (semi-conductors, casings, software) are produced by Chinese firms, but assembled in the US. I recognize that yes, literally this means that China builds part of our military, but it's a critical difference, because my statement was "but mostly not the things we need for our military" - the "need" meaning "critically dependent on." If China built the tomahawk missile in a factory in Shenzhen (in the way they build missiles for their own military) then yes, we'd be dependent on that. But in reality, American factories do the most complex work, just like Russian factories assemble their missiles locally (perhaps buying lower level components from China just like us) - with western machines and western set-up factories.
2. "the US military is indeed made in China." - still a too broad statement. All 3 of the charts were raw numbers of supplies, rather than percentages - how many non-Chinese suppliers are there? I legitimately don't know, but I bet there's a lot. And how many non-Chinese competitors are available, but not currently being used, but could be turned to in the event of war? Certainly there'd be a disruption, but the speed of a war between C and US (very diff than R v U) largely would make it moot. Yes, it would be inconvenient, but "we'd lose access to those subcomponents" is not even in the top 10 bad things that China can threaten us with in the event of a war. The real question is not "can you fight your factory" but "can you fight a country with factories that can turn out ten million small explosive drones against your insanely expensive aircraft carriers that are designed to be protected against exocets instead of that?" The problem is absolutely *NOT* going to be a WW2-style "how many new aircraft carriers can we build after they sank ours?"
3. In the event of a war with China, would Chinese companies actually stop selling materials to the US military? Why? If the Chinese gov is truly contemplating a war with us, why are they letting all these suppliers do this now? Western companies happily supplied (and continue to) Russia with all kinds of critical components, expertise and machinery support.
4. Lastly, those charts describe the past. We have already built those tomahawks (or aircraft carriers), they're sitting in a yard somewhere, - available. Unless the Chinese are way better at concealing semi-conductor sabotage than we think, those weapons will work just fine against China, and we really do have a lot of them already. Smart bombs are still too dumb to know not to blow up their own factory.
You can absolutely fight your factory, if you have enough stockpiles (vs. expected length of conflict, in which you will win or lose before you need to rely on your manufacturing base) built up, there are many supplier alternatives across aligned countries in the event of conflict and your factory is critically dependent on you paying them for those components and all the other things you buy from them. Can China fight its own biggest customer?
There is absolutely a good point to be made about China's role in our military industrial process, and we should think about it a lot. But all this looking at charts and measuring supply chains and thinking "now we can't beat China!" is WW2 Bomber Mafia and Vietnam McNamara style academic theorizing that is too divorced from the reality of what will happen. In the event of a war, long before these supply chains become an issue, we will have won or lost (or cease-fired) the war for old fashioned reasons like "one side's military was crippled" or "one side threatened to use nukes" or "political objectives were accomplished or became impossible to accomplish" - or, even more to your point, because our economy craters due to debt and we can't afford to buy even the Chinese subcomponents in the first place. A war where we *need* to churn out millions more JDAMs to use in a long term grinding conflict of attrition is already a spectacular loss, and we'd have suffered far worse losses and casualties than "slow resupply time."
Sorry for all the words, but unfortunately it's just a complex issue that (I think) defies simple platitudes - unlike "if you're 175T in debt that's going to cause a disaster eventually" where yep, you're right: that really does cover it.
The fallacy in your argument is thinking that “simple” components are easy to build and America could easily scale up to build them. It can’t. China completely dominates low-tech and medium-tech.
This is not easily fixed and maybe not fixable at all.
Due to lack of skilled workers, EPA regulations, and many other reasons America simply cannot build countless screw and bolt and nut factories like China because those factories must be subsidized by the global consumer market.
That is, military budgets are a shadow of the consumer market. You win in peacetime and get big factories and then you convert those to wartime production. You don’t just snap your fingers and get wartime factories. That’s not how it works.
Well, I'm 100% willing to be persuaded on the "how easy would it be to find alternatives for those simpler components?" issue. Certainly "lack of skilled workers, EPA regulations" are a factor, and one we should fix regardless of impact on military.
