[The Beast1]

I saw samsaeu's post in the Trump thread and while I agree with a decent amount of it, the national debt I do not.

The debt doesn't matter. In fact, when you look at who actually holds the most debt, it becomes clear who is going to get a haircut.

Retirees

Retirement programs and social security hold the most T-bill debt. The second this starts becoming untenable, there will be a move to reduce government benefit payments.

It's been mentioned here before that the boomers were effectively lied to. Things will start getting awkward. I expect retirement benefits for most government pensions and social security to get 50 cents on the dollar.

The military will never see their benefits slashed, ever. I've said it before and I'll say it again: the US will become a military dictatorship similar to what happened to Rome before Samsaeu's collapse theory happens.

And then there's WW3 black swan. Nothing ever happens In a vacuum.

[Arado]

(03-03-2019 01:20 PM)The Beast1 Wrote:  

I saw samsaeu's post in the Trump thread and while I agree with a decent amount of it, the national debt I do not.

The debt doesn't matter. In fact, when you look at who actually holds the most debt, it becomes clear who is going to get a haircut.

Retirees

Retirement programs and social security hold the most T-bill debt. The second this starts becoming untenable, there will be a move to reduce government benefit payments.

It's been mentioned here before that the boomers were effectively lied to. Things will start getting awkward. I expect retirement benefits for most government pensions and social security to get 50 cents on the dollar.

The military will never see their benefits slashed, ever. I've said it before and I'll say it again: the US will become a military dictatorship similar to what happened to Rome before Samsaeu's collapse theory happens.

And then there's WW3 black swan. Nothing ever happens In a vacuum.

So at what point should we worry about the debt, or are you a follower of Modern Monetary Theory (MMT) and believe that no matter how much debt we issue there will always be demand for US treasuries? Even when it goes to over 150% debt to GDP ratio well before the end of next decade?

[RoastBeefCurtains4Me]

I'm 54. I've figured for over 20 years that by the time I retire, Social Security won't be there for me. It's only 13 years until I turn 67, and I don't know that the whole thing will collapse in that time.

However, I think the amount that Social Security pays out is far short of what I'd need to have a basic cost of living, and therefore, I'll need retirement savings to supplement that income. The thing is, I also think that Social Security will become means tested as the numbers get worse and worse for sustaining the program. Therefore, if I have enough money to supplement my Social Security income, then I expect I will be means tested and get less income. If I save even more money to compensate for this, I will get means tested even worse.

Basically, if I have enough money to cover the difference between social security and a reasonable cost of living, then I expect I won't receive any social security at all. I am working to build my retirement funds accordingly.

As for the national debt, I expect that we will see some combination of making the wealth holders take a haircut, and inflating the debt away. Almost every single national government in the world is up to their eyeballs in debt, along with local governments, corporations, and households. There's no way that debt's going to get repaid, and the whole world will be in a similar situation as the debt carrying costs become unaffordable everywhere at the same time.

[heavy]

Everybody hates GWB, but he wanted to tackle (or at least talked a lot about tackling) Social Security in 2004.

That seems to be the last time any big time politician made any sort of attempt.

[Paracelsus]

Quote:

Things seem pretty grim, but I'm not sure about the timing. 20 years seems a long time to wait for the debt to become a major problem.

The debt is a major problem. Not in the future, now. When your debt is rising at such a rate that boom time growth can't stop it, and that debt is shortly going to hit the point where the US can't even make the interest payments on the loan, your problem is not in 20 years' time, it's right now, and you need to plan accordingly.

Quote:

Who knows what will happen in the meantime - an AI revolution can drop costs in all industries making debt irrelevant,

AI will not save the world. If AI does prove to be the Second Industrial Revolution as most people with vested interests in it claim it will, it will cause massive poverty, disruption, and death as all those people who used to work for a living are replaced by the machines -- just as the First Industrial Revolution caused massive upheavals as the people were forced like fucking rats to the mills and the textile houses in order to survive -- off the land, and kids as young as 10 went down the mines.

Kids 10 and younger are being encouraged to learn to code, I might add.

People on the Right sneered that those fired journalists should go learn to code, like they'd sneered at those manufacture workers. What's missing the point is that the AI will shortly learn to code for itself. When it does, that industry is gone as well, or gone to India or China. I have seen futurist shitheads claim the future is going to be in the creativity industries. This is Tim Ferriss taken to the point of the absurd. I believe in that just as much as I believe shitheads who think there's a future in Amazon being the supermarket of the world and all of us running around as delivery drivers to one another.

