alt Hacker NewsWe really need to reduce the fiscal/govt budget deficit. It's basically printing trillions per year, and as confidence in the soundness of the USD decreases, demanded interest rates rise, and increase the deficit further. The interest payments are already larger than the defense budget, about $1T/yr. It's an emergency at this point. The old method of raising interest rates to cool inflation isn't effective anymore with this sort of fiscal deficit, because it increases the interest payments, and effectively increases the rate of money printing, counteracting the effect of the decrease in private credit creation.
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> We really need to reduce the fiscal/govt budget deficit. It's basically printing trillions per year […]
That's not how money is created:
* https://www.bankofengland.co.uk/explainers/how-is-money-crea...
When governments (or anyone) wants to sell bonds, the money has to already exist 'in the wild'. The selling of government bonds does not create new money/currency. The pool(s) of money is already out there, and when bonds are offered, the people who control the pool(s) decide whether to buy or not.
(This isn't to deny that government deficits/debt needs to be at reasonable levels.)
There are two ways out of debt, you either pay it down or you inflate away the value of old debt. It seems like we are hurtling towards 2.
> It's an emergency at this point
Eh, it's an issue. We should solve it now. (We should have solved it ten years ago.) But we have a little time.
Emergency will be stagflation. Crisis would be if the Treasury couldn't sell debt.
> the old method of raising interest rates to cool inflation isn't effective anymore with this sort of fiscal deficit, because it increases the interest payments
There is no evidence of this. There might have been in Japan (in the 1980s). But Americans don't save as much as the Japanese, and the concavity of the wealth effect means that those who do don't tend to spend much more when their interest income rises.
Don't worry, with Democrats coming into office they'll reduce the deficit. All while Republicans shout and scream about the deficit being an emergency. Then Republicans will get back into power, enact massive tax cuts and balloon the deficit again.
But if we committed to reducing the deficit, we wouldn't be able to give tax breaks to AI Data Centers, Bomb Iran or subsidize our private health care system.
Don't worry. This administration is already hiring debt collectors to get those oustanding student loans in place.
The only way to fix the budget is to fix the medical system, and that doesn't mean enacting more schemes to figure out how to pay the absurd costs, it means destroying the cost side by applying long standing anti-trust law to the entire system.