The real end point is when no one will buy new debt, because it seems to risky. Either because the US has rapidly growing inflation from creating dollars to pay debts, or because a default seems likely.

Spending someone else's money is pretty fun, especially once you find a way to justify it as a moral good.

Welfare spending and public investment are about a shared sense of public good. That’s really what the US lacks, compared to European countries which support much higher levels of public spending with (historically at least) very broad public support.

>But this really isn’t about justifying spending as a moral good

hmm

Sometimes prophets have to revise the date of doomsday, but it doesn't seem to make them any less popular as prophets.

I haven't heard anyone predict hyperinflation, but high and under-reported inflation is here and it's not just government debt that is causing it.

The gap between revenue, and debt only keeps growing, it's growing at a rate of 4% relative to GDP per year (revenues at ~18%, debt at ~22%), and the lines are diverging with debt growing faster than revenues.

This debt accruance will eat more and more of the budget, less money for all the expenses, diminished levels of public services, less money for infrastructure projects at a time when your infrastructure needs quite a lot of renovation; less money for education, so on and so forth.

At some point it has to give, without reigning in this increasing divergence between debt, and revenues the USA will have to print money to either service interests or basic public services... Inflation might not become hyperinflation but definitely won't be on the 2% target when the burden of interest payment gets really bad.

Ex: after 2020 debt to GDP went down in real terms despite the massive increase in liquidity.

Of course that just enables more deficit spending and shifts the world more towards a modern monetary policy model, where inflation is the limiting factor.

It's a plausible view. Just as governments that can print their own money will not default, they will print to pay, they will also generally avoid going into a crushing crisis due to interest payment burden. It's politically easier to use the currency as an outlet.

Interest rate payments are supposed to limit the extent of deficit spending (and government budgets getting squeezed by interest is arguably partly deflationary, in that it can spur deflationary crisis and bad real economic environments), but in practice increasing interest payments creates more of a phase shift where the system shifts to forced debt haircuts, and that flows in kind to extra pressure on the currency.

Just look at the current environment where Fed independence is being breached like never before, with the aim of forcing interest rates down without consideration for data driven risk analysis...

It's a mix of a constantly churning "history rhymes it doesn't repeat" cycles (ex: stablecoins being rehypothecated/used as base level collateral with which to generate leverage is somewhat of a modern version of the late 1800s bank currency cycle), combined with what may be best described as technological development as theories and tools and ecosystems develop.

The zeitgeist is very much that it's about time for the Eurodollar (offshore dollars/Eurodollars bound by the 20 trillion dollar Eurodollar derivative market) to fade, but as of yet there haven't been any good alternatives.

It's a big burden to export your monetary policy and backstop global economic fragility, because it becomes your responsibility. Ex: that doesn't work with a system like China because they don't like putting their own people last in a loud and public way, while in the US the average person regularly and obviously comes away worse off during big interventions. It's also a bit of a trap to step into this, because central banks have mandates to protect systemic stability, yet by unwinding this sort of arrangement, capital flows reverse en-masse which is a clear threat to bond markets (and asset markets in the US's case, since it is so hyper financialized). That's something that is often missed in this conversation. It's a service that has to be provided, and it has costs.

Or perhaps we will attempt to give a system with no bank/regulator of last resort a go again. Probably a "history rhymes" style outcome, but you never know.

I'm can't see where you're going with that, can you explain?

The current iteration is almost certainly a phase, not an end point.

The system itself can be viewed through the lens of a sort of technology that is evolving like any other technology, and concepts like "paradigm shifts" can apply to the monetary system as well.

This particular system that we have is stable (perhaps only) within the context of a stable US centered world monetary order. Usually the conversation quickly veers into the decline of the US, etc, but that's not my point here to be clear. The current system is based on offshore dollars (eurodollars - confusing name, nothing to do with the euro currency) bound together in a 20 trillion dollar eurodollar derivatives market, which essentially takes Fed policy and propagates it through basis trades to the global Eurodollar system that is technically entirely outside of US jurisdiction. When the Fed does something like change interest rates, which is apparently quite important if you look at Bloomberg/Reuters etc, ask yourself what exactly is happening when interbank lending rates change. Map it out, it may be surprising. What's even more surprising is the lack of discussion about what things like rate changes actually mean technically, despite the vast mainstream discussion around these topics.

Since 2020 we have seen first hand that the world is actually quite isolated from the traditional banking space in many ways, on a first order basis. It's the higher order effects (such as policy propagation into global markets which are quite disconnected from Fed policy) that matter. The matter to note is that this is increasingly vestigial in nature, and evolution tends to eventually drop the vestigial remnants.

(I know these conversations tend to veer into doom and conspiracy, that isn't the intent at all. I think most would be surprised if the current system as it stands persists for another 100 years, if not 50, and that's a standard idea to have.)

Otherwise what is inflated away will be recouped by the interest rates when forced to keep borrowing.