Brief, but stunning commentary piece in the Fortune. They make a great analogy that’s easy to remember: I was also really surprised by this: They can’t even admit the US government is running on...
Brief, but stunning commentary piece in the Fortune.
They make a great analogy that’s easy to remember:
Most people cannot relate to trillion-dollar figures on a government ledger. So consider this: divide every number by 100 million — drop eight zeros — and federal finances look like a household budget in freefall.
That household earns $52,446 and spends $73,378 — running a $20,932 annual deficit. Its total liabilities and unfunded promises amount to $1,361,788 against just $60,554 in assets, leaving it $1.3 million in the hole. Uncle Sam, by any accounting standard, is insolvent.
I was also really surprised by this:
The Government Accountability Office (GAO) issued a disclaimer of opinion on the U.S. government’s FY 2025 financial statements — the 29th consecutive year it has been unable to determine whether the statements are fairly presented.
They can’t even admit the US government is running on borrowed time, money, and goodwill – and it’s been like that since the turn of the century!
One really does wonder if and when it all comes crashing down, US dollar and rest of the world included.
Probably whenever the rest of the world decides to stop using the USD as the reserve currency, and additionally, it stops being the currency that's used for trading oil. This topic is not a new...
One really does wonder if and when it all comes crashing down, US dollar and rest of the world included.
Probably whenever the rest of the world decides to stop using the USD as the reserve currency, and additionally, it stops being the currency that's used for trading oil.
This topic is not a new one. The French used the term exorbitant privilege to refer to the USA's unique ability to finance its deficit through the rest of the world. The simple fact of the matter is that for a very long time, everyone wanted American dollars. Conversely, American dollars are laughingly cheap to produce. A 100 dollar bill costs probably less than one dollar to make. But the US can sell it for 100 dollars to other nations, that want 100 dollars. And a lot of nations, certainly every nation that wants to purchase oil, wants dollars.
That's a damn good margin for the US.
It's a lot more complicated than that, but it's the gist of it. The US is also an economic powerhouse, but when it comes to debt management, it's really just that simple. Everyone wants dollars. So the American position is pretty unique internationally, and the reason the country's debt can be so damn high.
I'd say that's missing the point a little bit. The US is reaching levels of debt to GDP ratio that are becoming unsustainable without massive restructuring and/or budget balancing efforts. Just...
Conversely, American dollars are laughingly cheap to produce.
I'd say that's missing the point a little bit. The US is reaching levels of debt to GDP ratio that are becoming unsustainable without massive restructuring and/or budget balancing efforts. Just printing more money will, to cover this deficit, spur massive dedollarization efforts because it's not favourable to just inflate everyone's credit and dollar holdings into worthlessness. You're going to piss off a lot of countries by devaluing their dollar holdings through printing just because it's cheap to print.
Becoming and being the world's reserve currency is because others rely on your stability. Everyone wants dollars because they're stable and valuable, the US is eroding the former and may lose the latter if they don't act.
That’s not how anything works. For one, the assets the US treasury owns is not the other side of the accounting book - that would be the entire worth of the US, all of its citizens, all of its...
That’s not how anything works.
For one, the assets the US treasury owns is not the other side of the accounting book - that would be the entire worth of the US, all of its citizens, all of its companies, every natural resource. I can assure you that number is quite a bit higher than 39 trillion lol.
The US treasury is not a pure bank - it gets most of its revenues from taxes, not whatever other bonds it happens to own.
National debt is fundamentally a different beast than personal debt. First and foremost, the debt is issued in a currency that the country owns. That doesn’t mean you can do anything you want, but it means it’s an entirely different ballgame to personal or corporate debt. The levers and effects are completely different.
Japan has been at >200% debt-to-gdp ratio for over two decades now. That’s a deliberate policy on their part - may work out, may not, but certainly has not collapsed to nothingness in the meantime.
Japan is the canary in the coalmine. This is what absurdly high debt-to-gdp will turn into for any other country too. Their policy of borrowing against their own debt and forcing Japanese...
Japan is the canary in the coalmine. This is what absurdly high debt-to-gdp will turn into for any other country too. Their policy of borrowing against their own debt and forcing Japanese corporations (or just banks? I can't recall exactly) to buy bonds is backsliding hard. That's why their currency is in free fall and the Yen carry trade is breaking down.
but certainly has not collapsed to nothingness in the meantime.
