# Will there be a US economic collapse? **URL:** \ **Category:** Great Debates\ **Created:** [January 21, 2014, 2:46am UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337 "2014-01-21T02:46:22Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 26, 2014, 7:59am UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/41 "2014-01-26T07:59:51Z")
> [@WillFarnaby](#): > > Depends what you mean by economic collapse. Everyone is inflating their currency right now so it’s hard to say folks will give up on the dollar. What else will they hold? There will be another recession soon. When that happens watch out because the true believers of inflation are at the helm. Actually, a big problem in Europe is that Greece cannot inflate its currency. If it could, it would cause imports to be more expensive, exports to be more competitive, which would improve its balance of trade and thus employment. In the US inflation might be too low, since higher inflation encourages purchases now instead of later, improving consumption. I know what inflation looks like. In 1980 when we sold our house we had to finance the buyer at 12.5% interest - which was a good rate then. That was inflation. 4% interest rates - or lower a while ago - was more what my father was paying in 1951 than any time I remember. ---
**Author:** ![Budget\_Player\_Cadet](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/budget_player_cadet/32/205_2.png) [@Budget\_Player\_Cadet](https://boards.straightdope.com/u/Budget_Player_Cadet)\ **Post date:** [January 26, 2014, 10:02am UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/42 "2014-01-26T10:02:08Z")
> [@sweat209](#): > > That will not cause the US economic collapse want will cause it will be the trillions of trillions dollar debt and for past 20 years no president can fix the high unemployment problem. Wow, and I thought we were just talking about AGW where you didn’t know what you were on about. There is no economic model under which our trillions of dollars of debt actually harms an economy of this size. None. People talk of “confidence”, but over the last few years that theory fell apart, and the main math it was based on turned out to be a _spreadsheet error_ (on top of a colossal post hoc ergo propter hoc fallacy). You see, national debt alone is meaningless - it’s a figure that literally means nothing. Without comparing it to _who owes it_, it doesn’t further our understanding at all. Meaning you need to compare it to the country’s GDP. Yeah, sure, we have the highest debt by sheer numbers in the world. We _also_ have one of the largest economies in the world. And when you consider that side of the equation, [we’re not even in the top 20 debtor nations](http://en.wikipedia.org/wiki/List_of_countries_by_public_debt), and we have about 1/3rd of the debt of Japan (who _still_ hasn’t collapsed under the weight of its financial obligations :rolleyes:). And the interest rates on our bonds haven’t even been higher than inflation recently, and people are _still buying them_. That is, they consider these bonds to be a solid investment even when they’re running at a loss. But of course, all of this is rather moot. Who, exactly, is going to lose faith in the US? Who’s going to stop buying from the US? We’re one of the world’s largest economies with a massive global influence, and it is in _everyone’s_ best interest that the US remains stable. We’re not abut to go bankrupt unless the tea party _idiots_ in congress decide that doing so would be a smart political move. As for unemployment, [you’re simply straight-up wrong](http://www.washingtonpost.com/wp-srv/special/business/us-unemployment-rate-history/). We had full employment twice in the last 20 years - for one period under Clinton and one under Bush. Or do you not understand why 5% is considered “full employment”? Because that’s remedial economics lesson I’m not particularly interested in giving you. ---
**Author:** ![WillFarnaby](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/willfarnaby/32/514_2.png) [@WillFarnaby](https://boards.straightdope.com/u/WillFarnaby)\ **Post date:** [January 27, 2014, 4:47am UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/43 "2014-01-27T04:47:24Z")
> [@Voyager](#): > > That is not what we mean by inflation. Well it is inflation. Is inflation defined only as an increase in the price of bread? > [@Voyager](#): > > Actually, a big problem in Europe is that Greece cannot inflate its currency. If it could, it would cause imports to be more expensive, exports to be more competitive, which would improve its balance of trade and thus employment. Only in the shortest of short runs could this possibly be the case. Historically there’s no evidence for your claim. > [@](#): > > In the US inflation might be too low, since higher inflation encourages purchases now instead of later, improving consumption. So we can consume our way to prosperity? Nah. Future increases in the standard of living are secured by saving in the present. ---
