> There is some chance inflation will be keep increasing
So what? Inflation is GOOD for the debt, which is dollar-valued and not inflation-indexed! If you inflate the currency by 20% the real value of the outstanding debt drops by 20%.
That's always been the joke about federal borrowing, if we ever get in trouble we just print money to pay all the bonds and poof, no debt. Inflation being high makes borrowing cheaper, not more expensive.
The discourse about the subject is cursed. Everyone projects their own (largely political) priors onto it, everyone thinks macroeconomics works like checkbooks. It's just one bad idea after another.
(I think what you're trying to say is that interest rates being high makes borrowing expensive, and that high interest rates are a natural policy response to high inflation. But you have the causality backwards. In fact one reason borrowing doesn't care about inflation is that the fed moves the levers to keep the impact roughly constant.)
> Inflation is GOOD for the debt, which is dollar-valued and not inflation-indexed! If you inflate the currency by 20% the real value of the outstanding debt drops by 20%.
Unfortunately GDP is also dollar-valued, so debt:gdp ratio wouldn't change with inflation.
Inflation wouldn't only destroy debt (which is good) it will also destroy currency and to some extent the economy. In the very end it's part of FED mandate - to keep inflation in bay.
> The discourse about the subject is cursed.
I think macroeconomics is very complicated subject, with a lot of uncertainty of how things will unfold.
Your initial claim was that servicing our debt was much harder in 80s, so it's actually not as bad (or at least not worse) these days. What I'm trying to say we can all of sudden end up in a world where interest rates are back to 80s levels, while debt:gdp ratio (which is the real amount of debt in a way) is way higher. And this would be much more complicated problem to solve. Or we would not, because it's hard to predict a) where inflation goes from now on and b) what will FED do in the same kind of scenario to 80s.
But actually scratch it, it is already bigger problem than it was back then:
US needs to refinance/issue $9.2 trillion of debt this year. Current USG 10Y is ~4.5%, current GDP is 27.72 trillions. Which means after this year we will add 0.015 to the interest/gdp ratio (assuming very low current cost of the debt which is being refinanced, from https://fred.stlouisfed.org/graph/?g=iEiV). It will bring us above the level in 80s this year! Just this year of debt will bring the cost of servicing the debt above than it was back then. That's where huge issue is, unfortunately. And unless rates will go down it will be getting worse and worse really fast.
It... what? Good grief. If I buy a candy bar for $1, it counts to the GDP as $1. If it inflates and I have to pay $1.20 for the next one, you're saying that the GDP magically knows to adjust the accounting for how much it used to cost?! No, this is ridiculous. GDP counts currency.
The amount of bad economics being deployed in support of baldly political positions on HN is just astounding.
What about second calculation? I know assuming 0 rates of the refinanced debt is wrong, but it does give a sense of how bad the thing is.
As for your comment about my political position - you’re wrong, and frankly it’s not nicely engaging comment either. In fact I was of your opinion couple of months ago, but since then I changed it. As a meta comment the fact that such giants as Ray Dalio keep ringing the bell about the debt should be enough to, at least, seriously consider there might be an issue.
The second calculation is just spin, no numbers. Any time I see rhetoric like "refinanced debt" or "rolling over debt" I know to just ignore it. You picked it up from a partisan source trying to scare you. The idea is to liken it to irresponsible credit card behavior by consumers or whatever.
But in reality federal interest payments as a fraction of revenue are like 18%. That is well under the median consumer debt load, and very manageable.
The better metaphor, if you insist on using one (don't), would be to say that federal debt is like carrying a mortgage, where the title reflects the US economy as a whole, something that grows somewhat faster than housing real estate.
I literally gave you numbers. It's quite hard to estimate growth of interest/gdp ratio because of how many different securities are there but here's my try: https://chatgpt.com/share/682b4741-9bbc-8007-94fc-848198c9c3...
I got +0.006 this year, which will bring total ratio to 0.043, it's also 15% growth a year. We had this ratio last time in 97.
> But in reality federal interest payments as a fraction of revenue are like 18%.
... and rapidly growing.
> That is well under the median consumer debt load, and very manageable.
From what I gather ratio between household disposable income to household total debt is about 1:1. Government ratio is closer to 1:7. This is very different ratio.
However I'm not insisting on comparing household finances to gov finances, I'm not sure you can compare those two. At least not in a world where government controls money supply.
You keep accusing me in being partisan where in fact I go and do my own research. I think it's you who made up the mind that debt is not an issue and disregard anything which goes against your (partisan if you will) view of the world.
US has big budget problem. It will pay itself one way or another eventually (most likely through inflation/currency devaluation, affecting everyone and a lot), but so far it was mostly accumulating instead. The real solution is, of course, optimize spending (i.e. health care & military) and (what's even more important) tax the rich. Similarly to what we used to have in 50s. But we never gonna get there because, you know, the rich holds all the cards. So instead we'll get through a suffering of blown up currency, and I, personally, think we should be doing everything we can to avoid it. I don't think it's a problem of today, tomorrow or next year. But it's a problem and further we delay it worse the resolution would be.
You choose one very particular detail, critic it, don’t provide neither justification why it’s wrong or what would be better and behave like you’re correct about everything.
So what? Inflation is GOOD for the debt, which is dollar-valued and not inflation-indexed! If you inflate the currency by 20% the real value of the outstanding debt drops by 20%. That's always been the joke about federal borrowing, if we ever get in trouble we just print money to pay all the bonds and poof, no debt. Inflation being high makes borrowing cheaper, not more expensive.
The discourse about the subject is cursed. Everyone projects their own (largely political) priors onto it, everyone thinks macroeconomics works like checkbooks. It's just one bad idea after another.
(I think what you're trying to say is that interest rates being high makes borrowing expensive, and that high interest rates are a natural policy response to high inflation. But you have the causality backwards. In fact one reason borrowing doesn't care about inflation is that the fed moves the levers to keep the impact roughly constant.)