Yes, certainly. Many things can go differently. For one the US President, Obama, might go there on TV and tell: "My fellow Americans. Starting tomorrow we are raising taxes by 10-25%. We cut social security. We cut military. We cut across the board. Why? Because the Chinese demand their money!"
Possible? Of course! Probable? Your call.
Inflating the monetary base is actually doing the same, but without the need to raise taxes ex explicite. Everything gets more expensive year to year: tuition, insurance, services, etc. That's your hidden tax - inflation. We are paying off the Chinese by returning them money that's less valuable that the money we borrowed from them.
Some things, like 600% debt to GDP ratio that currently the US has are just facts of life. Can I imagine reality without them? Sure! The media is full of them from CNBC to Bloomberg News. Why you insist on me providing you scenarios? Ask them if they can imagine bubble in Treasuries! They certainly couldn't see one in housing or the .com one even though they both were straight in their faces. They laughed off anyone talking about bubbles then. The same now they lough into faces of Peter Schiff, Marc Faber, Jim Rogers, Kyle Bass, and others when they talk about bubble in the US Treasuries. In other words, you are asking wrong person to do the reality check. I'm the reality check to the mainstream camp blind to the obvious. 600% debt to gdp.
Can FED raise the interest rates to stop all the bubbles in their tracks? Sure they can! They need to be cautious though. Because at interest rates at 7%, the US Government will be spending over 50% of the annual budget just to pay interest on the debt we have. Can we imagine the FED going to raise the rates to 20% as Volcker did in the early 1980s? Sure, but then well over 100% of the state income from taxes would need to be paid on the interest alone! This is how much we owe. Can I imagine reality where this is not true? Sure, but why would I ever do that? Why to imagine world where mistakes aren't happening when they are right in our faces?
I'm not saying we don't have options. I'm just saying that taking into the account the dirty politics, we can't have the President have speech like that, can we?
Another solution: war. In the state of war we don't repay. That's the rule ages old.
So, yes there are plenty of scenarios: from bankruptcy, theory hyperinflation, ending on WW3.
There is no positive outcome from debt to GDP ratio at 600%. Sorry.
One could argue that we will just have "lost decades" as Japanese did. That the process will take forever and we will slowly decline and the rest of the world will follow suite. Might be that it will take 30 years. The thing is that looking at Russia, China, ISIS, I don't think they will just let us decline.
Ask them if they can imagine bubble in Treasuries! They certainly couldn't see one in housing or the .com one even though they both were straight in their faces. They laughed off anyone talking about bubbles then
You can proudly proclaim that the bubbles were obvious now that the pops have come to pass, but talk is cheap, and if you're wrong, it's always "just around the corner" until one day, you saw it coming all along. If it takes 30 years for the bubble to pop, then god damn, check out this HN thread from 2014 where you predicted this exact outcome THREE DECADES in advance, but nobody listened!
I'm not dismissing the consequences of running up absurd levels of debt, I just think it's sort of funny that in a thread regarding the failings of human certitude, you felt it necessary to demonstrate your certainty in outcomes regarding, of all things, macroeconomics, perhaps the least reliable science from which to model precise predictions.
The data you have from the U.S. Gov is false as it down NOT include benefits like social security, Medicare, Medicaid, etc that are substantial part of the budget. Once you include these guarantees among other guarantees ( like the bank guarantees ) you are looking at 600%
A quick internet search shows that one person came up with that estimate and published it without any actual calculations. I'd be curious to see the calculations, if only to point out what happens when a non-economist tries to make such calculations.
And the whole point is moot, because Medicare and Medicaid obligations can be easily lowered by legislation. Which is why the actual debt number is the one that matters.
http://www.shadowstats.com -- try that. See who opened that site. And no, they are not charging close to $200 / year and have the type of Customers they do because the US Gov stats are trustworthy. See which insitutions follow thesee stats vs. official stats, you will be surprised.
And just logically thinking, really: don't you think that the debtor with debt in USD that prints USD at the same time, doesn't have an incentive to under-report inflation? The situation is akin to you being able (as a debtor) to set APR on your own mortgage.
And then, the mystery of people complaining about raising prices of food, gas, housing, everything, and then believing in the official propaganda of "no inflation" in the past 7 years. Are you kidding me? Is your insurance cost the same as 7 years ago? Is the grocery bill the same? Cars cost the same? Maybe equities propped by inflationary policy have the same price?
I don't care if Nobel Price in Economics Krugman tells me I have no inflation for 7 years when I have been shopping for 7 years, watching equities and bond markets, just to know better. Sure, Keynsians are paid "economists" to peddle the idea of no inflation, they are all paid by Government. What do you expect them to do? Report 5-10% inflation y/y ?
And inflation is often hidden: $50k BMW 5-series is now 4-cylinder. Used to be 6. The can of coke in Germany for 1 euro used to be 330ml. Now it is 250ml. Price stays the same. So on, so forth. Isn't that inflation?
Possible? Of course! Probable? Your call.
Inflating the monetary base is actually doing the same, but without the need to raise taxes ex explicite. Everything gets more expensive year to year: tuition, insurance, services, etc. That's your hidden tax - inflation. We are paying off the Chinese by returning them money that's less valuable that the money we borrowed from them.
Some things, like 600% debt to GDP ratio that currently the US has are just facts of life. Can I imagine reality without them? Sure! The media is full of them from CNBC to Bloomberg News. Why you insist on me providing you scenarios? Ask them if they can imagine bubble in Treasuries! They certainly couldn't see one in housing or the .com one even though they both were straight in their faces. They laughed off anyone talking about bubbles then. The same now they lough into faces of Peter Schiff, Marc Faber, Jim Rogers, Kyle Bass, and others when they talk about bubble in the US Treasuries. In other words, you are asking wrong person to do the reality check. I'm the reality check to the mainstream camp blind to the obvious. 600% debt to gdp.
Can FED raise the interest rates to stop all the bubbles in their tracks? Sure they can! They need to be cautious though. Because at interest rates at 7%, the US Government will be spending over 50% of the annual budget just to pay interest on the debt we have. Can we imagine the FED going to raise the rates to 20% as Volcker did in the early 1980s? Sure, but then well over 100% of the state income from taxes would need to be paid on the interest alone! This is how much we owe. Can I imagine reality where this is not true? Sure, but why would I ever do that? Why to imagine world where mistakes aren't happening when they are right in our faces?
I'm not saying we don't have options. I'm just saying that taking into the account the dirty politics, we can't have the President have speech like that, can we?
Another solution: war. In the state of war we don't repay. That's the rule ages old.
So, yes there are plenty of scenarios: from bankruptcy, theory hyperinflation, ending on WW3.
There is no positive outcome from debt to GDP ratio at 600%. Sorry.
One could argue that we will just have "lost decades" as Japanese did. That the process will take forever and we will slowly decline and the rest of the world will follow suite. Might be that it will take 30 years. The thing is that looking at Russia, China, ISIS, I don't think they will just let us decline.