Economics

Let Me Take My Chances on the Wall of Debt

|

Shoot out the lights

The Washington Post today lays out one of the biggest dice-rolls of our times:

A massive wave of borrowing will start cresting this year when the U.S. and European governments sell an estimated $4 trillion in new bonds. The surge will course through the world financial system for several years as countries, corporations and banks borrow record amounts of money to repair the damage from the financial crisis and pay back loans from the boom that preceded it.

One crucial concern about the nascent economic recovery is whether markets can smoothly absorb that new debt, or whether it will force less-creditworthy governments into a Greek-style crisis, push weaker banks and corporations into default, and possibly trigger another downturn.

Analysts are split on the prospects. Large amounts of cash around the world and the expectation of continued low interest rates have some predicting a trouble-free outcome, while the sheer level of debt involved has others spooked about a destructive competition for credit. But that wall of debt has become a source of concern among economists at the International Monetary Fund and others who are trying to anticipate where the next crisis might arise.

Whole thing here; link via the Twitter feed of Rep. Paul Ryan.

NEXT: Morning Stagliano Roundup

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. 7 come 11!

    1. Mamma needs a new pair of shoes.

      1. I’ll just play the don’t pass. And maybe some don’t comes if things are going that way.

        1. That is a smart move. Sadly, Obama is calling in his last mark and laying everything on the sucker bets.

          1. What do you mean getting paid 30:1 on something with the a 1 in 36 chance is a sucker’s bet?

            1. Mathematics is racist. Only racism prevents those center bets from paying off for Obama.

  2. Attempting to fight debt deflation is futile. Just ask Japan where that road leads.

    1. Uhm, what happens when private debt has been paid off?

  3. Note that the best case scenario is that trillions in capital gets locked sucked out of the private/productive economy and locked up in low-interest government bonds.

    That’s the best case. It just goes downhill from there.

  4. You can go with the crazy people in the crooked house.

  5. I will gladly pay you someday for trillions and trillions of hamburgers today.

  6. we be so fucked…

  7. Have they made shorting U S government debt illegal yet?

  8. Large amounts of cash around the world and the expectation of continued low interest rates have some predicting a trouble-free outcome[…]

    Most likely the same assholes that were prescribing low interest rates to prop-up the housing market and who did not see the bubble coming.

  9. What do you mean getting paid 30:1 on something with the a 1 in 36million chance is a sucker’s bet?

  10. This smells suspiciously like the work of … KRUGABE!.

  11. Central Banks will print money to finance much of this borrowing and take the debt on their own books in exchange for cash. This will lead to a period of higher inflation which will bailout the sick housing and commercial property sectors, whittle away the real cost of the debt as it will be issued at rates below that of future inflation and, if governments are smart, will lead to an erosion of the real cost of public programs such as social security where they will keep increases in payments to below the rate of inflation.

    Presto problem solved.

    1. Is there anything double digit inflation can’t do?

      1. He forgot to mention that keeping people on a rolling treadmill of devaluing money gently encourages people to invest in riskier propositions they normally wouldn’t invest in, thus stimulating the economy.

        1. Are you saying that is a bug or feature?

      2. Don’t get too cocky about inflation coming down the pipe…we need to force some good bi-partisian austerity packages first…we can’t balance this budget with mere budget cuts or gold-bug-pleasing-inflation…we have to raise taxes. This is the only solution that will please all serious thinkers.

        All libertarians know that the VAT is the most scientifically efficient tax and that is better than the income tax so I recommend you put a VAT in place. If that won’t fly then we can accept a CO2 tax…you have the freedom to choose either one!

        1. We will let you enjoy your inflation if you will pass a VAT/CO2 tax….until then we are going to be tightening the screws.

  12. A massive wave of borrowing will start cresting this year when the U.S. and European governments sell an estimated $4 trillion in new bonds […] Large amounts of cash around the world and the expectation of continued low interest rates have some predicting a trouble-free outcome.

    And that’s the key to this whole game, kiddies, as the central banks debase the currencies to keep the interest rates low to give a big “Fuck You!” to all those lenders that still think government paper is “safe and secure.”

  13. Is this headline some kind of Richard and Linda Thompson reference?

    Do. Not. Like. Do not like hippie references on these pages. With a name like Reason

    1. I caught the Thompson reference and was quite pleased. Nice job, Matt.

    2. Richard Thompson is a hippie now?

    3. Have you even listened to Shoot Out The Lights?

  14. But- based on our carefully selected basket of assets, prices are plunging!

    It’s a super mega deflationary spiral, and we hafta doooooooo something, or we’re all gonna perish! The sky is falling, and we have to prop it up with giant stacks of money.

  15. What this world needs a Day of Jubilee. Back in Old Testament times, every 50 years, all debts were wiped out. No one owed anyone anything. I’d look up the relevant passages, but the bible gateway search engine appears to be down.

    1. I’m amazed there are entities out there that are still dumb enough to buy all these notes.

      It’s so obvious that at some point they’re going to be left holding the bag. I don’t think we could possibly pay off this debt even if we really wanted to, at least not decimating the value of the currency.

      1. We don’t want you to pay it off….EVER. We want 100% of your income to go to paying interest to us….and we are well on our way to reaching that goal…we’ll need to ban guns somewhere along the way.

  16. Coke machine circa 2020:

    INSERT PAYMENT AND MAKE SELECTION. THIS MACHINE ACCEPTS ONE THOUASAND AND FIVE THOUSAND DOLLAR BILLS.

  17. I promise that my friends and I are willing to do our part and absorb 10’s of trillions of the peoples debt as long as all of you do the responsible thing and just pass a CO2 tax or a VAT…you can pick either one! Don’t be unreasonable. Your interest payments will soon rise to be about 50-80% of your national budgets and you MUST pay these bills for your wasteful spending. You are under obligation to pay us, please show that you are honorable signers of the social contract…if you refuse to pay this interest we will be forced to create the appropriate Hegelian crisis and believe me…you don’t want that.

  18. I, sir Charles, criticize denialist for intimidating people from “adopting the precautionary measures necessary to avert environmental collapse”.

    A CO2 tax is the only way to avert collapse you bastards…stop pushing your paranoid anti-government crap…it is time to get serious about saving the world by putting new worldwide taxes in place.

  19. Government borrowing isn’t borrowing, borrowing.

    1. Pizza, pizza.

      1. Government borrowing, borrowing is more like rape, rape than pizza, pizza.

  20. What about a “Wall of Debt” with a lion?

  21. $100 placed at 7 percent interest compounded quarterly for 200 years will increase to more than $100,000,000 ? by which time it will be worth nothing.

  22. Love the Richard Thompson reference. You guys rock.

Please to post comments

Comments are closed.