Dalio has it right. He understands it is not the total of "debt" that matters, it's the growth rate of it relative to GDP, a point I have made repeatedly in these Fora , and a point most Americans, including many congressmen and senators, and especially our sociopath President, do not understand. Although the U.S. has no debt at all in the sense of private sector debt, it is OK to call it debt so long as we understand the difference. Dalio understands that if we allow the total of outstanding U.S. bonds and their servicing costs to grow faster than GDP, and yet do everything else right, we will eventually have a big problem, viz., out of control inflation. The term monetization is a fancy term for, in effect, the intentional decreasing of the buying power of a currency unit so we pay off federal bonds and interest with dollars that have less buying power than the dollars "borrowed" This is what the built-in 2% inflation target is all about. Deflating the buying power of our dollars lowers the real interest rate we pay on Treasury bonds. In actuality we don't borrow anything. We print and spend into the economy all the dollars we later appear to be borrowing.* (I like to call the "debt" Dalio is referring to "Ersatz Debt" to avoid confusion with private sector debt.) Naturally, if the ersatz debt grows faster than the GDP, there will eventually be a Big, BIG problem. The rate at which overall ersatz debt grows relative to GDP growth rate will determine how rapidly we arrive at the problem Dalio is warning us about. I don't want to write an encyclopedia article. I just want to make few salient points. Let us not forget that some Ersatz debt is essential (This is what most don't understand) Every penny of U.S. private-sector money has it's origin in deficits! Without deficits we'd have to raise pigs so we'd have something to exchange for a cow. Here are the key takeaways, folks: (1) The two ways to avoid the Dalio debt deluge is either to spend less relative to revenue. or increase revenue, or do both. Overall we have been doing neither. This "neither" is Trump economics on steroids, i.e., increasing spending on non-investment items while cutting taxes. Yikes! (2) The easiest fix and the one that makes the most sense is to both modestly reduce spending in non-investment areas while taxing more by bringing back the many marginal rate brackets that baseball announcer and undergraduate economics student at Eureka College, Ronald Reagan, eliminated. (Has any one noticed that the more money a person has the more they seem to hate taxes!) Normally in a well regulated economy, which a dysfunctional Congress makes impossible!, you would just start taxing enough and reduce spending enough to correct the imbalance over the next half century. (At least Elizabeth Warren tried.) Once we get into the danger area which we are currently approaching at the speed of light, something dramatic has to be done. (It won't be of course, but I'll be dead and the rest of you can deal with it. Oops, that sounds a lot like Donald Trump, doesn't it?) 3) Failure to tax is very popular, especially among the wealthy. In capitalist economies the return on capital always exceeds the economic growth rate. This was the central theme of a large volume on the best seller list a few years back. (Apparently few in Congress read it.) Consequently, a Capitalist economy that fails to tax appropriately will soon find that 0.1%, or less, of the population owns everything. The people who own everything but the government then buy the government, and that's the end of any remnants of democracy. No problem if you want to pick lettuce to make ends meet, but it will be on the owner's terms, not yours. 4) Perhaps most important of all is an understanding of how a well-run capitalist economy in a truly democratic society is able to take advantage of the definition of investment. This is something that economies that have disintegrated into totalitarian dictatorships can generally not do, because their bonds are too risky to attract buyers at low interest. The definition of an "investment" is money spent now that will return more money later. By definition, then, there is no limit to the amount a nation can spend on investment so long as they print their own money, have no outstanding real debt*, and can readily sell their bonds at low interest. Under these circumstances, the definition of investment eliminates the constraint placed on total deficit growth relative to GDP growth! (The prior statement might require that you put on your thinking cap.) For example, a few years back, and it might still be true, the U.S. could easily have had the best primary and secondary public education system in the world with top notch teachers, wonderful facilities and small class sizes, so long as the resulting, combined future increase in productivity and lowered social costs would equal or exceed the total cost of financing the investment.