Debt and the Deficit: Back to the Basics [View article]
That inference was misinterpreted LJK.
For the record, given the circumstances, I in no way suggest that there was (is) a better policy than the expansionary policy adopted at both fiscal and monetary level - as can be clearly deduced by the last 6 years of my published comments.
But I do think that deficits risks are underplayed when people (not you LJK - yikes!!) imply that continually running deficits pose little risk to American standards of living or that they do not represent any form of "burden" on society (whether direct or indirect).
Debt and the Deficit: Back to the Basics [View article]
I actually clicked "like" on this... I actually found it very entertaining from start to finish. I must keep off those hallucinogens though otherwise your doppelganger will come and beat me into shape again!
Debt and the Deficit: Back to the Basics [View article]
Well I've already named examples and the list is too long... but let's just say it may be quicker for you to find a a profligate government which could not longer afford to pay its way whose citizens did NOT pay in some form of austerity.
Debt and the Deficit: Back to the Basics [View article]
Lot's of words there LJK if you could hold fire on the accusations and inferences just a little - I feel as though I'm running a "spite deficit" here.
I must have (genuinely) misunderstood the part where you said nobody pays for inflation and then that inflation "IS" payment.
My point about hyperinflation is not so much that you cannot predict it without considering supply but rather you simply cannot predict it. All we can observe is that the probabilities of hyperinflation among currency-printers increase with higher debt and deficits.
But going back to basics, all things being equal, from a risk perspective (which is one way the bond market looks at it) 80 is better than 90 and 90 is better than 100.
Responding to the initial claim deficits are not a burden on anybody... well I, respectfully, think it is. Whether by taking debt to GDP up you increase the likelihood of that burden being paid off is another argument altogether. But it is still a debt burden and may still have to be paid for by the citizens of the state by a form of austerity. By increasing the size of that debt you are simply leveraging up and adding risk.
Debt and the Deficit: Back to the Basics [View article]
Wow:
"The ULTIMATE responsible party is the US Government, not a person or persons, the GOVERNMENT of the United States of America. "
Well I've never been a fan of gold but I can see I'm well out of my depth here... you must know something I don't. Last time I checked when a profligate government could not longer afford to pay its way the citizens paid in some form of austerity. It's great that we can create these SPV governments to which the citizens have no ultimate obligation towards - I should have thought of that!
Debt and the Deficit: Back to the Basics [View article]
By the way I'm neither an economist nor a historian but I do understand the idiosyncratic differences between the circumstances in Arg, Zimb, Weim, Ice. One should not dispute the valid points you made. But I feel one is entitled to dispute their relevance to this conversation and the point I am trying to make.
The point is, these countries incurred large amounts of debt and ultimately the consumers/taxpayers/sa... (aka citizens) were on the hook. They paid for this debt (in part) in the form of terrible inflation in whichever political guise or structural format that came about. Each circumstance will always be different but I do not think that is the same as saying they were coincidental to the activation of the inflation spigot.
Debt and the Deficit: Back to the Basics [View article]
There is a good general point here in that over the last century (in particular the last 2 decades) there has been a fundamental shift in peoples attitudes to debt and deficits.
Debt used to be good in so long as it was regarded as a promise to be honored not some self-righteous life support claim to a market that has always provided us (wealthy nations) cheap financing in the past.
Debt and the Deficit: Back to the Basics [View article]
A promise to print inflation... so really we're back to the point that nobody ever pays for inflation. Remind me to tell that to the next Zimbabwean housewife I meet.
The point about OUR debt is not who we are deemed to pay or when we are EXPECTED to pay it - I couldn't care less about that. The point is who ULTIMATELY is deemed to pay, cough up a portion of their wealth or income should that be called upon. That's why we call it debt to GDP and not "inflation promise to GDP" or "cumilative deficit to GDP". We owe it as it poses the risk that in the end it may have to be paid by some form of austerity or another.
The bigger the debt the higher the risk of that inflection point, in this environment, the bigger the deficit the faster you approach the aforesaid inflection point.
Debt and the Deficit: Back to the Basics [View article]
Hi Asbytec...
People, right?
This is what the American public sector represents n'est pas? It's all very well saying that the public sector pays but who ultimately is on the hook? Why does John Mauldin even bother writing anything?
Debt and the Deficit: Back to the Basics [View article]
We should really talk about what matters: people.