Balancing the budget is so politically unpopular we're seeing politicians rather let the country burn and pretend it's ok than actually trying to fix things. This has been overdue with US spending...
Balancing the budget is so politically unpopular we're seeing politicians rather let the country burn and pretend it's ok than actually trying to fix things.
This has been overdue with US spending going up and up and up and up. Just printing more money will not bridge this gap.
This is an overly simplistic article. The US Govt is not a household. The real eye opener is Public Debt vs GDP. Public Debt is $39 trillion. It makes up the largest portion of unfunded...
This is an overly simplistic article. The US Govt is not a household.
Follow up article from Fortune magazine... ‘There is no silver lining in this trajectory’: Budget watchdog warns of financial, inflation, or currency crisis due to $39 trillion U.S. debt...
By 2036, interest payments on the national debt are projected to exceed $2 trillion annually, equivalent to 5% of the U.S. economy.
Interesting commentary on this, points out how when Democrats look likely to take over partial control of the government, everyone worries about deficits again.
Serious question— wasn't addressing this the (stated) purpose of DOGE? That was of course an unmitigated clusterfuck but surely the rapid slash-and-burn had some effect on the national debt? Did...
Serious question— wasn't addressing this the (stated) purpose of DOGE? That was of course an unmitigated clusterfuck but surely the rapid slash-and-burn had some effect on the national debt? Did it make any impact at all?
The Trump admin claims that DOGE saved $215 billion. We've spent about that much on the Iran war as of today. Maybe a bit more; it's a bit hard to say exactly how much war costs when we already...
The Trump admin claims that DOGE saved $215 billion.
We've spent about that much on the Iran war as of today. Maybe a bit more; it's a bit hard to say exactly how much war costs when we already pay the overhead cost for a massive military every day.
No. Total verified claims of DOGE budget cuts are somewhere between 2 and 7 billion. That's about the same as the daily debt increase. Even if you'd be generous and say it's twice that, the US...
No.
Total verified claims of DOGE budget cuts are somewhere between 2 and 7 billion. That's about the same as the daily debt increase. Even if you'd be generous and say it's twice that, the US military burns through 2-3 billion a day. In peace time.
Disregarding the opportunity cost of slashing the IRS and their capacity of actually claiming tax and the like because if you factor those in it's not too far out of the realm of possibilities that entire endeavour was a cost increase.
DOGE might've been successful if the GOP also didn't slash taxes again while also increasing spending by some obscene amount. Do not take this as a statement in support of DOGE, as I think the...
DOGE might've been successful if the GOP also didn't slash taxes again while also increasing spending by some obscene amount.
Do not take this as a statement in support of DOGE, as I think the entire thing was founded on racism and smash and grab for citizen's data. But I think the unfortunate truth is we need both higher taxes and a decrease in areas of spending. I think it could be done almost wholly by addressing the DOD and DHS budgets tied with tax increases on the most wealthy, but I don't see any of that happening with our current political climate. It's going to take some huge crash for things to get fixed.
Anyone know if this actually means anything? Cause for years now stuff like this is announced like when Moody downgraded the US credit rating last year and nothing really came of it, I hold US...
Anyone know if this actually means anything?
Cause for years now stuff like this is announced like when Moody downgraded the US credit rating last year and nothing really came of it, I hold US stocks and it was fine.
Yes. It means that fortune doesn't hire people who are actually literate in fiance to write their pieces. There are many interesting problems going on with the US right now. The story proposed in...
Anyone know if this actually means anything?
Yes. It means that fortune doesn't hire people who are actually literate in fiance to write their pieces. There are many interesting problems going on with the US right now. The story proposed in the article is based on a complete misunderstanding of what they've even read. The media didn't miss it. The "media" appears to train people to better know what they're looking at.
There's a chance this winds up "correct" in it's prediction, but there's also a chance a fortune teller gets their prediction right. It's not based on any facts or merit. The entire way this article is framed is the financial equivalent of "SCIENTISTS DON'T KNOW HOW BUMBLE BEES FLY!"
Not right away. Ultimately it will. When you borrow money and stop paying it back worst case scenario is that someone comes for your kneecaps. For the US, who has significantly sized kneepads, it...
Not right away. Ultimately it will.
When you borrow money and stop paying it back worst case scenario is that someone comes for your kneecaps. For the US, who has significantly sized kneepads, it may be more prudent to just simply... stop loaning them money. You're unable to trust them paying it back so why bother?
