Stocks

[yos9694]

Talk about US Federal debt for a moment instead of the whole world.

Currently US Federal debt is $30T. A 1% increase in interest rates would raise the cost of servicing 300B over time (some debt is long term and won't be affected until matueity/reissue). Federal tax revenue is $4T, so the extra servicing costs are going to eat up to 7.5% of the revenue per 1% rise in rates. Unless major austerity measures are put into place (highly unlikely) this will just end up as an addition to debt along with the other deficit amounts.

It's a death spiral that will inevitably reach the bottom. The more debt created the buyers are needed. To get organic demand the bonds will need higher yields, but that will further exacerbate the debt servicing cost issue. Inorganic demand can be created by the Fed printing money and buying the bonds, but that creates more inflation. Either route compounds the existing problems and solves nothing, just kicks the can 1 year further down the road. Eventually the demand for US gov't bonds will be incapable of meeting the supply.

One major looming doomsday catalyst in my opinion is social security. For decades SSA has been giving away the FICA money in exchange for low paying US bonds (at the expense of everyone's future retirement). We have just crossed the tipping point for social security - they are paying more in benefits than they are collecting in FICA, so instead of lending money to the government they are going to be liquidating. That is a major shift to the demand/supply economics.

Economic growth in the double digits for several years could resolve this. Austerity measures that lead to budget surpluses also could. Population growth in working age people (i.e. massive immigration) could too. Pick one.

Or we can inflate the dollar by so much that past debt becomes trivila in amount. We know what that looks like because its been done before. And its horrible. The only other option is to directly default on the debt, which is probably equally ugly, but since the outcome isn't documented from a prior event it seems the most likely options for our politicians to choose (since they can later claim they didnt k ow it would go bad)

[YitzyS]

Talk about US Federal debt for a moment instead of the whole world.

Currently US Federal debt is $30T. A 1% increase in interest rates would raise the cost of servicing 300B over time (some debt is long term and won't be affected until matueity/reissue). Federal tax revenue is $4T, so the extra servicing costs are going to eat up to 7.5% of the revenue per 1% rise in rates. Unless major austerity measures are put into place (highly unlikely) this will just end up as an addition to debt along with the other deficit amounts.

It's a death spiral that will inevitably reach the bottom. The more debt created the buyers are needed. To get organic demand the bonds will need higher yields, but that will further exacerbate the debt servicing cost issue. Inorganic demand can be created by the Fed printing money and buying the bonds, but that creates more inflation. Either route compounds the existing problems and solves nothing, just kicks the can 1 year further down the road. Eventually the demand for US gov't bonds will be incapable of meeting the supply.

One major looming doomsday catalyst in my opinion is social security. For decades SSA has been giving away the FICA money in exchange for low paying US bonds (at the expense of everyone's future retirement). We have just crossed the tipping point for social security - they are paying more in benefits than they are collecting in FICA, so instead of lending money to the government they are going to be liquidating. That is a major shift to the demand/supply economics.

Economic growth in the double digits for several years could resolve this. Austerity measures that lead to budget surpluses also could. Population growth in working age people (i.e. massive immigration) could too. Pick one.

Or we can inflate the dollar by so much that past debt becomes trivila in amount. We know what that looks like because its been done before. And its horrible. The only other option is to directly default on the debt, which is probably equally ugly, but since the outcome isn't documented from a prior event it seems the most likely options for our politicians to choose (since they can later claim they didnt k ow it would go bad)

So basically, buy gold, or give all your money to tzedakah now when it's still worth something?

[yos9694]

So basically, buy gold, or give all your money to tzedakah now when it's still worth something?

Timing is always the issue. Too early can be as bad as too late

ETA also not a navi, could be wrong innpremise as well as timing. Just seems right to me

[ExGingi]

It looks really really bad. We've discussed this before, going back to when you were insisting it was absurd to expect inflation, and I'm pretty sure nothing I can say will convince you to change your opinion that this can go on forever with no repurcussion.

The can has already been kicked pretty far and it cannot go on forever. Maybe we're not close to doomsday but doomsday is inevitable- growth alone cannot get us out of this mess. And the only other option is real hyper inflation, which is equivalent to default

I never said it can go on forever without repercussion. I just learned not to try to predict anything, as the powers to be always come up with new ways to kick the can further down the road.

[avromie7]

Talk about US Federal debt for a moment instead of the whole world.

Currently US Federal debt is $30T. A 1% increase in interest rates would raise the cost of servicing 300B over time (some debt is long term and won't be affected until matueity/reissue). Federal tax revenue is $4T, so the extra servicing costs are going to eat up to 7.5% of the revenue per 1% rise in rates. Unless major austerity measures are put into place (highly unlikely) this will just end up as an addition to debt along with the other deficit amounts.

It's a death spiral that will inevitably reach the bottom. The more debt created the buyers are needed. To get organic demand the bonds will need higher yields, but that will further exacerbate the debt servicing cost issue. Inorganic demand can be created by the Fed printing money and buying the bonds, but that creates more inflation. Either route compounds the existing problems and solves nothing, just kicks the can 1 year further down the road. Eventually the demand for US gov't bonds will be incapable of meeting the supply.

