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Do you think it matters all that much? I know that some
Posted on: June 24, 2023 at 13:23:26 CT
JeffB MU
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think "We owe it to ourselves." so no big deal. Or that we can print as much as we need, so no big deal.
But that is foolish talk.
For one, we owe hundreds of billions to other nations.
For another, what will happen to the value of the US dollar if they default on loans? Say, not pay Social Security recipients what they think they have coming? Or default on pensions to federal workers or on military retirement funds or veteran's medical care? Maybe drop Medicare? or Medicaid? or food stamps? Stop government funding of student loans, home loans, Fannie Mae? Freddie Mac, FHA loans? No more FDIC backing of banks?
Countries are already starting to move away from the US dollar as the global currency. As that trend begins to gain steam so will inflation, which can cripple or destroy any economy. Printing ever more money will lead to hyper inflation. We've already raised interest rates in what is considered extreme fashion, and although it has destabilized and bankrupted some regional banks and weakened the rest, inflation is remaining stubbornly high.
It isn't like we can easily just reduce government spending and raise taxes. We are already spending $1 trillion+ more each year than we are taking in and as already mentioned the Fed has been raising interest rates at a frantic pace. As US notes and bonds mature and are rolled over the interest cost on our $32 TRILLION in debt is going to be ratcheting up significantly. We would need large cuts in spending and increases in taxes just to maintain an annual $1 trillion deficit.
But that isn't all, as they say... if inflation continues going up, and some of the reasons that it may have already been mentioned, the Fed will either need to raise interest rates even further to contain it, putting the brakes on in a huge way on the economy. That could easily push the country into recession or worse, dropping wages, losing jobs, hammering the stock market, reducing government income through taxes and increasing government expenses for unemployment and welfare benefits, Medicaid, Medicare (people retiring sooner) making the deficits even worse than they already are.
The negative feedback loop is a perfect storm for catastrophe.
But that is foolish talk.
For one, we owe hundreds of billions to other nations.
For another, what will happen to the value of the US dollar if they default on loans? Say, not pay Social Security recipients what they think they have coming? Or default on pensions to federal workers or on military retirement funds or veteran's medical care? Maybe drop Medicare? or Medicaid? or food stamps? Stop government funding of student loans, home loans, Fannie Mae? Freddie Mac, FHA loans? No more FDIC backing of banks?
Countries are already starting to move away from the US dollar as the global currency. As that trend begins to gain steam so will inflation, which can cripple or destroy any economy. Printing ever more money will lead to hyper inflation. We've already raised interest rates in what is considered extreme fashion, and although it has destabilized and bankrupted some regional banks and weakened the rest, inflation is remaining stubbornly high.
It isn't like we can easily just reduce government spending and raise taxes. We are already spending $1 trillion+ more each year than we are taking in and as already mentioned the Fed has been raising interest rates at a frantic pace. As US notes and bonds mature and are rolled over the interest cost on our $32 TRILLION in debt is going to be ratcheting up significantly. We would need large cuts in spending and increases in taxes just to maintain an annual $1 trillion deficit.
But that isn't all, as they say... if inflation continues going up, and some of the reasons that it may have already been mentioned, the Fed will either need to raise interest rates even further to contain it, putting the brakes on in a huge way on the economy. That could easily push the country into recession or worse, dropping wages, losing jobs, hammering the stock market, reducing government income through taxes and increasing government expenses for unemployment and welfare benefits, Medicaid, Medicare (people retiring sooner) making the deficits even worse than they already are.
The negative feedback loop is a perfect storm for catastrophe.
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Do you think it matters all that much? I know that some - JeffB MU - 6/24 13:23:26