Thread: What is going to happen when the US Treasury's debt burden becomes unsustainable?

The American government continues to spend more and more money, authorising the Treasury to issue more promisory notes.
All this debt will have to be paid back with compounding interest, yet the US Treasury continues to pay off old notes by issuing even more new ones. This cannot go on forever. The interest alone on the debt burden is becoming progressively less sustainable, and by some estimates could consume 100% of the nation's GDP within 50 years.

I think we can all agree that the government is not going to solve this problem until it becomes too late.
Spending less money and raising taxes is the simple and obvious solution, but it seems apparent this is not going to happen any time soon.

So what is going to happen?

Some of you seem to think the government can just print all the money it wants to pay off the debt. But America's money is becoming increasingly backed by the Treasury's debt itself. (at this time nearly half of the reserve assets held by the Federal Reserve Bank are US Treasury bonds/notes)

What if outside investors that the Treasury relies on to buy its bonds suddenly become insecure and demand higher interest rates? Then the Treasury will have to issue even more new bonds to get the revenue to pay this interest. But if the market becomes oversaturated with Treasury bonds, that could decrease the value of the dollar, since the dollar is backed by these bonds. This would cause inflation, and potentially lead to investors demanding even higher interest rates. This could initiate a vicious cycle that could spiral out of control within a short period of time, threatening the solvency of the US Treasury.

If the Treasury defaults on its debt, it will ruin the credit rating of the US Treasury for a very long time. Lower credit ratings mean investors demand higher interest rates, so it will become impractically costly for the government to ever borrow money for an emergency again. Keynesian economic "stimulus" simply will not be an option (at least until the government is able to cut costs and save enough money).

First thing will be progressive $ devaluation by up to 50% .
That will halve debt .
Doubt that Ben will have got much further than that .

Originally Posted by raymondo

First thing will be progressive $ devaluation by up to 50% .
That will halve debt .
Doubt that Ben will have got much further than that .

Effectively defaulting on debt, followed by increased tax reveneu via bracket creep as wages rise.

The gift that keeps on giving.

When is all this debt due?
It just seems to me that the Treasury should be placing as much debt as possible at the longest terms while interest rates are so low.

Over the next ten years the US economy is projected to generate almost $180Trillion, more than $600Trillion over the next 30.

$15Trillion debt in a $600Trillion economy is not an economic problem.

The government will continue borrowing until others will no longer buy its debt. At that point we will become like Greece.

The fed will keep buying it.

Originally Posted by fmw

The government will continue borrowing until others will no longer buy its debt. At that point we will become like Greece.

But when?

Maybe some of us don't want to live the next 40-50 years watching America slowly adopt more and more social programs and slowly choke itself to death. I sure as hell don't want to live the rest of my (*)(*)(*)(*)ing life with this as the "new normal" and watching Americans abandon free market capitalism for some kind of (*)(*)(*)(*)ed up socialist republic with a Hugo Chavez like President in the White House.

Better for the collaspe to come quickly so American see that progressive economics and keynes were all (*)(*)(*)(*)ing dirty liars deserving of thing but contempt and hate.

If the dollar hyper inflates, the central government will declare martial law, outlaw the private exchange of gold and silver, and impose a new world currency on the populace. After that, the UN and IMF will become the de facto world governing agencies and our sovereignty will have been successfully destroyed by socialist usurpers and tyrants.

Originally Posted by unrealist42

When is all this debt due?
It just seems to me that the Treasury should be placing as much debt as possible at the longest terms while interest rates are so low.

Over the next ten years the US economy is projected to generate almost $180Trillion, more than $600Trillion over the next 30.

$15Trillion debt in a $600Trillion economy is not an economic problem.

Firstly , it is not $16trillion debt . It is at least $100 trillion when you add the " exemptions" which the rigged accounting system currently allows .
Who is going to trade with you when the rest of the world moves to its own reserve currency?
European trade will fall as they get toilet flushed .
China can forget trade with America and simply switch all its efforts to its own developing economy .
50% of your current receipts are used to paying back interest and debt capital .
You are already bankrupt .

Originally Posted by raymondo

Firstly , it is not $16trillion debt . It is at least $100 trillion when you add the " exemptions" which the rigged accounting system currently allows .
Who is going to trade with you when the rest of the world moves to its own reserve currency?
European trade will fall as they get toilet flushed .
China can forget trade with America and simply switch all its efforts to its own developing economy .
50% of your current receipts are used to paying back interest and debt capital .
You are already bankrupt .

Don't let Rev see this, he will say printing money forever is needed in order to fulfill his equations.