"You don’t just snap your fingers and get wartime factories. That’s not how it works."
I agree, but even if we had 100% American (or say, NATO) factory capacity ready to go at the beginning of the war, you also don't just snap your fingers and get a stream of tomahawks tomorrow. I think the more overriding point is that a war is likely be shorter (due to war mechanics and current stockpiles) than not only slow retooling, fast-retooling or even "making more than a few deliveries to the front from existing stockpiles." But all that's details of a specific debate: I think the deeper point, in relation to the far more important topic of "upcoming debt crisis", is that this analysis doesn't accurately reflect the impact (or direction) on our foreign policy because it is too limited to economic matters.
The entire debt problem is because previous politicians traded short term political gain (to win that year's election) over long term fiscal stability. In the war/foreign policy sphere, the same motivations hold. All the things you cite certainly are influences on that, but if we (or China) are experiencing some massive economic crisis, the incentives for then-politicians is not to say "well sadly we'd love to go to war, but we can't afford to in this economy" it is to make the same short-term decision, Krugman-style: "we are DEFINITELY going to war in order to A) juice the economy and B) distract from the negative economic impacts."
No one really knows, Brian.
Besides, Balaji lives in Singapore too.
What are the potential solutions? There are none. Except from on a personal level invest in gold and Yuan.
I think there is a potential solution.
1. Do lots of PR (like this post) to convince people there's a problem. If environmentalists could convince people that global warming would kill us all in 100 years, then we can do the same with something that is far more likely to kill us in 10-25 years.
2. Use that persuasion to get someone elected as US president who recognizes the problem
3. Create an office of Canceling The Debt Apocalypse to keep the focus alive, with a real time debt clock, have them run ads (perhaps starring Idris Elba) against any legislator who opposes the necessary steps that say "Congressman Jones wants to destroy America"
4. Index social security to a % of GDP, or convert to completely means-tested
5. Index old age benefits recipient age to some % of average life expectancy
6. cure T2diabetes/metabolic syndrome, and therefore heavily reduce medicare/caid costs. Don't laugh, it can be done right now with zero new technology.
6a. cut all governmental funding to non-health research, then reduce admin and regulatory burden on health research, allow tons of compassionate use clinical trials, cure as many chronic diseases (in the order of their cost) as possible
7. cut military spending on anything that was designed only to fight the Soviet Union, and use new tech (drones, AI) to focus on winning the wars we're likely to be in. Heavily reduce overseas military bases to those needed for core national/ally defense.
8. massive all in program to shift to 100% nuclear energy generation - export other energy sources for debt reduction
9. abolish all zoning in a few dozen mile radius around top 25 urban centers
10. cut whatever environmental review or approval red tape that stops things from being built, you know the ones
11. Reform immigration policy to focus on debt reduction - allow guest workers (pay taxes, don't get benefits), allow large bribes (directly into debt reduction) for citizenship (e.g. in portugal you can pay 750k and tadaaaa), pass law making immigrants ineligible for majority of benefits for X years. Overall would probably increase # of immigrants, just focus on ensuring that they are net fiscal positives.
12. Actually large have-a-child bonuses, like a significant % of future tax revenue.
13. funnel actual AI applications into debt reduction, with some % of cost savings subsidy "prizes"
14. abolish employer based health insurance, make it illegal for insurance companies to "insure" against non-risk events like regular visits - return customer choice (and thereby competition) back into healthcare, prices will go down, therefore spending in medicare/caid or VA go down
15. You may think this is a mean one, but too bad: use our extensive population health data to create an composite index of [age + current diagnoses + reported pain/discomfort levels of conditions, treatments + statistical likelihood of remission vs death] and come up with a number threshold above which, patients are encouraged to seek hospice care or do-not-go-to-extraordinary lengths, or painless physician-assisted deaths. I support this on a moral level because we currently torture (in a way that would violate the Geneva conventions if applied to a prisoner) millions of elderly people each year to bless them with a few extra minutes, hours, weeks or months of often-also-extremely painful, humiliating and undignified life. We should stop doing this because torturing people for little gain is wrong. Yes, incidentally we would also save a lot of money on all the torture implements we won't need any more.