The indebted Greeks owe money.
The indebted Americans owe money.
It may mean something else to the observer or indeed the creditor. But that is what it means to the debtor. An obligation to pay - in whatever form that takes.
Debt and the Deficit: Back to the Basics [View article]
Well I was trying to respond to your comment that nobody pays for inflation but it appears to have got retracted somehow. And, I feel, that response answered the crux of it.
I wish all sovereigns lived in the world of your 12 year old but they don't. Thus the expenditure vs revenue imbalance is squared up with debt. We talk about DEBT to GDP ratio because that is what we owe other people and ultimately we (citizens) are on the hook.
I hate be confused of being a pedant (again) or having imaginary debate with a doppleganger but are you implying that the US can run deficits without incurring additional debt and/or without us (citizens) incurring any obligation to pay for it?
Debt and the Deficit: Back to the Basics [View article]
Wow! Now that's a statement! I think I now understand the premise upon which your entire theses are based off.
When we talk of "people paying people" which creditors exactly are we referring to?
If inflation is just a "thing", a phenomenon for which nobody has to pay for. Ultimately whether it is outright default of a sovereign (watch this space with Greece) or rampant/ inflation expectations the "paying person" is always the population of that State at large. Otherwise all our aloof economic pontifications are complete gobbledigook.
Debt and the Deficit: Back to the Basics [View article]
Agreed Dibber... I'm sure Argentinians and Icelanders will tell you they were driving by looking through the benign rear-view mirror of sovereign debt tranquility right up until their noses hit the airbag. It is possible for a fiscal responsibility to get the politicians and the market to agree a deficit today only for them both to turn on it later. Deficits are by definition a measure of the change of one's fiscal obligations and responsibility.
LJK I'm having difficulty reconciling the statements two statements:
"I mean that the deficit itself does not impose on anyone an obligation actually to pay anyone else anything ever. The accumulated public debt becomes part of our national capital stucture. There is no reason to believe that it will be paid back ever."
"...it is very possible to run too large a deficit"
Debt and the Deficit: Back to the Basics [View article]
Krugman is right in theory and he is right today. The bond market yields are low today.
"When I say that the nation's fiscal deficit is not a financial burden, I mean that the deficit itself does not impose on anyone an obligation actually to pay anyone else anything ever.The accumulated public debt becomes part of our national capital stucture. There is no reason to believe that it will be paid back ever."
You'll have to explain to me how this comment does not imply that there is little or no risk to running high deficits (sky high or however high)... let's pick a number ... say 15% of GDP.
Debt and the Deficit: Back to the Basics [View article]
Well actually it was misleading and I was only trying to help.
That's settled anyway, bond market participants, congress and leading economists have it wrong... we should be running sky high deficits. Afterall it will never have to be paid back ever by anybody... as long as we can run the deficit today there will be no future obligations to the nation. We should keep running deficits as far as the eye can see because is we look at the history of our national debt that is what we have always done and it worked just fine...
Debt and the Deficit: Back to the Basics [View article]
For the record, given the circumstances, I in no way suggest that there was (is) a better policy than the expansionary policy adopted at both fiscal and monetary level - as can be clearly deduced by the last 6 years of my published comments.
But I do think that deficits risks are underplayed when people (not you LJK - yikes!!) imply that continually running deficits pose little risk to American standards of living or that they do not represent any form of "burden" on society (whether direct or indirect).
Debt and the Deficit: Back to the Basics [View article]
Debt and the Deficit: Back to the Basics [View article]
Debt and the Deficit: Back to the Basics [View article]
I must have (genuinely) misunderstood the part where you said nobody pays for inflation and then that inflation "IS" payment.
My point about hyperinflation is not so much that you cannot predict it without considering supply but rather you simply cannot predict it. All we can observe is that the probabilities of hyperinflation among currency-printers increase with higher debt and deficits.
But going back to basics, all things being equal, from a risk perspective (which is one way the bond market looks at it) 80 is better than 90 and 90 is better than 100.
Responding to the initial claim deficits are not a burden on anybody... well I, respectfully, think it is. Whether by taking debt to GDP up you increase the likelihood of that burden being paid off is another argument altogether. But it is still a debt burden and may still have to be paid for by the citizens of the state by a form of austerity. By increasing the size of that debt you are simply leveraging up and adding risk.