**Author:** ![Trinopus](https://avatars.discourse-cdn.com/v4/letter/t/2bfe46/32.png) [@Trinopus](https://boards.straightdope.com/u/Trinopus)\ **Post date:** [January 27, 2014, 5:42am UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/44 "2014-01-27T05:42:55Z")
> [@WillFarnaby](#): > > . . . So we can consume our way to prosperity? . . . It works…to a degree. It works better when corporations employ lots of people, giving them wages enough for them to consume with. The western industrialized economy is built, in very large part, on consumption (cough cough?) and this element cannot be skipped over in a real recovery. The phrase “jobless recovery” is oxymoronic. ---
**Author:** ![Great\_Antibob](https://avatars.discourse-cdn.com/v4/letter/g/e47c2d/32.png) [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)\ **Post date:** [January 27, 2014, 3:47pm UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/45 "2014-01-27T15:47:43Z")
> [@WillFarnaby](#): > > Well it is inflation. Is inflation defined only as an increase in the price of bread? There’s nobody stopping you from using whatever definition of inflation you want. The problem, as always, is that few people use **your** definition. Using established economic theory but changing the definition of the terms used is ill-advised. Garbage in, garbage out. It’s a cute rhetorical trick, but it fails when applied to the real world. > [@WillFarnaby](#): > > Only in the shortest of short runs could this possibly be the case. Historically there’s no evidence for your claim. Historically, no nation has survived more than a thousand years, anyway. In the long run, we’re all dead. It’s a poor argument for a number of reasons, including the fact that appropriate actions are time-dependent, i.e. the correct action to take must needs change with the circumstances and because circumstances change, different actions will need to be taken later (both in the short and long term). Also, it’s basically what many, if not most modern developed nations (including the US) have done. Sure, they needed to adjust their actions eventually, but there’s no historical doubt it works in the short term (and not solely in the shortest of terms). It’s rather bizarre to see a claim it doesn’t. It’s pretty well established across most of the left-right economic spectrum that it does. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [January 27, 2014, 4:12pm UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/46 "2014-01-27T16:12:33Z")
Well, obviously the OP has a very faulty grasp of the issues at hand and I think most of the really erroneous stuff has already been addressed. I thought I’d do a drive by link from a past threat that referenced Zeitgeist for a comprehensive [debunking site](http://conspiracies.skepticproject.com/articles/zeitgeist/) (which I’ve provided to this particular OP in the past…s/he obviously hasn’t chosen to read it). ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [January 27, 2014, 4:22pm UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/47 "2014-01-27T16:22:29Z")
> [@Voyager](#): > > Actually, a big problem in Europe is that Greece cannot inflate its currency. If it could, it would cause imports to be more expensive, exports to be more competitive, which would improve its balance of trade and thus employment. I think what you mean is that Greece would want to devalue its local currency relative to the Euro, which isn’t really the same as “inflating.” Anyway, to debate monetary policy one first must concur on the “1st-order” fact of [_Neutrality of Money_ – the fact that adding a zero to all the dollar quantities in a Monopoly game leaves the game _unchanged_](http://en.wikipedia.org/wiki/Neutral_money) – houses cost $500 each now, but you collect $2000 instead of $200 when you pass Go. There are, of course, extremely important 2nd-order (and 3rd-order!) effects that make inflation “non-neutral” in practice, but on message boards one can find comments so confused(\*) that it’s clear the poster would be baffled by the Monopoly game example. (\* - As one example, a poster has related relatively mild “FRB-caused” inflation to “wealth confiscated from the American people.” :smack: ) ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 27, 2014, 5:39pm UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/48 "2014-01-27T17:39:25Z")
> [@septimus](#): > > I think what you mean is that Greece would want to devalue its local currency relative to the Euro, which isn’t really the same as “inflating.” Higher prices for imports would drive up other prices also. I was really going for the “inflation is not always bad” message. > [@](#): > > Anyway, to debate monetary policy one first must concur on the “1st-order” fact of [_Neutrality of Money_ – the fact that adding a zero to all the dollar quantities in a Monopoly game leaves the game _unchanged_](http://en.wikipedia.org/wiki/Neutral_money) – houses cost $500 each now, but you collect $2000 instead of $200 when you pass Go. There are, of course, extremely important 2nd-order (and 3rd-order!) effects that make inflation “non-neutral” in practice, but on message boards one can find comments so confused(\*) that it’s clear the poster would be baffled by the Monopoly game example. But consider a double board Monopoly game where only one of the board has its prices inflated. And we enforce property bidding. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 27, 2014, 5:50pm UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/49 "2014-01-27T17:50:45Z")
