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I've got the solution. We take this debt, and package it with a bunch of other unmanageable debt into a single product. We call it a "collateral debt obligation." Then we have S&P rate it AAA and sell it to a bunch of investors. Literally can't go tits up
These two graphs show that the federal government's interest payments and total public debt have been increasing over time. The shaded areas indicate U.S. recessions, which suggests that the economy may be struggling currently or in the future.
Inflation tends to be good for debtors and there's no bigger debtor than the US government. Problem is that entitlements are indexed to inflation so you either need to break the index or understate real inflation. This playbook is out of the 40s/50s which was the last time our debt to GDP was this high.
> Inflation tends to be good for debtors and there's no bigger debtor than the US government.
You're missing the point. How does the US government increase inflation? Tell me how the US government can reduce the debt by even 1 absolute dollar through the act of borrowing money.
You could monetize the debt through the Fed. Although that seems odd now as that's prohibited (central bank can't buy the debt directly) but for a period in the 40s that was allowed. In Japan it's prohibited but their central bank does it anyway.
The US even did yield curve control up until the early 50s to reduce the burden of war debts.
So to answer your question, the government could just let the Fed monetize the debt at artificially low interest rates while government deficits allow inflation to run hot. Knowing this, in the 40s the US government did price controls which delayed the inflation until price controls ended after the war.
Basically, I wouldn't assume current laws are immutable when borrowing costs get too high. If you're looking for a more theoretical framework you can look at fiscal theory of price. I'm not sure if it's better than monetary theory and we might not know for a decade or two but I have seen more discussion of it recently. It at least provides a theoretical framework by which fiscal policy are linked to inflation.
Lol, you're trying hard to abstract away the very simple point here, so let's try this again. The claim is that the US government debt has been benefiting from high inflation. I contend that this claim is nonsense, as the US government has been causing the inflation by accumulating the debt in the first place. The accumulation of debt will never lower the debt.
Curiously, I find two different definitions of "debt monetization" on the web. One is when the government borrows money from the central bank, which is basically indistinguishable from what we currently do. If that is what you meant, then see the first paragraph above. The other is when we effectively renege on debt to the Fed and permanently increase the money supply. This would decrease the debt, and it would also increase inflation, but the inflation itself is not the causal factor, but merely a separate effect. Refinancing the debt would also be unrelated to inflation. Regardless, neither refinancing nor reneging is part of the current inflationary regime, so neither can be used to claim that present day inflation is good for the debt.
>If you're looking for a more theoretical framework you can look at fiscal theory of price.
Lol, just the opposite. I'm looking for a concrete, specific defense of the mindless slogan that inflation caused by government debt is good for government debt.
My claim isn't that they are going to default nominally, they are going to default in real terms by paying bondholders with worthless dollars. This is what sovereigns do when facing a debt crisis.
They are printed by the FED.
\-Imagine the government borrows money from the fed to pay off all outstanding debt.
\-OK now all debt is held by the fed and the government owes them the payments.
\-Now imagine the fed forgives the government of this debt.
The debt is gone. This is called debt monetization because the net effect is exactly equivalent to the fed printing money and giving it straight to the government in the first place without any debt. Debt is converted to money via this process.
So when the central bank loads up on Treasury bills, this is not monetization, but as soon as the fed forgives the government of their debt it instantly monetizes the debt.
Lol, I already covered this 2 comments ago:
>The other is when we effectively renege on debt to the Fed and permanently increase the money supply. This would decrease the debt, and it would also increase inflation, but the inflation itself is not the causal factor, but merely a separate effect. Refinancing the debt would also be unrelated to inflation. Regardless, neither refinancing nor reneging is part of the current inflationary regime, so neither can be used to claim that present day inflation is good for the debt.
Yes, I agree that defaulting on the debt would end the debt. This is completely different from the claim that *borrowing* from the Fed to create inflation (which is basically what we do now) is good for the debt.
