Meta Econ Takeover Day 20 \ stacker news ~meta

2090 sats \ 14 comments \ @Undisciplined 6 Nov 2023 meta

There was a recent Timcast IRL clip where they were talking about how ridiculous the US national debt is.

How do you see this unravelling?

Who's left holding the bag?

People freak out if anyone proposes default, but then they'll admit there's no way to pay it back. I think hard default is the most ethical approach. At least it stiffs people who willingly leant the US Government money. However, soft default through inflation will probably just continue until the dollar collapses.

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427 sats \ 7 replies \ @siggy47 6 Nov 2023

No doubt soft default. It will be interesting to see if they go the traditional zirp and qe route, or get creative and recapitalize the banks through the FDIC. That might allow them to kick the can down the road a little further and keep rates higher for a while. The recapitalized banks would of course be required to buy treasuries, the "pristine collateral".

481 sats \ 4 replies \ @grayruby 6 Nov 2023

Whatever they decide to do it will be the same old money printing but have a cool new esoteric wrapper so they can claim it is totally not QE.

392 sats \ 3 replies \ @siggy47 6 Nov 2023

You gotta hand it to them. They come up with creative names: Money Creation Debt Monetization Security Printing And of course, everyone's favorite: Quantitative Easing

604 sats \ 2 replies \ @grayruby 6 Nov 2023

Open Market Operations. Who doesn't love a little OMO with their coffee in the morning.

449 sats \ 1 reply \ @siggy47 6 Nov 2023

Good one. Now I'm doing a search for these meaningless names. I think they came up with a new one during the covid crash. I can't remember what they called it.

392 sats \ 0 replies \ @siggy47 6 Nov 2023

In China they have a whole group named the Plunge Protection Team. I love that. They buy stocks. At least they admit it's not a free market. Edit: It turns out the U.S. has one too, but it's only rumored to actually intervene in markets here.

264 sats \ 1 reply \ @Undisciplined OP 6 Nov 2023

Do you think we're heading right back to ZIRP with the new war de jour? I had been expecting rates to stay elevated because of inflation concerns, but then war were declared.

482 sats \ 0 replies \ @siggy47 6 Nov 2023

I'm thinking a ZIRP move would scare the hell out of the markets. They will try to avoid it. Here's the scenario I see. Treasury issues lots of debt to pay for wars. Bond yields keep rising. All banks including TBTF are weakened by the plummeting bond values. Everyone is shocked because yields keep rising in the face of higher for longer interest rates. Reality is lower demand for U.S. debt. To help the banks, there will be an FDIC recapitalization while at the same time maintaining higher for longer interest rates. This will prevent spiraling inflation for a while, though it will still be way above the target rate. At least they think it will forestall hyperinflation. Who knows what will actually happen? The end is near.

264 sats \ 0 replies \ @Undisciplined OP 6 Nov 2023

Here's a timely article about exactly this topic:

The Interest Rate Shock Will Blow Up the Government’s Ponzi Game By Thorsten Polleit "As the federal government continues its Ponzi scheme of issuing debt to pay for past debts, interest rates will increase to the point where this no longer is a tenable strategy—if it ever was."

308 sats \ 2 replies \ @td 7 Nov 2023

Or will the CBDC arrive just in time to prevent the collapse and usher in a new glittering era of total financial control?

Putting it this way really illustrates how high the stakes are.

0 sats \ 1 reply \ @Undisciplined OP 7 Nov 2023

How do you see CBDC rollout affecting the ability to pay down the debt?

0 sats \ 0 replies \ @td 7 Nov 2023

Could be all wrong on this but once programmable money exists I don’t think the debt will matter. It gives the powers-that-be granular control over what can be purchased, or not. Total control of the money also removes the ability of the populace to express their dissatisfaction with whatever draconian measures get implemented. No train travel for wrongthink, etc.

I acknowledge there is a lot of hypothetical in there, so really it just an expression of unease about what CBDCs could mean. However, it does make me realise how much of a long way there is to go (probably many years, realistically) in terms of getting people to “see the light” and accept CBDCs. I would like to think that this may never happen, especially if there is an alternative.

305 sats \ 1 reply \ @elvismercury 6 Nov 2023

It seems like an actual literal default requires a level of honesty and intentionality that is completely absent from public life: "We got ourselves into a pickle, and now we're declaring a debt jubilee of sorts. Sorry, won't happen again."

Isn't this what Iceland did, post GFC? Although maybe that was driven by a simpler mix of things.

0 sats \ 0 replies \ @Undisciplined OP 6 Nov 2023

It's not unprecedented, but I'm not sure if the reserve currency holder has ever done it that honestly. Technically, the US defaulted in 1933 and 1972, but that's not how we tend to look at it.

In 1933, the dollar was defined in terms of gold, so $20 of loans meant 1oz of gold. When they officially devalued the dollar, debts were kept in their dollar amounts rather than their gold amounts. All debt holders took enormous haircuts.

In 1972, foreign central bank deposits at the Fed were defined in terms of gold. So, when Nixon uncoupled the currency from gold that was another major default.