Thus far the US has never missed a debt payment but that's because they are rich and can just print the missing amount if necessary. But when debt balloons to the point your tax revenue can no longer cover it, it becomes exceedingly difficult to pay for regular things, let alone your debt repayments, without borrowing more (which they no longer want to do because they can't trust you to pay it back as soon as you start missing repayment, Moody's downgrade was the first loss of trust).
So why not print your way out of this hole? You can, and the US has, but when you're at the point you need to bridge a gap this large your printing will crater the value of your money which will cause hefty domestic inflation, it will piss off foreign investment and treasury holders, it will destabilize global trade when every country holding dollars now has worthless paper, and all of those other nasty ramifications you get from hyper inflating your currency.
At the current course the question isn't if, it's when.
So its more like another chip at the US credit trustworthiness rather than the straw that broke the camels back Kind of like the threeish times the US credit rating has been downgraded? The...
So its more like another chip at the US credit trustworthiness rather than the straw that broke the camels back
Kind of like the threeish times the US credit rating has been downgraded?
The article makes it sound like as long as we continue to ignore the issue, most everyone else will too, so we’re fine unless some cowboy republican succeeds in forcing the issue.
Brief, but stunning commentary piece in the Fortune.
They make a great analogy that’s easy to remember:
I was also really surprised by this:
They can’t even admit the US government is running on borrowed time, money, and goodwill – and it’s been like that since the turn of the century!
One really does wonder if and when it all comes crashing down, US dollar and rest of the world included.
Probably whenever the rest of the world decides to stop using the USD as the reserve currency, and additionally, it stops being the currency that's used for trading oil.
This topic is not a new one. The French used the term exorbitant privilege to refer to the USA's unique ability to finance its deficit through the rest of the world. The simple fact of the matter is that for a very long time, everyone wanted American dollars. Conversely, American dollars are laughingly cheap to produce. A 100 dollar bill costs probably less than one dollar to make. But the US can sell it for 100 dollars to other nations, that want 100 dollars. And a lot of nations, certainly every nation that wants to purchase oil, wants dollars.
That's a damn good margin for the US.
It's a lot more complicated than that, but it's the gist of it. The US is also an economic powerhouse, but when it comes to debt management, it's really just that simple. Everyone wants dollars. So the American position is pretty unique internationally, and the reason the country's debt can be so damn high.
I'd say that's missing the point a little bit. The US is reaching levels of debt to GDP ratio that are becoming unsustainable without massive restructuring and/or budget balancing efforts. Just printing more money will, to cover this deficit, spur massive dedollarization efforts because it's not favourable to just inflate everyone's credit and dollar holdings into worthlessness. You're going to piss off a lot of countries by devaluing their dollar holdings through printing just because it's cheap to print.
Becoming and being the world's reserve currency is because others rely on your stability. Everyone wants dollars because they're stable and valuable, the US is eroding the former and may lose the latter if they don't act.
That’s not how anything works.
For one, the assets the US treasury owns is not the other side of the accounting book - that would be the entire worth of the US, all of its citizens, all of its companies, every natural resource. I can assure you that number is quite a bit higher than 39 trillion lol.
The US treasury is not a pure bank - it gets most of its revenues from taxes, not whatever other bonds it happens to own.
National debt is fundamentally a different beast than personal debt. First and foremost, the debt is issued in a currency that the country owns. That doesn’t mean you can do anything you want, but it means it’s an entirely different ballgame to personal or corporate debt. The levers and effects are completely different.
Japan has been at >200% debt-to-gdp ratio for over two decades now. That’s a deliberate policy on their part - may work out, may not, but certainly has not collapsed to nothingness in the meantime.
Japan is the canary in the coalmine. This is what absurdly high debt-to-gdp will turn into for any other country too. Their policy of borrowing against their own debt and forcing Japanese corporations (or just banks? I can't recall exactly) to buy bonds is backsliding hard. That's why their currency is in free fall and the Yen carry trade is breaking down.
It certainly looks to be going in that direction.
Balancing the budget is so politically unpopular we're seeing politicians rather let the country burn and pretend it's ok than actually trying to fix things.
This has been overdue with US spending going up and up and up and up. Just printing more money will not bridge this gap.
This is an overly simplistic article. The US Govt is not a household.
The real eye opener is Public Debt vs GDP.