** This is something impossible to achieve in the private sector where neither GDP nor social cost savings are a concern, and a net profit is necessary. It's yet another profound example of how government can achieve goals that the private sector can only dream about. A prior example of such a thing is the interstate highway system built under the Eisenhower administration. This was a monumentally expensive investment with quite likely a negative net cost. It just takes two things, folks. One is an understanding of how government finance works and its unique characteristics compared to private sector finance; the other is creativity and vision. ___________________ *To understand this quite confusing manipulation of the currency, it helps to think of U.S. bonds being just another form of money, but an interest paying form, a form that does not add to the M2 money supply. The Fed's job consists, among many other things, of interchanging, back and forth, one form of money for another. Although the Fed does the equivalent of money printing whenever they cover a Treasury account deficit, they are really just acting as an agent of the Congress. The Fed has zero control over the amount of new money created. That's entirely controlled by Congress when they set the level of taxing and spending. (Only Congress can "coin money"!) **I'm thinking schools designed by the countries best architects with a gym/basketball court, a football/soccer field and a skating rink, art and private music classes once or twice a week for every kid, shop classes with the best equipment and instructors, and a selection of language offerings (six years in grade school), wonderful biology and chemistry labs. In other words a school with all of the classes and facilities now dropped from our present schools because we said we can't afford them. None of this is possible if the bone head in the oval office gets his way and returns education completely back to the states who can not finance this sort of thing because they can't print money, they can't monetize and they must pay too high a rate on their bonds which carry risk of default. This,however, is all completely doable as an investment at the federal level. All it takes is vision. We can do so much more than we are doing, and the net cost will approach zero!
That's a cynical view, but probably not all that far from the truth. We could certainly do much better.
stupid illegal @piehole Your argument fundamentally misunderstands the reality of U.S. debt dynamics, the relationship between deficit spending and economic growth, and the limitations of monetary policy. Let’s break this down very clearly and very forcefully, because the stakes of such misguided reasoning are huge: 1. The U.S. Debt is Real Debt—Not ‘Ersatz Debt’ The claim that U.S. debt is somehow “not real” because the government issues its own currency is demonstrably false. Debt issued in U.S. dollars must still be serviced with interest payments, which are a real claim on future tax revenues or further borrowing. The illusion that monetization can make debt "not matter" is the root cause of many historical economic collapses, from Weimar Germany to Zimbabwe to Venezuela. Interest payments alone are skyrocketing: The U.S. government spent over $1 trillion on interest in 2023—more than the entire defense budget. This is real money, real spending, and real crowding-out of other fiscal priorities. Debt monetization is inflationary: Printing money to pay down debt is functionally no different than devaluing the currency. The more money you create without corresponding economic productivity, the less valuable that money becomes. 2. Debt Growth Does Matter Relative to GDP You suggest that the total stock of debt isn't what matters, but rather its growth rate relative to GDP. While this is partially true, your assumption that "we can always outgrow the debt" is deeply flawed. The U.S. has not been growing its GDP at a rate sufficient to keep up with rising debt for nearly two decades. Debt service is exponential: The higher the debt, the higher the interest payments, which then require even more borrowing. This creates a vicious cycle where more and more economic output is devoted to just paying interest rather than productive investment. There is a limit to bond market tolerance: When bond investors lose confidence, yields spike, making borrowing even more expensive. The notion that the U.S. can print endlessly without bond markets punishing it is delusional. 3. The U.S. Cannot Simply ‘Print’ Its Way Out You imply that the government can print unlimited amounts of money to pay for its obligations because it issues its own currency. This is the exact kind of thinking that leads to currency collapses. Confidence is everything: The U.S. dollar’s global reserve status is not guaranteed. The moment foreign investors (who hold trillions in U.S. debt) believe the U.S. is simply inflating away its obligations, they dump Treasuries, demand higher yields, and the spiral accelerates. Japan’s model is not the U.S. model: Many point to Japan as an example of a high-debt country that has avoided crisis. But Japan has internal financing, meaning its citizens buy its debt. The U.S. relies on foreign buyers to finance its deficits. If they walk away, the U.S. doesn’t have a captive audience for Treasuries. 