Reduced costs in industries making debt irrelevant doesn't remove all the bodies that are suddenly no longer needed. And if you think a Universal Basic Income is going to solve these problems, I will again point you to the US national debt and the fact it can't even do Social Security or the VA competently or properly, let alone give money to 200 million Americans who'll have zero incentive and zero capacity to compete with the AIs for jobs.

AI is not going to be the great blessing to all mankind. No more than the Internet was. That started out and got away from the powers that be real quick...for a while. It's being curtailed now, starting (where else?) in Europe. Eventually, and most likely with the help of AI, it's going to be turned into little better than and as useless as CB Radio in terms of keeping people employed.

Same will happen with AI: maybe an early breakout and lots of innovation, but because people are fucking stupid and like to only shop at one place for all their shit, it'll wind up under the hegemony of a few corporations who'll use it for their best advantage, not that of humanity.

Quote:

China's further rise can disrupt the balance of power, blockchain can disrupt the banking system, etc...

If China rises, it will not be to the benefit of the United States. And if the Sinophiliacs are even right, you will see a world with very different values, morals, and ethics than Western freedom. There's no press or religious freedom in China, and they are working very hard on their state-based suppression social engine right now.

The only thing blockchain is going to disrupt is the market for gold - at best. There is no such thing as an unbreakable computer system ... especially with notional AI assistance. And here's the thing: if blockchain proves to generate a more trusted form of currency than fiat currency, that will actually trigger the destruction of the US dollar. Because the only thing keeping the US dollar together is the fact there's so much of the shit worldwide and because most of the US is doped up on cheap consumer credit, and will be right to the day it goes over the cliff.

[The Beast1]

(03-04-2019 07:51 AM)Arado Wrote:  

(03-03-2019 01:20 PM)The Beast1 Wrote:  

I saw samsaeu's post in the Trump thread and while I agree with a decent amount of it, the national debt I do not.

The debt doesn't matter. In fact, when you look at who actually holds the most debt, it becomes clear who is going to get a haircut.

Retirees

Retirement programs and social security hold the most T-bill debt. The second this starts becoming untenable, there will be a move to reduce government benefit payments.

It's been mentioned here before that the boomers were effectively lied to. Things will start getting awkward. I expect retirement benefits for most government pensions and social security to get 50 cents on the dollar.

The military will never see their benefits slashed, ever. I've said it before and I'll say it again: the US will become a military dictatorship similar to what happened to Rome before Samsaeu's collapse theory happens.

And then there's WW3 black swan. Nothing ever happens In a vacuum.

So at what point should we worry about the debt, or are you a follower of Modern Monetary Theory (MMT) and believe that no matter how much debt we issue there will always be demand for US treasuries? Even when it goes to over 150% debt to GDP ratio well before the end of next decade?

Did you read my post before posting that nonsense?

Go to Google and do a little searching to find out who consumes the most treasury bills. Here's a hint for you: over 50% of it is held by retirement programs in trust.

When you eliminate the useless feeder programs of the government, the consumption drops to sustainable levels below what debt is needed.

The goverent has a vested interest in using it's fiscal policy to sop up cash in the market. T bills aren't going anywhere.

T bills financing retirement programs and other social hand outs however will. If you live on the government tit, that gravy train is quickly ending.

[Repo]

(03-04-2019 10:39 AM)The Beast1 Wrote:  

(03-04-2019 07:51 AM)Arado Wrote:  

(03-03-2019 01:20 PM)The Beast1 Wrote:  

I saw samsaeu's post in the Trump thread and while I agree with a decent amount of it, the national debt I do not.

The debt doesn't matter. In fact, when you look at who actually holds the most debt, it becomes clear who is going to get a haircut.

Retirees

Retirement programs and social security hold the most T-bill debt. The second this starts becoming untenable, there will be a move to reduce government benefit payments.

It's been mentioned here before that the boomers were effectively lied to. Things will start getting awkward. I expect retirement benefits for most government pensions and social security to get 50 cents on the dollar.

The military will never see their benefits slashed, ever. I've said it before and I'll say it again: the US will become a military dictatorship similar to what happened to Rome before Samsaeu's collapse theory happens.

And then there's WW3 black swan. Nothing ever happens In a vacuum.

So at what point should we worry about the debt, or are you a follower of Modern Monetary Theory (MMT) and believe that no matter how much debt we issue there will always be demand for US treasuries? Even when it goes to over 150% debt to GDP ratio well before the end of next decade?