> [@WillFarnaby](#): > > Well it is inflation. Is inflation defined only as an increase in the price of bread? Please give a cite showing how inflation is calculated, then. And it is obviously not computed using one item. > [@](#): > > Only in the shortest of short runs could this possibly be the case. Historically there’s no evidence for your claim. Try [here.](http://www.economicshelp.org/macroeconomics/bop/policies-to-reduce-deficit/). Clearly more exports and fewer imports means more is produced internally. > [@](#): > > So we can consume our way to prosperity? Nah. Future increases in the standard of living are secured by saving in the present. Then deflation, which improved the value of savings, must be good for the economy. Care to give a cite for that? If someone is laid off because all the savers are not buying the products his company makes, his savings rate is soon going to plummet. Clearly there is a balance, but we are still have a consumption issue, as evidenced by the relatively slow rate of capacity increase we need. It is better than it was in 2008, at least. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [January 27, 2014, 5:56pm UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/50 "2014-01-27T17:56:17Z")
> [@WillFarnaby](#): > > The stock market, real estate, farmland, etc What, in your view, is the difference between inflation and assets that appreciate in value? Let’s say I bought Apple stock 10 years ago, and the price of the stock has gone up a bazillion percent. Is that inflation? ---
**Author:** ![Honesty](https://avatars.discourse-cdn.com/v4/letter/h/f04885/32.png) [@Honesty](https://boards.straightdope.com/u/Honesty)\ **Post date:** [January 27, 2014, 6:03pm UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/51 "2014-01-27T18:03:32Z")
> [@Budget\_Player\_Cadet](#): > > Wow, and I thought we were just talking about AGW where you didn’t know what you were on about. There is no economic model under which our trillions of dollars of debt actually harms an economy of this size. None. People talk of “confidence”, but over the last few years that theory fell apart, and the main math it was based on turned out to be a _spreadsheet error_ (on top of a colossal post hoc ergo propter hoc fallacy). You see, national debt alone is meaningless - it’s a figure that literally means nothing. Without comparing it to _who owes it_, it doesn’t further our understanding at all. Meaning you need to compare it to the country’s GDP. Yeah, sure, we have the highest debt by sheer numbers in the world. We _also_ have one of the largest economies in the world. And when you consider that side of the equation, [we’re not even in the top 20 debtor nations](http://en.wikipedia.org/wiki/List_of_countries_by_public_debt), and we have about 1/3rd of the debt of Japan (who _still_ hasn’t collapsed under the weight of its financial obligations :rolleyes:). And the interest rates on our bonds haven’t even been higher than inflation recently, and people are _still buying them_. That is, they consider these bonds to be a solid investment even when they’re running at a loss. But of course, all of this is rather moot. Who, exactly, is going to lose faith in the US? Who’s going to stop buying from the US? We’re one of the world’s largest economies with a massive global influence, and it is in _everyone’s_ best interest that the US remains stable. We’re not abut to go bankrupt unless the tea party _idiots_ in congress decide that doing so would be a smart political move. Look at your Wikipedia link and click on the “Gross governmental debt as % of GDP”. The U.S is in the top 11 and is between Cape Verde and Singapore. What you’re not mentioning is the increasing \>$600 billion dollar deficit is burning a hole in the U.S budget. You’re not mentioning that investors will demand higher interest rates as our deficit barrels toward our annual GDP. You’re also not mentioning that we’re experiencing the highest peacetime deficit in the history of the United States. Though there are some bumps to road, the United States before 1980 did not incur peacetime deficits (other than to pay down debt from a preceding war). The origins of our deficit harken back to Reagan the Magnificent who decided that cutting taxes without cutting spending would lead to an increase in tax receipts. Unfortunately, this never occurred and to obfuscate that fact, Reagan the Magnificent raided Social Security, ended federal revenue sharing to States and municipalities, and cut welfare benefits to millions of poor Americans. The 80’s tax cuts were _not_ paid for, they were, in a sense, a redistribution of wealth from the poor to the rich. This redistribution was with the implicit promise that the rich would bring jobs to the masses, this did not (and has not) occurred. The best thing would be to reverse the Reagan tax cuts while protecting the middle class and update the tax bracketing scheme to take into account an salary of $20 million (that’s apparently the new norm). Americans have bought into this neo-capitalism crap, where we’re taught that rampant consumerism is the pathway to happiness, that international trade brings with it the greatest economic prosperity known in the cosmos, and that governmental interference in the free market leads to economic distress and personal anxiety. I don’t get it. Give me a European-like [mixed economy](http://en.wikipedia.org/wiki/Mixed_economy) any day over this fake, consumerist nonsense. - Honesty ---
