re: #102 Spocomptonite

It has been explained over and over again on these pages that you cannot equate and compare individual debt and sovereign debt. Please, don’t do it.

Japan has been in a deflationary spiral for over ten years with periodically negative interest rates. Europe, Spain, Portugal and Ireland are a mess. Debt is not some endlessly elastic thing you keep stretching when you need more of it. There are economic limits to the efficiency of a leveraged sovereign balance sheet. We need debt to fund the country’s operations, and that will never change. But the availability of reasonably priced debt is a function of investors’ perception regarding repayment; ability to repay is a function of revenue, which in this country comes solely from taxes raised and some interest income on various bits of the Fed’s balance sheet and other miscellaneous sources. The only other option a sovereign has is to print more money, which leads to a different set of problems.

There are known tipping points at which a sovereign is perceived to have exceeded its borrowing capacity. These are calculated as % of GNP, etc. The US economy is huge, but borrowing capacity is not some bottomless wishing well we can run to forever. Debt limits are stupid, as this point has been made, because the markets will decide when the US is out of borrowing capacity - not Congress.