Debt and the Deficit: Back to the Basics [View article]
"The ULTIMATE responsible party is the US Government, not a person or persons, the GOVERNMENT of the United States of America. "
Well I've never been a fan of gold but I can see I'm well out of my depth here... you must know something I don't. Last time I checked when a profligate government could not longer afford to pay its way the citizens paid in some form of austerity. It's great that we can create these SPV governments to which the citizens have no ultimate obligation towards - I should have thought of that!
Debt and the Deficit: Back to the Basics [View article]
The point is, these countries incurred large amounts of debt and ultimately the consumers/taxpayers/sa... (aka citizens) were on the hook. They paid for this debt (in part) in the form of terrible inflation in whichever political guise or structural format that came about. Each circumstance will always be different but I do not think that is the same as saying they were coincidental to the activation of the inflation spigot.
Debt and the Deficit: Back to the Basics [View article]
Debt used to be good in so long as it was regarded as a promise to be honored not some self-righteous life support claim to a market that has always provided us (wealthy nations) cheap financing in the past.
Debt and the Deficit: Back to the Basics [View article]
The point about OUR debt is not who we are deemed to pay or when we are EXPECTED to pay it - I couldn't care less about that. The point is who ULTIMATELY is deemed to pay, cough up a portion of their wealth or income should that be called upon. That's why we call it debt to GDP and not "inflation promise to GDP" or "cumilative deficit to GDP". We owe it as it poses the risk that in the end it may have to be paid by some form of austerity or another.
The bigger the debt the higher the risk of that inflection point, in this environment, the bigger the deficit the faster you approach the aforesaid inflection point.
Debt and the Deficit: Back to the Basics [View article]
People, right?
This is what the American public sector represents n'est pas? It's all very well saying that the public sector pays but who ultimately is on the hook? Why does John Mauldin even bother writing anything?
Debt and the Deficit: Back to the Basics [View article]
The indebted Greeks owe money.
The indebted Americans owe money.
It may mean something else to the observer or indeed the creditor. But that is what it means to the debtor. An obligation to pay - in whatever form that takes.
Debt and the Deficit: Back to the Basics [View article]
I wish all sovereigns lived in the world of your 12 year old but they don't. Thus the expenditure vs revenue imbalance is squared up with debt. We talk about DEBT to GDP ratio because that is what we owe other people and ultimately we (citizens) are on the hook.
I hate be confused of being a pedant (again) or having imaginary debate with a doppleganger but are you implying that the US can run deficits without incurring additional debt and/or without us (citizens) incurring any obligation to pay for it?
Debt and the Deficit: Back to the Basics [View article]
When we talk of "people paying people" which creditors exactly are we referring to?
If inflation is just a "thing", a phenomenon for which nobody has to pay for. Ultimately whether it is outright default of a sovereign (watch this space with Greece) or rampant/ inflation expectations the "paying person" is always the population of that State at large. Otherwise all our aloof economic pontifications are complete gobbledigook.
Debt and the Deficit: Back to the Basics [View article]
It is possible for a fiscal responsibility to get the politicians and the market to agree a deficit today only for them both to turn on it later. Deficits are by definition a measure of the change of one's fiscal obligations and responsibility.
LJK I'm having difficulty reconciling the statements two statements:
"I mean that the deficit itself does not impose on anyone an obligation actually to pay anyone else anything ever. The accumulated public debt becomes part of our national capital stucture. There is no reason to believe that it will be paid back ever."
"...it is very possible to run too large a deficit"
Perhaps you or your doppleganger can help?
Debt and the Deficit: Back to the Basics [View article]
The bond market yields are low today.
"When I say that the nation's fiscal deficit is not a financial burden, I mean that the deficit itself does not impose on anyone an obligation actually to pay anyone else anything ever.The accumulated public debt becomes part of our national capital stucture. There is no reason to believe that it will be paid back ever."
You'll have to explain to me how this comment does not imply that there is little or no risk to running high deficits (sky high or however high)... let's pick a number ... say 15% of GDP.
Debt and the Deficit: Back to the Basics [View article]
That's settled anyway, bond market participants, congress and leading economists have it wrong... we should be running sky high deficits. Afterall it will never have to be paid back ever by anybody... as long as we can run the deficit today there will be no future obligations to the nation. We should keep running deficits as far as the eye can see because is we look at the history of our national debt that is what we have always done and it worked just fine...