Can the U.S. Keep Adding Debt Forever? | WSJ

As lawmakers prepare for another hike in the U.S. debt ceiling, WSJ's Greg Ip explains why it’s economically feasible for the U.S. to keep borrowing, as long as interest rates stay low.

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#DebtCeiling #USDebt #WSJ

[Thebreakdownshow]

I wish my debt ceiling worked like that.

[renerivera]

I'm gonna call my bank and tell them that I voted to raise my debt ceiling to my credit card.

[phatphan]

US debt is like a giant snow ball rolling down a mountain. The longer it rolls, the bigger it gets. Finally, it will crush everyone at the end of the road.

[jamuojisan]

debt certainly has flexible ceiling when you're the one printing the money.

[antonpopov]

A currency is only viable as long as it is trusted and used by the masses. The power of the currency isn’t with the government it’s with the people.

[kimchikoalaa]

i just find it absurd that the debt ceiling seems so redundant. if the government is determined to spend more they will; why bother going through all the red tape of writing laws to raise it

[ShmuelWeintraub]

This is really interesting. The WSJ claims that the highest deficit spending in history was down to CV19 related spending on funding for the "american people". Yet about 2/3rds of that spending bill DID NOT go to individual Americans.

The $1.4T stimulus spending bill is also dwarfed by the 2008-2013 quantitative easing (which to a certain degree is still going on), which involved in part effectively printing some $60-85Bn per MONTH over a multi year period. This money was used almost exclusively to fund wall street operations and recapitalize the banks which created the 2008 financial crisis while ordinary Americans lost their homes.

Yet the WSJ does not bother to mention any of that spending. Interesting.

[treesnmoguls]

"It's economically feasible for the U.S. to keep borrowing, as long as interest rates stay low". It might be feasible for purposes of funding spending above revenues, but it is a tax on savers. We have negative real interest rates, folks!

[krishnaSagar]

Everyone just wants to make as much as possible and leave. The debt will increase

[pjdelucala]

There are many economists who believe that adding to our debt is not a crisis because the debt really does not need to be paid back, but they are ignoring certain negative consequences a large debt causes in the economy that hurt poor, working class and middle class people.

Our debt does not have to be paid back. We only need to roll it over and pay the interest. So, indeed it can increase forever. Politicians know that, and they also know the debt ceiling WILL be raised, so they are not concerned about borrowing more money and going beyond that debt ceiling. They also are not concerned about high interest rates because they know the Fed can and will print more money. This scenario has been going on full steam since 2000.

The Fed printing money makes our monetary supply open not closed. Open means that the money supply expands. Expanding the money supply causes inflation. In the 19th century, except for commercial fraction reserve loans, we had a closed money gold standard. It was an era of lower prices as the economy expanded using a limited supply of dollars.

Today, with our large debt, if the Fed did not increase the money supply and the government continued to borrow more, interest rates would have to skyrocket due to what is called the Crowding Out effect. That is when the private sector and public sector compete for the same number of dollars in a closed monetary system. The crowding out effect would increase interest rates. So, the Fed comes to the rescue by printing more money increasing the supply of money in the economy to keep interest rates low. The Fed when printing money, uses it also to buy the debt! Today, the Fed owns about 9 trillion dollars worth of U.S. treasuries. In 2008 it only owned 800 billion dollars of debt. The new money goes into the economy and causes both asset and consumer inflation. It is why we have seen real estate prices, bonds prices and stock prices soar since 2008. Now we have very high consumer inflation.

So, the problem with the debt is not the debt itself because we don't have to pay back the principle. The problem is that it causes inflation and hurts many people who don’t own assets. We cannot afford to have high interest rates due to our large debt, so the Fed prints money to increase the supply of money to keep those interest rates low and to give the government the opportunity to borrow more of the new money. So, the debt forces an open monetary system which insures asset and consumer inflation each year. People with assets love asset inflation but consumer goods inflation hurts people who don't own assets and people on fixed incomes. It causes a larger gap between the haves and the have nots.
So, the problem with a large debt is that it encourages money printing and more borrowing by the government. The new money then causes asset and consumer inflation and hurts people struggling in life.

Simple as that.

Peter de Luca: Economist

[briank]

I love how they gloss over cutting back on spending. We don't have a revenue problem, we have a spending problem

[homegrownwild]

They think we are dumb and they are correct

[johnhumphrey]

it is not a debt ceiling; it is a bottomless pit.

[MagicSteel]

If we have to raise debt ceiling to pay the bills, we're already insolvent.

[wangstick]

Low interest rates = retirees lose. Inflation = retirees lose.

[homewall]

Debt today is used to spend the wealth of the unrepresented future. It's feasting on your children's lives.

[Paniro]

It's insane to think that the debt ceiling has never decreased from it's conception. I would assume that this needs to be addressed from a global standpoint and exchange rate stand point.

[mirmahboub]

US doesn't have debt problem, has spending problem.

[JC-ewze]

Stopping kidding yourself! Borrow from social security did not court. Who said so? Actually US debt is over 100 percentage, more like 140 %. Hello check you debt clock currently satting in 28.8 trillion.

[umeshchittirai]

Personal debt should also work like this 😂