Did you read my post before posting that nonsense?

Go to Google and do a little searching to find out who consumes the most treasury bills. Here's a hint for you: over 50% of it is held by retirement programs in trust.

When you eliminate the useless feeder programs of the government, the consumption drops to sustainable levels below what debt is needed.

The goverent has a vested interest in using it's fiscal policy to sop up cash in the market. T bills aren't going anywhere.

T bills financing retirement programs and other social hand outs however will. If you live on the government tit, that gravy train is quickly ending.

Eh you said the debt doesnt matter, and then immediately explained what cuts will be made, implying that it does matter (otherwise why cut anything at all?). You literally took two opposing stances in the same post, though I suspect that was just a function of not writing out your thoughts as clearly as you could have.

Anyway, yes a huge portion of the debt is to US citizens. But as it grows and a higher percentage of the government's expenditures go to paying the interest, then the other debts will grow at increased rates. So yes the debt does matter, and if we are to reduce pr rework some of those programs we should get on with it already.

[The Beast1]

You're probably right Repo. It does matter to some who foolishly planned on retiring off of social security and the thought pensions could actually be managed carefully.

If you're not planning or paying into either you'll be fine. Are a bunch of boomers really going to go apeshit crazy in the streets ? No they'll just whine like they always have and realise the lies they've been fed.

Awkward decisions will have to be made regarding the elderly who planned poorly. And frankly that's their own fault. Hopefully they'll have kids they can lean on. Otherwise , sucks to be them!

[Repo]

Your also assuming that Republicans will be in charge to actually make the cuts. If Democrats are, nothing will be cut and they'll just jack up taxes for everyone. So it matters for more than just those people.

[Arado]

From zerohedge

Quote:

This week we also learned that the federal budget deficit is exploding as well. The following comes from Business Insider…

According to a report from the Treasury Department released Tuesday, the budget deficit — that is the difference between what the federal government takes in and what it spends — hit $310 billion in the first four months of fiscal year 2019.

Fiscal years for the federal government run October through September, so the data reflects the shortfall from October 2018 through January 2019. Based on the data, the deficit increased by 77% compared to the same period the prior year.

A 77 percent increase in one year?

I don’t even have the words to describe how foolish this is.

We are on pace to add way over a trillion dollars to the national debt this year, and one of the big things fueling this horrific debt binge is our rapidly expanding interest payments…

Finally, and perhaps most concerning, is that for the first four months of this fiscal year, interest payments on the U.S. national debt hit $192 billion, $17 billion, or 10% more than in the same four-month period last year and the most interest ever paid in the first third of the fiscal year. As Reuters’ Jeoff Hall points out, annualizing the $192BN interest expense means that the interest on U.S. public debt is on track to reach a record $575 billion this fiscal year, more than the entire budget deficit in FY 2014 ($483 BN) or FY 2015 ($439 BN), and equates to 2.7% of estimated GDP, the highest percentage since 2011.

I generally agree with your points, Paracelsus but am just trying to understand why mainstream economists are still relatively ambivalent about the exploding debt.

(03-04-2019 10:39 AM)Paracelsus Wrote:  

AI will not save the world. If AI does prove to be the Second Industrial Revolution as most people with vested interests in it claim it will, it will cause massive poverty, disruption, and death as all those people who used to work for a living are replaced by the machines -- just as the First Industrial Revolution caused massive upheavals as the people were forced like fucking rats to the mills and the textile houses in order to survive -- off the land, and kids as young as 10 went down the mines.
...
Reduced costs in industries making debt irrelevant doesn't remove all the bodies that are suddenly no longer needed. And if you think a Universal Basic Income is going to solve these problems, I will again point you to the US national debt and the fact it can't even do Social Security or the VA competently or properly, let alone give money to 200 million Americans who'll have zero incentive and zero capacity to compete with the AIs for jobs.

I agree with your points that AI will create major disruptions in society and the job market, but I still think it could help with the debt. Right now, the one skyrocketing cost that is driving a good chunk of our exploding deficit is healthcare. AI can substantially decrease costs once everyone has AI assistants monitoring their diet, sleep, exercise patterns, etc to maximize their health. We can have AI anesthesiologists and AI doctors diagnosing people and even performing surgery. AI could also revolutionize the education industry as well - an AI teacher with minimal marginal cost could easily outperform even your highest paid superstar teacher or professor. Another huge governmental expense now made redundant.