One major looming doomsday catalyst in my opinion is social security. For decades SSA has been giving away the FICA money in exchange for low paying US bonds (at the expense of everyone's future retirement). We have just crossed the tipping point for social security - they are paying more in benefits than they are collecting in FICA, so instead of lending money to the government they are going to be liquidating. That is a major shift to the demand/supply economics.

Economic growth in the double digits for several years could resolve this. Austerity measures that lead to budget surpluses also could. Population growth in working age people (i.e. massive immigration) could too. Pick one.

Or we can inflate the dollar by so much that past debt becomes trivila in amount. We know what that looks like because its been done before. And its horrible. The only other option is to directly default on the debt, which is probably equally ugly, but since the outcome isn't documented from a prior event it seems the most likely options for our politicians to choose (since they can later claim they didnt k ow it would go bad)

The real solution is to stop borrowing. Inflation will make the current debt and its interest payments trivial over 50 years. Unfortunately, the politicians will just use it as an opportunity to borrow more and continue leaving us on the brink of collapse.

[ExGingi]

It's a death spiral that will inevitably reach the bottom. The more debt created the buyers are needed. To get organic demand the bonds will need higher yields, but that will further exacerbate the debt servicing cost issue. Inorganic demand can be created by the Fed printing money and buying the bonds, but that creates more inflation. Either route compounds the existing problems and solves nothing, just kicks the can 1 year further down the road. Eventually the demand for US gov't bonds will be incapable of meeting the supply.

Yet, in the current environment:

https://twitter.com/irafjersey/status/1491476054338322435?s=21

https://twitter.com/metresteven/status/1491473787253968898?s=21

I don't claim to know the answer, and while I have heard much about Rogoff & Reinhardt's book, and strongly believe it's premise is correct, I don't think there is precedent with a world reserve fiat currency.

[yos9694]

I hear you. Its impossible to predict when, I agree, but there will be a straw that breaks the camel's back.

As for politicians' abilities, I think you give them too much credit. They didn't engineer the economic enviornment just exploited it. With few exceptions they are just lazy average thinkers who focus their energy on oisher v'chovod, not on any master planning or conspiracy. The fact that America enjoyed an economic boom from late 1970's can be attributed as much to Baby Boomers reaching peak productive years, doubling the workforce by adding women, increased efficiency of the working class, etc- just as much or more so than any policy that politicians can claim responsibility for.

If this is the best they could do with 40 years of boom, what do you think they can accomplish in a stagnant or contracting economy?

[Mf1]

@YitzyS
You buying Canada goose on drop?

[YitzyS]

@YitzyS
You buying Canada goose on drop?

Canada Goose can make you drop in the Hudson

[CountValentine]

If this is the best they could do with 40 years of boom, what do you think they can accomplish in a stagnant or contracting economy?

Been hearing about the debt issue for over 40 years. It is now a non-issue to most because of that.

[ExGingi]

I hear you. Its impossible to predict when, I agree, but there will be a straw that breaks the camel's back.

As for politicians' abilities, I think you give them too much credit. They didn't engineer the economic enviornment just exploited it. With few exceptions they are just lazy average thinkers bums and liars who focus their energy on oisher v'chovod, not on any master planning or conspiracy. The fact that America enjoyed an economic boom from late 1970's can be attributed as much to Baby Boomers reaching peak productive years, doubling the workforce by adding women, increased efficiency of the working class, etc- just as much or more so than any policy that politicians can claim responsibility for.

If this is the best they could do with 40 years of boom, what do you think they can accomplish in a stagnant or contracting economy?

FTFY!

Did you seriously call politicians thinkers? Or were you using voice recognition typing and got thinkers instead of stinkers?

While I agree that politicians don't control much, there are also central bankers and other powers that pull some strings. Anyone remember the PIIGS? Did they default? Where are they now? Not every country is Argentina, and a fiat currency with reserve status is something that didn't exist prior to 1970 IINM, so one can't bring much proof from anything before 1970.

[ExGingi]

Again, more of a macro observation, but ignore the bond market at your own risk:

https://twitter.com/macroalf/status/1492147721461026817?s=21

[ExGingi]

I hear you. Its impossible to predict when, I agree, but there will be a straw that breaks the camel's back.

Words of wisdom: inevitable ≠ imminent.

https://twitter.com/adamscrabble/status/1398413589963214851?s=21

[yos9694]

Words of wisdom: inevitable ≠ imminent.

If you drop a piece of paper off a skyscraper it is inevitable that it will stop falling even though the wind could keep it up longer than it should. It's not like chasing the horizon that keeps getting further away as you go towards it.

[Hampton22]

is there any stock chats on whatsapp?

[Shauly101]

anyone here with experience selling covered calls?

[yos9694]

anyone here with experience selling covered calls?

Sure, that's not uncommon. For a few bucks you give away any potential upside while keeping all the downside risk and reducing your liquidity. What's your question

[ExGingi]

Sure, that's not uncommon. For a few bucks you give away any potential upside while keeping all the downside risk and reducing your liquidity. What's your question

Or use as a way to enhance ones portfolio income.

One can also get covered call ETFs such as XYLD and ETB just to name a few.

[YitzyS]

You win some, and you...

[ExGingi]

What happened to VIAC today?

https://archive.is/MIxsw

Overreaction?