[quote=livinincali][quote=dumbrenter]
To make things even interesting, the US can not only choose the interest rate, but the debt is denominated in paper that the US can print at will.
So where exactly is the problem? How can we be over-leveraged when we get to control the rate AND the denomination in which the debt is serviced?
We can keep issuing debt till there is no buyer at which point we cannot issue debt anymore which means there is no more debt problem.
OR we will reach a point of exchange rates / devaluation / inflation where it will become cheaper to make things here instead of making them overseas and shipping them here. Which means more jobs here and a vibrant economy.
Looks like folks holding dollar or dollar denominated assets will win in either case. Or so it seems to this dumb renter.[/quote]
The problem is that real wealth is the promise of future productivity. We put that debt in terms of dollars but a dollar in itself has almost zero tangible value. When you print too much and people lose faith in actually getting paid back in productive output and instead bags full of paper money you get hyper inflation.[/quote]
Given the demand for dollar now, I question if we are anywhere close to a point where people lost faith in USD. Our experiences in 2008 and 2011 show that as crisis hits, dollar becomes more expensive relative to other currencies. So, relative to other currencies, USD does have tangible value and each time we have a crisis, it seems to even appreciate in value (i.e. opposite of hyperinflation).
Based on this experience, this non-economist dumb renter questions if US even has a debt crisis.
None of the rules that applied to other economies, currencies throughout our history apply here anymore, so we have no history to look back to.
In my view, we are all actually sitting very pretty and need to thank our good fortune that folks outside our shores have an insatiable appetite for our paper. The only risk is when major commodities / goods will be priced in currencies other than USD. Unlikely to happen for grain and agriculture related ones since US still dominates that trade as an exporter. So that only leaves out oil or in general any energy source. As long as they are priced in USD, all is good.
