I still haven't heard anything that says what the consequences are though. The implication in the Fortune piece is possible inflation. That isn't really a high probability event right now - the Fed hit their announced inflation target maybe once or twice for a quarter in the last two decades. They consistently miss it low. Low energy prices, low income growth, and recession are all drags on inflation that factor into the lower probability there.LawBeefaroni wrote: ↑Fri Jan 15, 2021 9:09 amWe might not have a decade. China is aggressively attacking the dollar. Interest rates are bound to rise over 10 years. And as we all know, reigning in deficit is hard enough. Chopping off debt? Not going to happen. It's $1.9T we're going to be stuck with. Can we kick the can long enough until we're all dead and don't have to deal with it? Probably. But hat's not sustainable fiscal policy.
We also sometimes hear about how interest rates are going to increase - sometimes even drastically. That hasn't happened but naturally at this point the only direction is up. The pressure is less than imagined because unless inflation finally rears its head *high* Interest rates aren't foreseeably an issue either. All signs point to deflation/low interest rates for quite some time barring a broad-based recovery in the economy. There aren't any hints of that .
Even an attack on the dollar doesn't even change that math - it'll change consumer spending power for the worse but it doesn't really make those fundamental problems any worse. I'll beat on this point once more - Japan is still the example why there isn't any real immediate threat. Part of that is a relatively weak currency, part is high savings rate, and part is debt is owed domestically by the citizenry and the government - the last point is very important.
What's pretty interesting is we have more 'control' over this debt situation than we think. That is why I found the comparison to Italy ... frankly dumb in the Fortune piece. A lot of our debt is owed to ourselves. Specifically the SS trust fund. We have a couple of levers there. A few are bad - cut the benefit or raise retirement age and a better one - remove the income cap on the SS payroll tax. That latter one will help the debt situation immediately because we could cut borrowing on the 'front end' to cover the short fall funding the SS trust fund. It's a tax increase but it's all well above median income.
We also have other 'wealth reservoirs' to tap. Tax rates are historically low on people who can easily afford to pay more. That said, I don't even worry a little about this isn't because we have massive and more pressing problems that make this one easy in comparison. Also, I consider that taxing the rich is possibly one of the things we'll need to do to dig out of this mess to fix the massive inequality problem we have and this could be a convenient excuse. But I also won't hold my breath on that.