**Author:** ![Great\_Antibob](https://avatars.discourse-cdn.com/v4/letter/g/e47c2d/32.png) [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)\ **Post date:** [January 27, 2014, 6:13pm UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/52 "2014-01-27T18:13:44Z")
> [@Honesty](#): > > Look at your Wikipedia link and click on the “Gross governmental debt as % of GDP”. The U.S is in the top 11 and is between Cape Verde and Singapore. Yes…Singapore, which is actually often touted for its fiscal responsibility. Funny that, eh? Near the top of the list (whether you are looking at gross government debt or public debt as % of GDP) is Japan. Now look at interest rates there. > [@Honesty](#): > > What you’re not mentioning is the increasing \>$600 billion dollar deficit is burning a hole in the U.S budget. You’re not mentioning that investors will demand higher interest rates as our deficit barrels toward our annual GDP. People have been warning of higher interest rates right around the corner for the last 5 years. I’d like to see the economic model where this happens. So far, it appears not to exist, except in soundbite form. Worse, you are conflating the deficit with the debt. US debt as a ratio of GDP might be close to 1:1, but the deficit is nowhere close. But let’s say we are talking about debt instead of the deficit. At the moment, Japan’s debt to GDP ratio is over 200%. There’s more than twice as much debt as Japan’s annual GDP. Japan’s interest rates? [Not so high](http://www.tradingeconomics.com/japan/interest-rate). It’s under 1%. They actually want a higher interest rate and have been deflationary not too long ago, but somehow that huge debt to GDP ratio just isn’t cutting it. Again, funny how that works, eh? ---
**Author:** ![Honesty](https://avatars.discourse-cdn.com/v4/letter/h/f04885/32.png) [@Honesty](https://boards.straightdope.com/u/Honesty)\ **Post date:** [January 27, 2014, 6:54pm UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/53 "2014-01-27T18:54:19Z")
> [@Great\_Antibob](#): > > Worse, you are conflating the deficit with the debt. US debt as a ratio of GDP might be close to 1:1, but the deficit is nowhere close. I am not conflating anything. The higher our deficit rises toward annual GDP, the more it increases the likelihood of investors demanding higher interest rates. Further, the deficit has been climbing from a paltry $79 billion in 1980 to $744 billion annually, today. Since this economic Broadway show of fiscal irresponsibility during peacetime did not start till the 1980’s, I want to talk about the annual deficit not the debt. Specifically, I want to talk about the growing \>$600 billion deficit that’s mainly due to unpaid for tax cuts in the 80’s and 2000’s as well as an two unpaid wars and an unpaid Prescription drug program. These tax cuts were done with the explicit and implicit promise that they would generate an increase in tax receipts and jobs. Neither have occurred. Reverse the Reagan tax cuts while protecting the poor and middle class, stop sending our goddamn money to other countries, and invest money in our own country (e.g. cities, interstate highway, school, research, etc). - Honesty ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [January 27, 2014, 7:05pm UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/54 "2014-01-27T19:05:38Z")
Then why does it appear that there is no correlation between interest rates and annual deficits in the post-World War II economic history of the country? ---
**Author:** ![Great\_Antibob](https://avatars.discourse-cdn.com/v4/letter/g/e47c2d/32.png) [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)\ **Post date:** [January 27, 2014, 7:15pm UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/55 "2014-01-27T19:15:23Z")
> [@Honesty](#): > > I am not conflating anything. The higher our deficit rises toward annual GDP, the more it increases the likelihood of investors demanding higher interest rates. Then why did you state “as our deficit barrels toward our annual GDP” there would be a problem? Our current deficit is less than 5% of our annual GDP. And the deficit has been falling the last couple years (as the measures taken during the worst of the recession are wearing off). Something’s not adding up here. And, as **Ravenman** notes, there is no real evidence of a correlation between interest rates and deficits. There is a positive correlation between interest rates and _debt_, but it’s not an especially strong one that can be used in isolation to forecast economic doom. Better yet, look at some of those countries again. Japan is, once again, a nice example. They had a budget deficit last year of **over** $1 trillion, i.e. more than the US, on a GDP of not quite $6 trillion, i.e. less than the US. Their deficit to GDP ratio is vastly worse than the US (3-4% vs 17-18%) with no sign of rising inflation. Actually, their issue is that inflation is too low. ETA: By the way, as a percentage of GDP, the US deficit is expected to shrink further over the next couple years from the peak at the height of the recession. If the issue is absolute size of the deficit, well, our economy is rather large. But as a percentage, the deficit is shrinking, not growing. As noted earlier, there’s some funky math going on in the idea that the deficit to GDP ratio is even an issue. ---