The US has enough food to feed people and enough land to house the population, and when most manufacturing production becomes automated, then actually keeping people at basic sufficiency with UBI should be pretty easy with a highly automated economy, and we will be able to use surplus production to pay off the debt.

(03-04-2019 10:39 AM)Paracelsus Wrote:  

Quote:

China's further rise can disrupt the balance of power, blockchain can disrupt the banking system, etc...

If China rises, it will not be to the benefit of the United States. And if the Sinophiliacs are even right, you will see a world with very different values, morals, and ethics than Western freedom. There's no press or religious freedom in China, and they are working very hard on their state-based suppression social engine right now.

Point about China was that the RMB will come closer to disrupting the dollar's reserve status, which will accelerate the debt crisis. Or, a military conflict with China could cost trillions of dollars dramatically increasing the US debt in a short period of time.

(03-04-2019 10:39 AM)Paracelsus Wrote:  

The only thing blockchain is going to disrupt is the market for gold - at best. There is no such thing as an unbreakable computer system ... especially with notional AI assistance. And here's the thing: if blockchain proves to generate a more trusted form of currency than fiat currency, that will actually trigger the destruction of the US dollar. Because the only thing keeping the US dollar together is the fact there's so much of the shit worldwide and because most of the US is doped up on cheap consumer credit, and will be right to the day it goes over the cliff.

Exactly - that's why I was skeptical of Samseau's 20 year timeline - in fact I'm concerned that the endgame could be much sooner (assuming there is no AI utopia around the corner.)

[Paracelsus]

(03-07-2019 08:56 AM)Arado Wrote:  

From zerohedge

Quote:

This week we also learned that the federal budget deficit is exploding as well. The following comes from Business Insider…

According to a report from the Treasury Department released Tuesday, the budget deficit — that is the difference between what the federal government takes in and what it spends — hit $310 billion in the first four months of fiscal year 2019.

Fiscal years for the federal government run October through September, so the data reflects the shortfall from October 2018 through January 2019. Based on the data, the deficit increased by 77% compared to the same period the prior year.

A 77 percent increase in one year?

I don’t even have the words to describe how foolish this is.

We are on pace to add way over a trillion dollars to the national debt this year, and one of the big things fueling this horrific debt binge is our rapidly expanding interest payments…

Finally, and perhaps most concerning, is that for the first four months of this fiscal year, interest payments on the U.S. national debt hit $192 billion, $17 billion, or 10% more than in the same four-month period last year and the most interest ever paid in the first third of the fiscal year. As Reuters’ Jeoff Hall points out, annualizing the $192BN interest expense means that the interest on U.S. public debt is on track to reach a record $575 billion this fiscal year, more than the entire budget deficit in FY 2014 ($483 BN) or FY 2015 ($439 BN), and equates to 2.7% of estimated GDP, the highest percentage since 2011.

I generally agree with your points, Paracelsus but am just trying to understand why mainstream economists are still relatively ambivalent about the exploding debt.

(1) Economists are, in general, idiots/academics, and yes, those two words are exchangeable. See Nassim Taleb's entire Incerto for the longer explanation.

(2) Economists have no skin in the game, i.e. they do not suffer any consequences when their projections and prognostications turn out to be wrong. This means they have no reason to give a fuck about the state of the national debt.

(3) "Mainstream economists" are, in a word, visible economists, i.e. journalists, who like all journalists have a massive agency problem: they have no incentive to have differing views and after a very short inculcation period primarily write to impress one another, not themselves.

(4) Economists are people, i.e. they will convince themselves of something if it suits their beliefs. Very few economists either want to be the one who says there is a real problem, for fear of either being wrong at that moment or for fear of being the only one who says it - see also the agency problem again. For example, see how many economists predicted the subprime crisis, i.e. virtually zero.

(5) Mainstream economists take seriously the idea of Modern Monetary Theory, which in essence holds money exists not as a medium of exchange but as a standard of deferred payment, with government money being debt the government may reclaim through taxation.

This latter point is ludicrous, and like a lot of ludicrous ideas, has cropped up in history before: in 1914, where the idea was called Chartalism, and lasted right until the Depression and the Weimar Republic's hyperinflation hit and delivered a fairly significant lesson on how money actually works and killed the idea of Chartalism for just over 100 years.

The simplest criticism of MMT is that Hauser's Law basically then implies that the debt is at least five times the maximum capacity of the government's "repayments", i.e. taxation: because you never get more than about 20% of a country's GDP by way of taxation.

