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so there are 15966.15 x 1000 x 1000 inches to the moon
1000 x 1000 is a million (1 with 6 zeros)
a trillion is a 1 with 12 zeros
a trillion divided by a million is a million
so the distance to the moon is 15966.15 trillion inches
our national debt is ~20 trillion
15966/20 = 798
798/2 = ~400 trips to the moon and back to get an idea of 20 trillion inches
There is absolutely no way to pay it off.
The only 2 possible outcomes are to inflate it away or default.
It is kind of funny... not that many years ago people were fretting about how the financial markets and the Federal Reserve would function with no Treasury debt in existence, as projections were showing would happen.
What's important is not the absolute number, but rather debt compared to GDP (or some other macro number). Today we're a little over 100% of GDP, which is too high IMO. But if the federal govt. would just work with a blasted balanced budget that ratio could be trimmed to 50% over 25-30 years.
We last paid off the public debt in 1836. It was a "special case" exercise. No one has any plans to repeat it. Meanwhile, the people who hold public debt notes plainly wish in very large numbers to continue holding them. National debt and household debt are very different matters.
National debt is a fiction. It cannot be repaid, it is darn impossible in principle to repay it, an atempt would remove all the money in circulation and there still would be "debt" remaining. National debt is a way to inject new money in the system. For you to save national "debt" must increase. In the end money is just an abstract tool. for as long as money can be used to entice and coerce people into laboring they can create debt by megazillions to the end of days.
We last paid off the public debt in 1836. It was a "special case" exercise. No one has any plans to repeat it. Meanwhile, the people who hold public debt notes plainly wish in very large numbers to continue holding them. National debt and household debt are very different matters.
This assumes that those who hold debt are always happy to do so, will not want to cash in that debt, and will be willing to take on more and more of it.
Roughly $2.5 trillion of that debt is held by the Social Security Trust Fund. Do you think that, maybe, one day they'll need to liquidate that debt to pay out the benefits they've promised? What happens then? At some point, as you issue more and more debt, people start to scratch their heads and ask if it's really a good deal, and you have one way to assure them it is... pay a higher yield. But by doing that, more and more of your current budget goes to servicing debt payments, leaving less revenue to pay for all the spending you're doing when revenue wasn't enough already, or you wouldn't be issuing debt! And once you enter that spiral, you're doomed.
The list of nations that have defaulted on their debt is long. And every one of them "had never defaulted before!"... until they did. The US is not somehow immune to the basic laws of economics.
This absurd debt is the reason that interest rates must continue to be held near zero, as they have for over a decade now. If interest rates rise to anywhere near the historical normal, interest on the debt will take up even more of the federal budget--meaning taxes must rise even more (since Washington is incapable of reducing spending even by a tiny amount).
Why is this bad? Because anyone saving for retirement gets virtually no benefit from compounding interest. That means pretty much NOBODY will be able to save enough for retirement, and everyone will rely on a Social Security system that requires about $2.7 trillion in either benefit cuts or INCREASED Social Security taxes to pay for the Baby Boom alone.
This assumes that those who hold debt are always happy to do so, will not want to cash in that debt, and will be willing to take on more and more of it.
Also that the sun will continue to rise in the east.
Quote:
Originally Posted by jnojr
Roughly $2.5 trillion of that debt is held by the Social Security Trust Fund.
There is more than one SS Trust Fund, and as of the end of February, they held balances of $2,861,747,604,000. There are many other significant federal trust funds as well, all of them invested in US Treasury securities, the safest and most secure investment vehicle in the history of the world. .
Quote:
Originally Posted by jnojr
Do you think that, maybe, one day they'll need to liquidate that debt to pay out the benefits they've promised? What happens then?
The bulk of these SS investments is in bonds due between now and 2031. Many billions of dollars worth of them come due every month. As SS still does not need or want the cash, they are simply rolled over into new debt as they mature. Exactly the same thing happens with debt held by the public.
Quote:
Originally Posted by jnojr
At some point, as you issue more and more debt, people start to scratch their heads and ask if it's really a good deal, and you have one way to assure them it is... pay a higher yield. But by doing that, more and more of your current budget goes to servicing debt payments, leaving less revenue to pay for all the spending you're doing when revenue wasn't enough already, or you wouldn't be issuing debt! And once you enter that spiral, you're doomed.
The debt exists because people have dollars they wish to invest. The application of household-level thinking to the situation is worse than counter-productive.
Quote:
Originally Posted by jnojr
The list of nations that have defaulted on their debt is long. And every one of them "had never defaulted before!"... until they did. The US is not somehow immune to the basic laws of economics.
The laws of economics plainly state that a currency-issuing authority can never be forced into default.
This absurd debt is the reason that interest rates must continue to be held near zero, as they have for over a decade now.
The actual reason was the need to stimulate economic activity in the wake of the worst economic decline since the Great Depression. That along with a flood of buyers bidding rates down.
Quote:
Originally Posted by NHartphotog
If interest rates rise to anywhere near the historical normal, interest on the debt will take up even more of the federal budget--meaning taxes must rise even more (since Washington is incapable of reducing spending even by a tiny amount).
These things do not happen in a vacuum. Interest on the public debt was effectivley higher in the 1990's. We suffered only good times as the result.
Quote:
Originally Posted by NHartphotog
Why is this bad? Because anyone saving for retirement gets virtually no benefit from compounding interest.
Anyone who is saving for retirement by investing in money-market or passbook savings accounts has much larger problems than low interest rates. Actual investors have been enjoying a field day since 2009.
Quote:
Originally Posted by NHartphotog
That means pretty much NOBODY will be able to save enough for retirement, and everyone will rely on a Social Security system that requires about $2.7 trillion in either benefit cuts or INCREASED Social Security taxes to pay for the Baby Boom alone.
SS can pay for boomer benefits out of cash on hand. That's why those balances were accumulated to begin with.
SS can pay for boomer benefits out of cash on hand. That's why those balances were accumulated to begin with.
Those balances are just IOUs from one branch of the government to another. After all the internal transfers are done the check run needs to be covered by taxed or printed dollars. If the trust fund was invested in 3rd party assets would be a different story.
The size alone is irrelevant. What matters instead are interest payments relative to GDP and relative to the budget By this measure the debt is much less a concern than say 30 years ago. Also, the growth of debt vs. growth of GDP is a useful measure.
Last edited by toosie; 03-19-2017 at 08:43 AM..
Reason: TOS - no signatures please
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