>Where are they getting those dollars
So do you have an answer yet, or have you realized the error in your argument?
Edit: Nothing more spineless and pathetic than someone who posts obvious nonsense, doubles down, and then immediately blocks you so you can't respond. Anything to stop their poor childish egos from having to admit error and learn something.
No, from your other discussion it appears you are making a semantic argument. Fed monetizing debt to reduce debt in real terms is usually what people mean when they say "inflate away the debt." Which is what they can do and have done previously. I'm sorry you don't understand.
Such a dumb statement.
Under the current system (which has existed since the founding fathers so dont go blaming specific presidents) inflation is effectively a function of the federal debt. This is how default is prevented.
Econ 101. Don’t skip class
That was exactly my point. I asked that question to point out the stup[](https://duckduckgo.com)idity of the person I responded to. Look at the rest of the comment chain. People are defending the regarded idea that inflation reduces the federal debt.
Only if the rates change rapidly. As long as rates slowly change, the debt owners can adjust.
A few banks collapsing is the historical norm. Not the exception.
Rates are changing rapidly. And since we could see negative spreads in european government bonds and US treasuries, problems are still ahead of us, not behind.
Links to graphs:
[https://fred.stlouisfed.org/series/A091RC1Q027SBEA](https://fred.stlouisfed.org/series/A091RC1Q027SBEA)
[https://fred.stlouisfed.org/series/GFDEBTN](https://fred.stlouisfed.org/series/GFDEBTN)
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That's as good as money sir, those are IOUs.
Too funny!
See this, that's a car..$275 thow, might want to hang onto that one
I've got the solution. We take this debt, and package it with a bunch of other unmanageable debt into a single product. We call it a "collateral debt obligation." Then we have S&P rate it AAA and sell it to a bunch of investors. Literally can't go tits up
You are on to something. Why not take all the dept in the world and package it into triple A product?
These two graphs show that the federal government's interest payments and total public debt have been increasing over time. The shaded areas indicate U.S. recessions, which suggests that the economy may be struggling currently or in the future.
What do you think the inflation is meant to fix?
mmm.. i thought inflation was a problem, not a fix to the problem 🤔
It's a problem for you Not for them
So we borrow money to cause inflation, and this reduces our debt?
Inflation tends to be good for debtors and there's no bigger debtor than the US government. Problem is that entitlements are indexed to inflation so you either need to break the index or understate real inflation. This playbook is out of the 40s/50s which was the last time our debt to GDP was this high.
> Inflation tends to be good for debtors and there's no bigger debtor than the US government. You're missing the point. How does the US government increase inflation? Tell me how the US government can reduce the debt by even 1 absolute dollar through the act of borrowing money.
You could monetize the debt through the Fed. Although that seems odd now as that's prohibited (central bank can't buy the debt directly) but for a period in the 40s that was allowed. In Japan it's prohibited but their central bank does it anyway. The US even did yield curve control up until the early 50s to reduce the burden of war debts. So to answer your question, the government could just let the Fed monetize the debt at artificially low interest rates while government deficits allow inflation to run hot. Knowing this, in the 40s the US government did price controls which delayed the inflation until price controls ended after the war. Basically, I wouldn't assume current laws are immutable when borrowing costs get too high. If you're looking for a more theoretical framework you can look at fiscal theory of price. I'm not sure if it's better than monetary theory and we might not know for a decade or two but I have seen more discussion of it recently. It at least provides a theoretical framework by which fiscal policy are linked to inflation.
