re: America's national debt surpasses $30 trillion for the first time

quote:

---

Anyone ever considered what would happen if the US government just refused to pay back the federal reserve?

---

Or pay back china.

China's gold is on US soil

We've dicked around for years and years and if China wanted to, they could put an absolute hurt on us.

quote:

---

China holds more than $1 trillion of the U.S. national debt. That's a large portion of the $7.6 trillion in Treasury bills, notes, and bonds held by foreign countries. The rest of the $29 trillion national debt is owned by either people in the U.S. or by the U.S. government itself.

---

quote:

---

Also to be fair, it's worth mentioning that GDP is at an all time high as well of $23 Trillion.

---

Our debt is only 130% of our GDP.

quote:

---

Explain to me like im 5 why 30 trillion (or any other trillion matters) if 20 trillion didnt matter compared to zero dollars in debt.

---

I’ll take that challenge

There are “independent” rating agencies that are charged with putting a rating on government debt. We have enjoyed the highest ratings based on the fact that we have a relatively robust capitalist system , relatively low tax environment, low interest rates the largest economy, and relatively low Federal dept to GDP ratio.

If, for whatever reason, these rating agencies decide to lower our rating then lenders will demand a higher rate of return.

Once the debt to gdp ratio exceeds 100%, Investors and ratings agencies get nervous. Current gdp is around 23 trillion so we’ve blown past that 100% ratio generally considered manageable. We’re at 130% debt ratio. As a comparison, England is @95%. Venezuela is over 200% And Japan is over 200% and they’ve been stuck in a no growth pattern for decades! We’re about like Italy at 130%. We can manage but the trend is bad.

It becomes a matter of whether a government can pay interest on its debt and the perception of whether we can pay that debt load. Of course the US can pay the interest on its debt but that becomes more questionable as interest rates rise and we issue more bonds.

We are currently in an environment where both of these things are happening.
Covid happened and politicians did what politicians do. Throw money at it. They asked the federal reserve to print money! Trump did it, pelosi did it, Biden is doing it… they all want to be hero’s by throwing money at it. That added trillions to our debt load.

The US government brings in roughly 4trillion a year to pay the bills. They borrow to make ends meet. That creates the deficit. The amount of interest on the debt to be paid amounts to roughly 500billion a year so that means our interest on the debt is 12.5% of the cost to run the government. As that ratio grows, it makes investors nervous. It grows when either or both the deficit grows and/or the interest on it grows(which can happen if interest rates increase or the deficit grows)

So How will we continue to pay this interest as it becomes a bigger portion of the budget? Either raise taxes or lower spending on other things- Medicare, social security? Nah. Won’t happen. Cuts in the energy department or department of education? Drops in the bucket. Cut the military? Heck, that’s what backs up the strength of the dollar and probably part of the reason that we can keep our high rating on our bonds.

Of course we could grow ourselves out of it but that becomes harder to do as we become more saddled with debt.

So, They won’t cut spending at all. They’ll raise taxes! And then what!? The environment for investment grows less favorable so capital exits…. Growth slows or shrinks, then Gdp shrinks…. We enter a death spiral .

the federal reserve is the largest debt holder which is a bizarre arrangement. I guess We could just stiff them.

That won’t happen though.

We’re on a course of higher taxes. There will be fighting between politicians as to where to get it which means that the democrats will complain about the rich having too much. The republicans will act like they want to cut spending but they don’t have to balls to do anything because democrats will accuse them of throwing grandma off the cliff to save Medicare dollars.
So we’re looking at a consumption tax in addition to higher income taxes. The estate tax will go up or at least the threshold of what can be taxed will go down. That is essentially an increase in the rate. We’ll see what other clever ideas they come up but I don’t hold out much hope that politicians will have answers beyond what what I’ve outlined above.

Doing nothing is possible. The market will eventually dictate a course of action. Investors will make decisions to either invest (buy equities, bonds or real estate) here or not. If the environment looks dicey, they’ll invest elsewhere.

quote:

---

Our debt is only 130% of our GDP.

---

I'm not saying it's ideal, but just throwing out an absolute dollar figure leaves a lot of relevant info out. In any event, several countries who seem to gain praise a lot around here (Japan, Singapore) are worse - with Japan being nearly 2X.

quote:

---

I’m just waiting for total collapse now.

---

It's inevitable. We're not even trying to mitigate it or delay it at this point. The fact that government as a whole is not recognizing it just further makes me question everything.

Just so you can get some perspective of how big this number is, one trillion seconds would equal about 31,688 years 269 days 17 hours 34 minutes 25 seconds. (Leap years counted)

quote:

---

Genuinely curious when was the last time we had a fiscally responsible president? Not a single one of those sob’s in DC have shown any sliver of responsibility when it comes to money.

---

Bill Clinton ran surpluses 2 years in a row and the debt actually retreated.

This was in the roaring 90s so it wasn't that hard.

First and only time in my lifetime, as far as I know. Every president since Reagan (and including Reagan) has increased spending enormously.

The government doesn't have a revenue problem. It has a spending problem.

quote:

---

o be fair, Trump and basically every President since Reagan has been an atrocious offender on national spending. It was the thing that pissed me off the most about Trump.

---

Reagan had a purpose. He was spending the Soviet Union into collapse. Ideally the next phase would have been shrinking the government and the deficit.