It’s something of a joke to talk about credit expansion in a closed economic loop. Especially when the loop tightens and you end up with…
If I owe you a million dollars and you owe me a million dollars dollars, are we collectively $2M in debt?
We’re entirely too zeroed in on the fictitious credit balances and totally divorced from real material conditions. How many labor hours are we spending? How much of our fossil fuel energy reserve have we committed? What is the growth/contraction rate of potable water and arable land?
I don’t really give a shit about $40T in IOUs. I care about the actual managed decline of the capital stock. The actual number of skilled laborers in a given profession. The long-term burn-down of natural resources relative to our ability to conserve, recycle, and reproduce them.
You’re right to highlight the decline of tangible assets like skilled labor, value chains and natural resources, but I think you’re conflating the circular borrowing (and spending) between tech companies with the US Government’s ability to pay back their debts. The tech companies are using circular relationships to inflate their nominal revenue, but the US government actually owes money in a linear fashion. (And as you pointed out, the government has destroyed much of its domestic production capacity for the long term, with energy perhaps being the most worrying resource to have been squandered).
The biggest problem is that the interest on the public debt adds about $1T per year, which means that 19% of all federal revenue (or 39% of individual income taxes) is needed just to pay off the interest.
It is true that the Government could just essentially print money to wipe out their debts to domestic lenders, and that’s roughly 3/4 of the money that the government owes. But that would lead to massive inflation, and it leaves approximately $10T in foreign-held debt. Historically, the USA has been able to use the position of the USD as the global reserve currency to offload its inflation on the rest of the world (see how Europe stagnated after the 2008 subprime mortgage crash in the USA, or for that matter look at Japan).
But the USD is now losing its position as the reserve currency. Foreign governments are selling off US treasuries. Foreign pension funds are selling off US stocks. The US is becoming increasingly isolated even to former close allies, and it is no longer seen as a safe place to park money. So if the government tries Quantitative Easing or any similar measure that has worked in the past, that inflation won’t be readily absorbed by the US’s allies, and it’s the US public that will have their investments and pensions wiped.
Yeah but they are not indebted like a govt like you showed in your first post. I hate how stupid that circular “borrowing” is, but it has nothing to do with usa govt borrowing. NVidia are lending, and can choose to sell it off if/when they want to. The usa govt cannot sell off its debt if that makes sense.
No. They’re much worse off, as they don’t control their own currency or have sovereignty within their own borders.
I hate how stupid that circular “borrowing” is, but it has nothing to do with usa govt borrowing.
Governments (ostensibly) borrow money to provide economy-growing amenities and economy-preserving hedges against adversity. All of these loans can be described as investments, with an ROI tied back to national GDP growth and liabilities mitigation. The circular debt patterns of these mega-corps have a similar rationale. Oracle, NVIDIA, and OpenAI are effectively partners in a project to create a value-adding service. Their debt is an accounting tool to allocate future profits, not a drag on their economic activity. Just the opposite. Credit expansion allowed a party to bring more natural, capital, and labor resources to bare in a shorter time frame, in order to obtain profits sooner than otherwise.
NVidia are lending, and can choose to sell it off if/when they want to.
To whom?
Nobody else is in the business of producing microprocessors at this scale. NVIDIA extends the loans entirely to incentivize OpenAI to consume more compute, which incentivizes Oracle to build more data centers, which incentivizes NVIDIA to produce more chipsets.
Who else would want this debt? It doesn’t serve the same economic end-goal. Who else would have enough currency to assume the debt?
In debt to whom?
It’s something of a joke to talk about credit expansion in a closed economic loop. Especially when the loop tightens and you end up with…
If I owe you a million dollars and you owe me a million dollars dollars, are we collectively $2M in debt?
We’re entirely too zeroed in on the fictitious credit balances and totally divorced from real material conditions. How many labor hours are we spending? How much of our fossil fuel energy reserve have we committed? What is the growth/contraction rate of potable water and arable land?
I don’t really give a shit about $40T in IOUs. I care about the actual managed decline of the capital stock. The actual number of skilled laborers in a given profession. The long-term burn-down of natural resources relative to our ability to conserve, recycle, and reproduce them.
debt to blackrock, vanguard, china, Japan and US citizens mostly
You’re right to highlight the decline of tangible assets like skilled labor, value chains and natural resources, but I think you’re conflating the circular borrowing (and spending) between tech companies with the US Government’s ability to pay back their debts. The tech companies are using circular relationships to inflate their nominal revenue, but the US government actually owes money in a linear fashion. (And as you pointed out, the government has destroyed much of its domestic production capacity for the long term, with energy perhaps being the most worrying resource to have been squandered).
The biggest problem is that the interest on the public debt adds about $1T per year, which means that 19% of all federal revenue (or 39% of individual income taxes) is needed just to pay off the interest.
It is true that the Government could just essentially print money to wipe out their debts to domestic lenders, and that’s roughly 3/4 of the money that the government owes. But that would lead to massive inflation, and it leaves approximately $10T in foreign-held debt. Historically, the USA has been able to use the position of the USD as the global reserve currency to offload its inflation on the rest of the world (see how Europe stagnated after the 2008 subprime mortgage crash in the USA, or for that matter look at Japan).
But the USD is now losing its position as the reserve currency. Foreign governments are selling off US treasuries. Foreign pension funds are selling off US stocks. The US is becoming increasingly isolated even to former close allies, and it is no longer seen as a safe place to park money. So if the government tries Quantitative Easing or any similar measure that has worked in the past, that inflation won’t be readily absorbed by the US’s allies, and it’s the US public that will have their investments and pensions wiped.
They talk about the government debt, not nvidia or something.
NVIDIA alone bolds $191B in US treasuries. So that’s money the US effectively owes NVIDIA.
What do we want to bet NVIDIA’s tax liabilities are for this year?
Yeah but they are not indebted like a govt like you showed in your first post. I hate how stupid that circular “borrowing” is, but it has nothing to do with usa govt borrowing. NVidia are lending, and can choose to sell it off if/when they want to. The usa govt cannot sell off its debt if that makes sense.
No. They’re much worse off, as they don’t control their own currency or have sovereignty within their own borders.
Governments (ostensibly) borrow money to provide economy-growing amenities and economy-preserving hedges against adversity. All of these loans can be described as investments, with an ROI tied back to national GDP growth and liabilities mitigation. The circular debt patterns of these mega-corps have a similar rationale. Oracle, NVIDIA, and OpenAI are effectively partners in a project to create a value-adding service. Their debt is an accounting tool to allocate future profits, not a drag on their economic activity. Just the opposite. Credit expansion allowed a party to bring more natural, capital, and labor resources to bare in a shorter time frame, in order to obtain profits sooner than otherwise.
To whom?
Nobody else is in the business of producing microprocessors at this scale. NVIDIA extends the loans entirely to incentivize OpenAI to consume more compute, which incentivizes Oracle to build more data centers, which incentivizes NVIDIA to produce more chipsets.
Who else would want this debt? It doesn’t serve the same economic end-goal. Who else would have enough currency to assume the debt?