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The $34 trillion mountain of national debt is a 'boiling frog' situation for the US economy, JPMorgan warns
(www.businessinsider.com)
this post was submitted on 08 Jan 2024
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United States | News & Politics
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Unfortunately this is about the federal government’s “debt,” which is a red herring, and not the country’s international balance of payments deficit.
yea also, U.S. is like the only country which doesn't need to worry about balance of payments. You see this with how every other country's current account deficit is shown in U.S. Dollars instead of the local currency.
of course, there are very good reasons to not have a current account deficit. self reliance and all (plus the dollar slowly losing its status)
It's true that they can just print money here, but this leads to secondary effects that the article touches on. Specifically, increased currency volume tends to mean devaluation leading to private lenders to tighten up.
If they print enough of it without shredding any through taxation, yes, but I think this is commonly overblown so Congress can claim they can’t pay for stuff, except of course for military stuff. This article was timed for Congress to make spending decisions; they come out every cycle. Congressional leaders announce an agreement on spending levels, a key step to averting shutdown
Right, as far as public spending goes there isn't really a problem. They can print to an infinite amount because the debt is in their own currency, and as long as you print the currency, you can print however much you want. There's never going to be a default because the fed can just create more credit. The government can always pay its debt by simply printing the money.
The problem for the US economy lies with private debt that is leading to a default. Creditors are tightening their lending which is leading VC funded businesses to crash. Meanwhile, individuals become increasingly unable to service their debts, we're seeing them being forced to forfeit their property. Private banks that are holding debt also end up with bad debt as a result. This sort of dynamic is precisely what we saw leading up to the 2008 crisis. We're now seeing similar things happening, but on a much bigger scale.
The Fed raised their rates in order to tighten credit, cool the economy, and cause layoffs. And they had to have known that people would start defaulting on their debts. I think that’s the main driver here.
My understanding is that the government knows these banks are insolvent from underwater bonds, and quantitative easing is how they’re trying to keep that swept under the rug. It’s some hat trick around the bonds’ values.
The bonds are underwater as a direct result of the Fed raising rates, and they knew, or should have known, that this would happen.
I think this is the QE hat trick currently in play to rescue banks: https://longviewfa.com/how-the-banking-failures-unfolded/