No. of Recommendations: 4
" Yet here we are still Muddling Through. Why?
Governments have other advantages that households and businesses don’t. They can set their own contract terms, raise tax rates, and manipulate their currencies. They can even force people to buy their debt through bank reserve requirements, etc. They can (and it appears they will) let banks purchase US debt without having it count against their capital requirements. This is a huge change and a real bonus to banks. Of course, it means more US government debt will be bought and pushes out the day of reckoning. We can only guess how far. Probably more than we think. But then, the old Hemingway line about “How did you go bankrupt?” Answer: “Slowly and then all at once” comes into play.
We are currently in the “slowly” phase. We have no idea when the “suddenly” part starts. All this gives the government more wiggle room, but they still have limits.
Looking at dozens of historical precedents, Reinhart and Rogoff found that countries run into trouble when accumulated debt exceeds 90% of GDP. The US blew through that line over a decade ago in the aftermath of the Great Recession. Now it’s around 123% (not including state and local debt, which has another 10%). We are firmly in the danger zone."
https://www.mauldineconomics.com/frontlinethoughts... 