The crowding out effect you highlighted is crucial and often overlooked in these discussions. When government borrows at this scale, it doesnt just create a fiscal problem it shifts capital away from productive investments. Your point about the austerity threshold between 170% and 190% is sobering. Markets wont wait for theoretical limits to be reached before demnding higher returns.
Because our debt is so enormous (38 trillion and growing) and we still run a deficit every year (the US takes in 5 trillion a year and spends 7 trillion a year) it will only grow. Already the interest alone is more than our national defense, as you noted. But it cannot be restated enough. We spend $2 trillion MORE than we take in EVERY SINGLE YEAR. Which adds to the $38 trillion already owed, which is BEFORE you add in any interest
So the fed will have no real choice but to lower interest rates to better manage the interest payments. Again, just the interest payments not the debt itself. It’s like we are only paying the minimum balance on our credit card and we are struggling to do that while we keep using it to purchase things. So the Fed will have no choice but to lower interest rates and start printing more money, which will keep us inflationary. We have no stomach for austerity so cutting spending is a non-starter. It would take an across the board 40% cut to ALL government spending to eliminate that $2 trillion dollar deficit. Remember DOGE? Remember how much they wanted to cut government spending? Two trillion. And they couldn’t. They tried hard and seemed willing to take any public backlash. But they failed spectacularly. No politician is getting elected on the “imma gonna cut 40% of all government spending!” platform.
Cheap credit and low interest rates are the marching orders for the foreseeable future so inflation will result until it’s unsustainable. Until a correction occurs. But before that there will be a window where interest rates are low and housing prices haven’t skyrocketed yet where some moves can be made. Namely invest in the stock market and buy a course. You need to acquire assets that appreciate and beat inflation. Anyone not owning property and/or in the stock market/buying gold and/or silver or maybe bitcoin is going to lose ground quickly. Wealth inequality will skyrocket again as rich people in the market get richer and their mansions become more valuable. But we will shed quite a lot of the middle class whose purchasing power decreases as inflation does what inflation does
That’s how I see it anyway. I’m no economist but the math is pretty simple and dire here
The crowding out effect you highlighted is crucial and often overlooked in these discussions. When government borrows at this scale, it doesnt just create a fiscal problem it shifts capital away from productive investments. Your point about the austerity threshold between 170% and 190% is sobering. Markets wont wait for theoretical limits to be reached before demnding higher returns.
Because our debt is so enormous (38 trillion and growing) and we still run a deficit every year (the US takes in 5 trillion a year and spends 7 trillion a year) it will only grow. Already the interest alone is more than our national defense, as you noted. But it cannot be restated enough. We spend $2 trillion MORE than we take in EVERY SINGLE YEAR. Which adds to the $38 trillion already owed, which is BEFORE you add in any interest
So the fed will have no real choice but to lower interest rates to better manage the interest payments. Again, just the interest payments not the debt itself. It’s like we are only paying the minimum balance on our credit card and we are struggling to do that while we keep using it to purchase things. So the Fed will have no choice but to lower interest rates and start printing more money, which will keep us inflationary. We have no stomach for austerity so cutting spending is a non-starter. It would take an across the board 40% cut to ALL government spending to eliminate that $2 trillion dollar deficit. Remember DOGE? Remember how much they wanted to cut government spending? Two trillion. And they couldn’t. They tried hard and seemed willing to take any public backlash. But they failed spectacularly. No politician is getting elected on the “imma gonna cut 40% of all government spending!” platform.
Cheap credit and low interest rates are the marching orders for the foreseeable future so inflation will result until it’s unsustainable. Until a correction occurs. But before that there will be a window where interest rates are low and housing prices haven’t skyrocketed yet where some moves can be made. Namely invest in the stock market and buy a course. You need to acquire assets that appreciate and beat inflation. Anyone not owning property and/or in the stock market/buying gold and/or silver or maybe bitcoin is going to lose ground quickly. Wealth inequality will skyrocket again as rich people in the market get richer and their mansions become more valuable. But we will shed quite a lot of the middle class whose purchasing power decreases as inflation does what inflation does
That’s how I see it anyway. I’m no economist but the math is pretty simple and dire here
We had a chance to let the “Tax cuts for the Rich and Deficits Act of 2017” expire, but Republican flubbed it! Actully made the deficit worse.