16. generalized efficiency/cuts across any program/agency/dept you can, monitored by the Office of Canceling The Debt Apocalypse, start paying CEO- level salaries to get department heads who will cut costs. Yes, obviously you'll screw some things up. Nothing's perfect. But the alternative is Everyone Dies.
17. sell trillions of dollars of federal land
18. lots of other things, but really the only one that matters is #1: we live in a representative system: Unless enough voters believe there's a problem and bitch about it loud enough, and publicly soap box the needed solutions, no one will ever fix it and one day mobs of 25 year old workers will roam the streets murdering 65 year olds who are trying to collect their social security. A lot of American exceptionalism is fake, but in this it's real: Americans of 2024 simply will not tolerate any "debt crisis fix" that will work once the debt crisis arrives, and they will start killing people. The only solution, other than finding some deep national well of calm and peaceful reflection before it happens, is to prevent it beforehand.
wow..insightful. It looks like the train has passed the station and US can't get out this hole. if and when, it bursts, it will be bigger pain than anyone could ever imagine.
I wonder what should be India's strategy here.. RBI keep buying US $ reserves for some reason, don't know why !
I hate it when my train passes the station and I am in a hole and then the hole bursts.
This is quite insightful. I’d lost track on US debt after 30 trillion! 🤦🏾♂️
Well, sounds like you have that in common with law-makers...
Well posted, Balaji.
Agree!
An important article, thank you.
Some quick questions:
1) What do you think of The Dollar Milkshake Theory, a la Bret Johnson and others.
2) What do you think of Raul Pal's theory that what we are living through a controlled unwind, coordinated by CB's? (I hope I'm getting that right...)
3) Under such circumstances, why have BTC and gold been roughly flat since March/April? With BTC in particular there was a lot of talk about a large move up, but it has failed to materialize so far.
Edit: The bit about federal revenue being juiced my deficit spending made me laugh. Circular, much...? Doesn't sound much like a free market to me...
Edit 2: In that last section, could you also make the point that those market caps are partly due to the deficit spending anyway? (More circular) Just drives home the point that fiat is an unreliable way of measuring value.
Those graphs are like "surrealist" artworks!
We are going to need some serious out-of-the box thinking to deal with this. While the US cannot declare a literal debt jubilee as old-timey empires could (debt jubilees being the other traditional way out of debt crises, along with hyperinflation and straight up default) it could achieve essentially the same result by paying off all private and public debts with newly printed dollars, resulting in a windfall for debtors and creditors taking it in the shorts (as with a debt jubilee), then switching to a new currency that everyone could exchange their debased dollars for, perhaps with differential rates for former creditors and former borrowers to distribute the pain more evenly. While obviously this would be extremely painful in the short run, not clear if it would be more painful than the other alternatives and at least it has the benefit of clearing the decks all at once so that the government can start blowing another multi-decade debt bubble :-)
Coco, your proposal is indeed a radical approach to resolving debt crises.
How do you think the public and financial institutions would respond to such a dramatic restructuring of the economic system?
Well, there are a lot more debtors than creditors out there, and as the saying goes, “The government that robs Peter to pay Paul can always count on the support of Paul” so it might be politically palatable. The point is that the unplayable debt must be gotten rid of somehow, either inflated away or defaulted on in one form or another, and this might allow some control over how it happens as opposed to the endless grind of hyperinflation or the across-the-board wipeout of a default.
*unpayable, not “unplayable” — can’t seem to edit
Listening to the Party Line on this, 3 years on makes my jaw drop
https://www.youtube.com/watch?v=yq_E3HquRJY
The punchline? "Economists used to think debt/GDP > 1 is bad; now they don't know" Cut to a clip from the IMF chief. Astounding stuff, really.
Please do for Europe.