I’m not sure why you feel the need to put ‘people’ in inverted commas, as though I am being naive and people are not really involved. By ‘people’ I obviously meant the market.
And your description of the dynamics of the interest rate market is not really accurate.
I wasn’t suggesting that it was likely, I was discussing how it would play out if it happened.
No, this is misleading. The Fed has full control over short term rates, but it can’t ultimately control long term rates. What a loss of confidence in U.S. government debt really means is a loss of confidence in the Fed’s ability to control inflation. The Fed can always print money, but if people start to perceive that printing money is the only way that the U.S. government can repay debt, that implies massive inflation. In a scenario with those expectations, the Fed is no longer in control - the market, not the Fed, will raise the interest rate that they demand in order to be willing to hold long term government debt. In other words, the price of long term U.S. debt will collapse in the marketplace. The Fed is actively manipulating the long end right now (including corporate borrowing rates) to shore up the economy in exceptional circumstances; but it is only able to do that because of market confidence in the Fed’s control and the ultimate strength of the U.S. economy. But it’s all a function of the existence of that confidence. If that confidence were to fade, the Fed has no ultimate control over the long term rates that the market will demand to buy long term government debt.
So to circle back - the exact schedule of maturing debt, and the technical fact that debt can’t be “called in” is irrelevant to all this. There’s a massive secondary market in government debt, there is immediate price discovery across the entire yield curve. That yield curve is a transparent and immediate representation of market expectations of what the Fed will do, and confidence in what it ultimately can do. The exact schedule at which debt needs to be refinanced is irrelevant - any loss of confidence in the Fed’s ability to control inflation would be immediately apparent in the secondary market with a collapse in the long end (a sharp increase in long term government bond rates).
Money is imaginary. The effects of money aren’t imaginary at all; but the money itself is. It works as long as enough people imagine that it will work. (This is true even if it’s gold. Gold is valuable – its non-monetary uses aside – because people expect other people to think that it’s valuable.)
If too many people stop thinking that the money printed by the USA is worth anything, then it won’t be worth anything. But if that happens, we’ll be in so much trouble otherwise that the exact amount of government debt at the moment won’t matter.
The use of the dollar as a medium of exchange and the use of the dollar (or dollar-denominated debt) as a store of wealth are two different things.
Admittedly the demarcation between the two uses becomes blurred: investors want to keep part of their wealth in a liquid form, easily converted to money.
Sure, but the use of gold to store wealth is no less imaginary than its use as a medium of exchange. It only works because we all agree it works.
Actually, not “sure” - what does this even mean? The only way ANYthing, gold or paper, stores wealth is because of the general belief that it currently has value and will have value in the future. In fact, almost all of gold’s current value comes not from any inherent value but from the belief that it will be exchangeable for useful goods and services in the future.
And even the gold nuts believe this – they just think that in an apocalyptic event gold will be the ONLY thing they can exchange for goods and services.
Well, there was a bit of a run on old silver coins in the run up to Y2K on the similar belief that they would have in the upcoming collapse whereas newer coins wouldn’t (and were easier to obtain then gold).
To be fair, I don’t think they expect it to be the only thing exchangeable; but it is relatively easily portable, and keeps well, which isn’t going to apply to, say, tomatoes. They do seem to expect that everyone will take it, though.
More tampons can be stashed in the same space and/or transported for the same weight. I suspect they’d be even more valuable than toilet paper :D.
(Interestingly, and even more off-topic, I haven’t heard of a shortage of tampons and pads in the covid panic shopping. I didn’t think to look at the store as I no longer need them.)
