Should there not be some considerable caution here? All that unlimited money printing surely will have long-term consequences. There seem to be many who think “print our way to prosperity” ought to be accepted policy. I don’t think such has worked well historically.
Well, the problem here is that we’re in uncharted territory; fiat money’s only been around since the 70’s. There is no history that’s really reliable to guide us.
The larger question here is this: “Is concern about debt levels just a throwback in thinking to the days when we had a backed currency, or is it a universal truth?”
Here’s some rhetorical questions:
- Why would our bondholders care about our debt levels, as long as they’re getting paid, and S&P and Moody’s tell them they’re going to keep getting paid? (Individual corollary: you have a renter which has a high income and LOAD of personal debt, and he’s always paid you right on time. Do you kick him out because you found out he has a load of debt, as long as you keep getting paid, and he still has his job?)
- And if they’re confident they’re going to keep getting paid, why wouldn’t they lend more?
- As long as there’s a market for our debt at rock-bottom interest rates, why wouldn’t we keep borrowing? (Individual corollary: you have enough cash to use it to buy a new car, but the new car promotional interest rate is 0%. What do you do?)
Moody’s and Fitch rate US debt at AAA; S&P rates us at AA+, but they made it clear that they’re concern was political posturing (the downgrade came down when Cruz shut down the government) and not ability to pay.
In government bond financing, the historical default rate of investment-grade government bonds is .11%. So, it’s safe money.
Intuitively, there has to be an end, someplace, to the free money gravy train. But I don’t think we’re anywhere close to that end, for better or for worse.