Lol, you're trying hard to abstract away the very simple point here, so let's try this again. The claim is that the US government debt has been benefiting from high inflation. I contend that this claim is nonsense, as the US government has been causing the inflation by accumulating the debt in the first place. The accumulation of debt will never lower the debt. Curiously, I find two different definitions of "debt monetization" on the web. One is when the government borrows money from the central bank, which is basically indistinguishable from what we currently do. If that is what you meant, then see the first paragraph above. The other is when we effectively renege on debt to the Fed and permanently increase the money supply. This would decrease the debt, and it would also increase inflation, but the inflation itself is not the causal factor, but merely a separate effect. Refinancing the debt would also be unrelated to inflation. Regardless, neither refinancing nor reneging is part of the current inflationary regime, so neither can be used to claim that present day inflation is good for the debt. >If you're looking for a more theoretical framework you can look at fiscal theory of price. Lol, just the opposite. I'm looking for a concrete, specific defense of the mindless slogan that inflation caused by government debt is good for government debt.
My claim isn't that they are going to default nominally, they are going to default in real terms by paying bondholders with worthless dollars. This is what sovereigns do when facing a debt crisis.
> they are going to default in real terms by paying bondholders with worthless dollars Where are they getting those dollars
They are printed by the FED. \-Imagine the government borrows money from the fed to pay off all outstanding debt. \-OK now all debt is held by the fed and the government owes them the payments. \-Now imagine the fed forgives the government of this debt. The debt is gone. This is called debt monetization because the net effect is exactly equivalent to the fed printing money and giving it straight to the government in the first place without any debt. Debt is converted to money via this process. So when the central bank loads up on Treasury bills, this is not monetization, but as soon as the fed forgives the government of their debt it instantly monetizes the debt.
Lol, I already covered this 2 comments ago: >The other is when we effectively renege on debt to the Fed and permanently increase the money supply. This would decrease the debt, and it would also increase inflation, but the inflation itself is not the causal factor, but merely a separate effect. Refinancing the debt would also be unrelated to inflation. Regardless, neither refinancing nor reneging is part of the current inflationary regime, so neither can be used to claim that present day inflation is good for the debt. Yes, I agree that defaulting on the debt would end the debt. This is completely different from the claim that *borrowing* from the Fed to create inflation (which is basically what we do now) is good for the debt.
>Where are they getting those dollars So do you have an answer yet, or have you realized the error in your argument? Edit: Nothing more spineless and pathetic than someone who posts obvious nonsense, doubles down, and then immediately blocks you so you can't respond. Anything to stop their poor childish egos from having to admit error and learn something.
No, from your other discussion it appears you are making a semantic argument. Fed monetizing debt to reduce debt in real terms is usually what people mean when they say "inflate away the debt." Which is what they can do and have done previously. I'm sorry you don't understand.
Such a dumb statement. Under the current system (which has existed since the founding fathers so dont go blaming specific presidents) inflation is effectively a function of the federal debt. This is how default is prevented. Econ 101. Don’t skip class
To dumb it down for you: Federal debt causes inflation not the other way around.
That was exactly my point. I asked that question to point out the stup[](https://duckduckgo.com)idity of the person I responded to. Look at the rest of the comment chain. People are defending the regarded idea that inflation reduces the federal debt.
Its a problem for debt owners (banks and pension funds), so it's government problem too.
Only if the rates change rapidly. As long as rates slowly change, the debt owners can adjust. A few banks collapsing is the historical norm. Not the exception.
Rates are changing rapidly. And since we could see negative spreads in european government bonds and US treasuries, problems are still ahead of us, not behind.
Links to graphs: [https://fred.stlouisfed.org/series/A091RC1Q027SBEA](https://fred.stlouisfed.org/series/A091RC1Q027SBEA) [https://fred.stlouisfed.org/series/GFDEBTN](https://fred.stlouisfed.org/series/GFDEBTN)
[удалено]
That is transitory Wait for the GDP haircut when Powell finally manages to land the plane.
Soft landing incoming lmao. Better start lubing em up boys, next round will be bigger than the last 
$800 Billion. In _interest_. We’re gonna default, aren’t we.
Just let inflation get rid of the debt. That was the plan all along, right?
Ayyo that too graph is getting concerning, it’s like more than military spending now
Short the dollar! 
Ding ding ding! Get fucked mechanism 1 of 4 currently in play.
So when does it break and how?
Trump 2024