4. Taxation Alone Cannot Fix This You propose that the answer is simply more taxation on the wealthy while making targeted spending cuts. While this sounds good politically, it is mathematically insufficient. The U.S. does not have a revenue problem—it has a spending problem. Even if we taxed the top 1% at 100%, it would not close the deficit. The government is growing spending at an unsustainable pace, and entitlement programs (Social Security, Medicare) are set to explode. Reagan’s tax cuts spurred economic growth, increasing total tax revenue. The idea that simply hiking taxes will balance the books ignores that high taxes often stifle economic growth and reduce incentives for investment. The Laffer Curve is real: At a certain point, higher taxes reduce economic activity, meaning less total revenue. Blindly raising taxes without addressing spending is a fool’s errand. 5. The ‘Investment’ Argument is Misleading You argue that government should spend unlimited amounts on “investment” as long as the return is greater than the cost. In theory, this sounds reasonable. In practice, it never happens that way. Government spending is inefficient: The private sector has profit discipline, meaning money is allocated to projects with a real return. The government, by contrast, allocates based on politics, leading to bloated, inefficient programs that do not generate the promised returns. Infrastructure projects are no longer cost-effective: The idea that we can build things like Eisenhower’s highway system at reasonable cost ignores the modern reality—today, regulations, environmental impact studies, and labor laws make large-scale federal investments orders of magnitude more expensive than in the past. Education is not a silver bullet: The argument that more spending on education automatically improves outcomes is disproven by decades of data. The U.S. already spends more per student than nearly any other country, yet results remain mediocre. 6. The Endgame is Already Playing Out The path the U.S. is currently on is not sustainable, and the warning signs are already here: U.S. bond yields are rising, reflecting growing market concern over U.S. fiscal health. The Federal Reserve is trapped: If it hikes rates to control inflation, the cost of debt servicing explodes. If it cuts rates to ease borrowing, inflation re-accelerates. Foreign buyers are reducing their exposure to Treasuries, with China and Japan slowing their purchases. At some point, there are only three ways this ends: Austerity – Cutting spending drastically to restore fiscal balance (politically unpopular, but necessary). Hyperinflation/Debasement – Printing money to cover debt, leading to rapid loss of currency value. Debt Restructuring or Default – The government is forced to renegotiate debt terms, which would permanently damage U.S. credibility. Final Verdict: You Are Massively Underestimating the Risks Dalio may have some things right, but you are dangerously wrong in dismissing U.S. debt as “Ersatz Debt.” The idea that debt does not matter because the U.S. can print its own money is a recipe for disaster. The only responsible path forward is: Controlled deficit reduction – Cutting non-essential spending gradually while protecting vital services. Tax reform that prioritizes growth – Simplification, closing loopholes, but avoiding punitive taxation. Monetary discipline – The Fed must not be pressured into financing endless deficits. Ignoring the problem only guarantees a financial crisis. It’s not a question of if, but when.
It seems you are confused. If and when you grow up I'd be happy to address any specific questions you might have. But please be specific. The Fed has nothing to do with the size of deficits, so it can hardly be pressured into "financing endless deficits." The size of deficits is totally controlled by Congress. Since the government has no real debt, what better way to describe what appears to everyone in the private sector as borrowing, but is not, as the creation of "Ersatz debt"? You'll only understand my posts if you first purge all conspiracy theories from your brain. There are millions like you so you've lots of company even if it isn't necessarily good company. You can only understand what I write if you look at these transaction from the government side. Notice I did not say that deficits of any size are tolerable.
It would be more intellectually honest of you if you would argue the point of US debt with piezoe with your OWN mind, rather than ChatGPT.
What an excellent question! I cast my comments not in the frame of U.S. debt concerns, the main subject of this thread and clearly what you had in mind when you asked your question, but in the frame of a much broader, far more important aspect of the United States as it exists in the year 2025. Were you in Stalin's Russian in 1933, or Hitlers Germany in 1938, etc., etc., and asked your question, what do you suppose the answers would be? Very much the same as now, in 2025, in the United States, I would guess. Wouldn't you agree? In the oval office sits a man whose psychologist niece described as "the most dangerous man in America", a man who meets not only three of the listed criteria to be diagnosed as a sociopath, according to the APA diagnostic manual, but every single one of the listed personality traits of a sociopath! We elected a sociopath and a severe narcissist as our President. Should it be necessary to go any further. I don't think so. History may not repeat, but it certainly does rhyme.