Public Debt is $39 trillion.
It makes up the largest portion of unfunded liabilities.
About one third of treasuries are reissued every year at the current rate of interest.
Interest costs currently make up 15 percent of federal spending.
There are two headwinds here. Debt can keep rising. Rates can keep rising.
Rates can actually go up a lot faster than debt, especially if the debt markets worry that America will inflate its way out of the problem.
Or, you know, if some idiot seriously suggests USA "negotiates a deal" on debt.
Follow up article from Fortune magazine...
‘There is no silver lining in this trajectory’: Budget watchdog warns of financial, inflation, or currency crisis due to $39 trillion U.S. debt
Interesting commentary on this, points out how when Democrats look likely to take over partial control of the government, everyone worries about deficits again.
Serious question— wasn't addressing this the (stated) purpose of DOGE? That was of course an unmitigated clusterfuck but surely the rapid slash-and-burn had some effect on the national debt? Did it make any impact at all?
The Trump admin claims that DOGE saved $215 billion.
We've spent about that much on the Iran war as of today. Maybe a bit more; it's a bit hard to say exactly how much war costs when we already pay the overhead cost for a massive military every day.
And now they're asking for $200 billion more for the Iran war: https://www.bbc.com/news/articles/c5y73gwk1qdo
For reference, that's more than we've provided in aid to Ukraine since 2022.
We're not close to $215B, but there's no end in sight either.
No.
Total verified claims of DOGE budget cuts are somewhere between 2 and 7 billion. That's about the same as the daily debt increase. Even if you'd be generous and say it's twice that, the US military burns through 2-3 billion a day. In peace time.
Disregarding the opportunity cost of slashing the IRS and their capacity of actually claiming tax and the like because if you factor those in it's not too far out of the realm of possibilities that entire endeavour was a cost increase.
DOGE might've been successful if the GOP also didn't slash taxes again while also increasing spending by some obscene amount.
Do not take this as a statement in support of DOGE, as I think the entire thing was founded on racism and smash and grab for citizen's data. But I think the unfortunate truth is we need both higher taxes and a decrease in areas of spending. I think it could be done almost wholly by addressing the DOD and DHS budgets tied with tax increases on the most wealthy, but I don't see any of that happening with our current political climate. It's going to take some huge crash for things to get fixed.
You are thinking of the tea party protests? Oh, no, those guys only cared about taxes and spending when a black dude was president. Never mind.
Anyone know if this actually means anything?
Cause for years now stuff like this is announced like when Moody downgraded the US credit rating last year and nothing really came of it, I hold US stocks and it was fine.
Yes. It means that fortune doesn't hire people who are actually literate in fiance to write their pieces. There are many interesting problems going on with the US right now. The story proposed in the article is based on a complete misunderstanding of what they've even read. The media didn't miss it. The "media" appears to train people to better know what they're looking at.
There's a chance this winds up "correct" in it's prediction, but there's also a chance a fortune teller gets their prediction right. It's not based on any facts or merit. The entire way this article is framed is the financial equivalent of "SCIENTISTS DON'T KNOW HOW BUMBLE BEES FLY!"
Not right away. Ultimately it will.
When you borrow money and stop paying it back worst case scenario is that someone comes for your kneecaps. For the US, who has significantly sized kneepads, it may be more prudent to just simply... stop loaning them money. You're unable to trust them paying it back so why bother?
Thus far the US has never missed a debt payment but that's because they are rich and can just print the missing amount if necessary. But when debt balloons to the point your tax revenue can no longer cover it, it becomes exceedingly difficult to pay for regular things, let alone your debt repayments, without borrowing more (which they no longer want to do because they can't trust you to pay it back as soon as you start missing repayment, Moody's downgrade was the first loss of trust).
So why not print your way out of this hole? You can, and the US has, but when you're at the point you need to bridge a gap this large your printing will crater the value of your money which will cause hefty domestic inflation, it will piss off foreign investment and treasury holders, it will destabilize global trade when every country holding dollars now has worthless paper, and all of those other nasty ramifications you get from hyper inflating your currency.
At the current course the question isn't if, it's when.
So its more like another chip at the US credit trustworthiness rather than the straw that broke the camels back
Kind of like the threeish times the US credit rating has been downgraded?
The article makes it sound like as long as we continue to ignore the issue, most everyone else will too, so we’re fine unless some cowboy republican succeeds in forcing the issue.