Even economic terrorist Paul Krugman says MMT ignores inflationary pressure.

MMT is essentially the religious dogma created to try and assuage people that their debt situation is not, in fact, in deep shit.

(6) Most specifically, economists are ambivalent about the debt because they believe too strongly in the strength and trust people have in the US dollar. See my earlier comments about the red line on ski slopes regarding that trust. Or if you want a more erudite dissection, look at Nassim Taleb and his foundational idea, the Black Swan: an event that nobody sees coming not because nobody predicted it or because anyone was careless, but because Black Swans are not subject to prediction at all; if they were, they wouldn't be Black Swans. The sudden collapse in trust of the US dollar is unthinkable. For that very reason - and mainly because of the US's debt to GDP ratio - it is inevitable.

[Arado]

(03-08-2019 01:13 PM)Paracelsus Wrote:  

(03-07-2019 08:56 AM)Arado Wrote:  

I generally agree with your points, Paracelsus but am just trying to understand why mainstream economists are still relatively ambivalent about the exploding debt.

(1) Economists are, in general, idiots/academics, and yes, those two words are exchangeable. See Nassim Taleb's entire Incerto for the longer explanation.

(2) Economists have no skin in the game, i.e. they do not suffer any consequences when their projections and prognostications turn out to be wrong. This means they have no reason to give a fuck about the state of the national debt.

(3) "Mainstream economists" are, in a word, visible economists, i.e. journalists, who like all journalists have a massive agency problem: they have no incentive to have differing views and after a very short inculcation period primarily write to impress one another, not themselves.

(4) Economists are people, i.e. they will convince themselves of something if it suits their beliefs. Very few economists either want to be the one who says there is a real problem, for fear of either being wrong at that moment or for fear of being the only one who says it - see also the agency problem again. For example, see how many economists predicted the subprime crisis, i.e. virtually zero.

(5) Mainstream economists take seriously the idea of Modern Monetary Theory, which in essence holds money exists not as a medium of exchange but as a standard of deferred payment, with government money being debt the government may reclaim through taxation.

This latter point is ludicrous, and like a lot of ludicrous ideas, has cropped up in history before: in 1914, where the idea was called Chartalism, and lasted right until the Depression and the Weimar Republic's hyperinflation hit and delivered a fairly significant lesson on how money actually works and killed the idea of Chartalism for just over 100 years.

The simplest criticism of MMT is that Hauser's Law basically then implies that the debt is at least five times the maximum capacity of the government's "repayments", i.e. taxation: because you never get more than about 20% of a country's GDP by way of taxation.

Even economic terrorist Paul Krugman says MMT ignores inflationary pressure.

MMT is essentially the religious dogma created to try and assuage people that their debt situation is not, in fact, in deep shit.

(6) Most specifically, economists are ambivalent about the debt because they believe too strongly in the strength and trust people have in the US dollar. See my earlier comments about the red line on ski slopes regarding that trust. Or if you want a more erudite dissection, look at Nassim Taleb and his foundational idea, the Black Swan: an event that nobody sees coming not because nobody predicted it or because anyone was careless, but because Black Swans are not subject to prediction at all; if they were, they wouldn't be Black Swans. The sudden collapse in trust of the US dollar is unthinkable. For that very reason - and mainly because of the US's debt to GDP ratio - it is inevitable.

Good points - there is a herd mentality to many social science professions in which theories dominate over hard data. I suppose the next question is what are your trigger points that you are looking out for in terms of positioning your investment portfolio to prepare for a debt crisis?

1) Major recession which will lead to drop in tax receipts and jump in welfare spending, leading to double or triple deficit
2) U.S. debt being auctioned off at increasingly higher yields as foreigners don't want to purchase it (any particular yield % and duration you are focusing on?)
3) Spike in gold price in USD
4) Change in the IMF SDR basket of currencies
5) Major jump in non-USD currencies or other medium of exchange (bitcoin, gold, etc) used to conduct international trade
6) Specific debt to GDP ratio?

One those triggers are hit, what is the best way to prepare? Buy gold? Real Estate? REITs? Foreign stocks?

The ECB, BOJ, PBOC(China) are pumping tons of liquidity into their financial systems. The Fed actually looks somewhat conservative in comparison. Couldn't those countries (Italy/France for Eurozone) be just as likely to have a debt crisis in the near future?

[Arado]

This is scary. Without counting the growth in national debt, GDP growth would have been negative!