**Author:** ![Honesty](https://avatars.discourse-cdn.com/v4/letter/h/f04885/32.png) [@Honesty](https://boards.straightdope.com/u/Honesty)\ **Post date:** [January 27, 2014, 8:35pm UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/56 "2014-01-27T20:35:47Z")
> [@Ravenman](#): > > Then why does it appear that there is no correlation between interest rates and annual deficits in the post-World War II economic history of the country? I am not an economist, but I can wager a few guesses: 1. The Bretton Woods conference. 2. Monetary policy that puts pressure to keep interest rates low. 3. The U.S economy hasn’t reached the tipping point in respect to annual deficits and interest rates demanded by investors. Keep in mind, **Ravenman** , the [spike in interest rates for Greece](http://iuwest.files.wordpress.com/2011/09/piigs-bond-spreads-2011-09-09.jpg)occurred over a period of a year. I don’t think there’ll be any gradual increase in interest rates for U.S debt due to the annual deficits, it’ll occur when there’s another crisis and investors lose confidence can finance its debt. [QUOTE=Great Antibob] Then why did you state “as our deficit barrels toward our annual GDP” there would be a problem? [/QUOTE] Sorry, I can see how that can be confusing. What I mean is that we have a debt that’s uh, according to the Treasury Department today, at a frosty $17.2 trillion. We have an expected GDP for 2013 to be $16.6 trillion with an annual deficit of $680 billion.These are peacetime deficits that are unheard of in our history and all it takes is a another war or a crisis, and the monetary situation can get much worse for everyone. [QUOTE=Great Antibob] Our current deficit is less than 5% of our annual GDP. And the deficit has been falling the last couple years (as the measures taken during the worst of the recession are wearing off). [/QUOTE] This is true. Last year, the U.S government pulled in $2.8 trillion in revenue and _still_ had a deficit of $680 billion in 2013. This should indicate that revenue to the government is not sufficient for optimal growth and should further suggest the unpaid for tax increases of the 1980’s should be reversed. - Honesty ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [January 27, 2014, 9:52pm UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/57 "2014-01-27T21:52:26Z")
> [@Honesty](#): > > I am not an economist, but I can wager a few guesses: > > 1. The Bretton Woods conference. > > 2. Monetary policy that puts pressure to keep interest rates low. 😕 This seems to be two very good (well, at least modestly good) reasons why interest rates and deficits are not correlated. But you’re actually making an argument of why they will continue to be uncorrelated, which is the opposite of what you were afraid might happen. It’s like saying that I have only avoided getting the flu because I’ve had a flu vaccine. If I’ve had the vaccine and it has protected me from the flu, why should I then get worried about catching the flu? > [@](#): > > 1. The U.S economy hasn’t reached the tipping point in respect to annual deficits and interest rates demanded by investors. Okay, but even you must realize that deficits are getting substantially smaller right now. As best as we can tell, this year’s deficit will probably be one-third the side of the 2009 deficit of nearly $1.5 trillion. So again, why are you worried about “a tipping point” when all indications are that we continue to move even further away from the tipping point? And if the $1.5 trillion deficit was nearing the tipping point, how can you explain that the CPI actually contracted slightly in the same year of that record deficit? And that interest rates have gone down significantly since that year? None of it makes sense. It’s like you’re sounding the alarm bell about the potential for a fire when the weather is turning from hot, to warm, to moist, to raining, to snowstorm… > [@](#): > > Keep in mind, **Ravenman** , the [spike in interest rates for Greece](http://iuwest.files.wordpress.com/2011/09/piigs-bond-spreads-2011-09-09.jpg)occurred over a period of a year. I don’t think there’ll be any gradual increase in interest rates for U.S debt due to the annual deficits, it’ll occur when there’s another crisis and investors lose confidence can finance its debt. Again, I’m not quite following. Are you saying that a Greece’s deficits cause the upturn in interest rates? Or that the general economic crisis did? Because if you’re saying that a multifaceted economic crisis could cause interest rates to spike, that’s pretty much impossible to argue with. Yes: if the US economy collapsed in multiple serious respects, interest rates could go up a lot. But that isn’t what you’ve been talking about so far. You’ve said deficits can cause interest rates to grow uncontrollably. So you seem to be implying that Greece’s deficits caused the interest rate to spike… in which case, I ask, how can you be sure? If I find a dead body riddled with literally dozens of bullets, how can one be so sure and specific that there was one particular slug that was the cause of death? ---
