The scale of the US debt

The ineffable NickM at Counting Cats weights into the US debt problem with a superb post providing some scale to the problem:

But let's look at the headline figure: the USA is 16 trillion, 240 billion, 420 million in debt (plus some "loose change"). Now I have a background in physics and astrophysics so when I say a figure is astronomical please believe me. I say "loose change" because I assume that is the way government thinks of it
bear in mind this is the sort of loose change you can buy a small warship with, not a can of Coke - this is government loose change
He does the maths and conjours an image of a stack of dollar bills just over 1.1 million miles high. Let's be generous and replace those $1 Washingtons with $100 Franklins. That's still 11,000 miles high - if you stacked them horizontally then you could go halfway around the world.

As NickM points out, each man, woman and child in the USA is currently personally responsible for over $50K in US debt. Just for avoidance of doubt, there is absolutely no way this is getting repaid in the next couple of decades. Why should it? As long as the US taxpayer can cover the interest (a mere $1K/person at 2%) and there's not an obvious go-to second-strongest economy, the debt-holders are just going to roll over the loans and be grateful for what they have.

Of course, this means that the debt will not shrink. It will grow, because the US politicians (and most of the population) realise that they can spend more than they earn with essentially no consequence. So that $16tn will grow, and grow, and grow... No longer is the amount of debt the main consideration in the USA's economic strength; rather, it's the ratio of debt interest payments to GDP.

At some point some of the other major G7 countries are going to recover economically and want capital for major products (e.g. oil pipelines, fusion reactors etc.) So they're going to be touting for significant amounts of capital at an attractive 4% rate. So the US is going to have to up its effective returns to 3%. So the weight of their debt has just increased by 50%.

Then someone looks at the ever-aging retirees of the USA, and the ever-increasing cost of Medicaid and private funding (leading to a reduction in estate and sales taxes), does the math and refuses to believe that the USA is even going to have the revenue to pay the debt interest. So the risk increases, and the USA has to up its rate of return to 5%. So the weight of their debt has just increased by another 65%.

This may be 10-20 years in the future, but when the world's biggest economy is on a trajectory to effectively default on its debt interest payments, we should start worrying about it right now.

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