**Author:** ![Great\_Antibob](https://avatars.discourse-cdn.com/v4/letter/g/e47c2d/32.png) [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)\ **Post date:** [January 27, 2014, 10:15pm UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/58 "2014-01-27T22:15:44Z")
> [@Honesty](#): > > Sorry, I can see how that can be confusing. What I mean is that we have a debt that’s uh, according to the Treasury Department today, at a frosty $17.2 trillion. We have an expected GDP for 2013 to be $16.6 trillion with an annual deficit of $680 billion. Then why bring up the debt? It seems like you don’t have a coherent story. If I’m reading your implication correctly (please correct me if I’m wrong), you are now saying that deficits _alone_ aren’t the issue, but the case of large - defined in absolute rather than relative terms - deficits are a problem when combined with debt close to GDP. That’s a rather different story. And one that’s not even necessarily true. There are plenty of examples of countries with very large debt to GDP ratio and large deficits that did not experience interest rate spikes. In fact, I gave one - Japan. The UK right now is another. The postwar era UK was another, as was postwar America. Really large debt _can_ be a problem. But it’s not a problem in itself. It’s a problem only in context of the general economic picture. And the big economic picture of the US isn’t exactly rosy, but it also doesn’t indicate any signs of a massive spike in interest rates anytime soon. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [January 28, 2014, 5:32am UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/59 "2014-01-28T05:32:45Z")
I doubt whether Gross Government Debt is the best measure to focus on when comparing countries’ fiscal soundness. For one thing, the U.S. figure includes trillions owed to Social Security; do Japan or European countries account for their Social Security similarly? Also, much of the U.S. debt is owed to U.S. financial institutions. If you want to speak of the badness of diverting taxpayer funds to Wall Street, forget bonds – focus on the egregious payoffs associated with TARP. :mad: It isn’t bad for the U.S. to borrow in order to invest in U.S. infrastructure. A more relevant statistic for many purposes, I think, is [(foreign assets minus foreign liabilities) ÷ GDP](http://en.wikipedia.org/wiki/Net_international_investment_position). That list shows that Portugal and Greece are really hosed (-115%), that U.S., ahead of France, isn’t in trouble yet (-17%) and why Japan is untroubled (+56%). The _rate of change_ in the U.S. NIIP is much scarier: the U.S. imports annually almost a trillion dollars worth of goods more than it exports. That has to be financed, whether by government debt, private debt, or asset sales. (OTOH, it may seem to matter little to the average American whether a given skyscraper is owned by an American billionaire or by a Japanese billionaire.) ---
**Author:** ![Try2B\_Comprehensive](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/try2b_comprehensive/32/65_2.png) [@Try2B\_Comprehensive](https://boards.straightdope.com/u/Try2B_Comprehensive)\ **Post date:** [January 28, 2014, 7:16am UTC](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337/60 "2014-01-28T07:16:31Z")
I thought it was the case that Greece was unable to make its minimum payments on its debts, had to get bailed out by the EU, and the whole kerfuffle meant that their bond rates went way up. Had they simply been able to print more money like we do (erroneously called ‘inflating currency’ elsewhere if I am not mistaken), that trouble could have been avoided, but the EU doesn’t allow that because they have One Currency I guess, and Greece doesn’t just get to decide to issue more of its own. I think in the US, the only threat of not paying our debts is the Tea Party forcing the government into default. That said, a $600 billion and shrinking deficit is bad, you’d think it’d be as simple to solve as raising taxes and cutting the defense budget, but all cuts to the military seem to go to cutting the VA or soldier pensions or the GI Bill and not things like less aircraft carriers and overseas bases i.e. there is way more to the picture than meets the eye. And just try and raise taxes! You’d need an army. [Previous page](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337.md?page=2) [Next page](https://boards.straightdope.com/t/will-there-be-a-us-economic-collapse/679337.md?page=4)