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this post was submitted on 26 Jul 2025
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They choose to cut the operational budget. Also the solution to lower interest payments is to set the interest rate to zero, something the Congress can easily do since Fed itself was created by the Congress.
Btw interest on reserves which is also a liablitity of the Gov (fed, not treasury) is never mentioned. Interest on Treasuries is only ever mentioned because it's a line item on the Gov budget.
Of course it's all a choice. The whole economic system is a choice. I'm just pointing out what ends up happening in practical terms.
yea my point was that the amount of sovereign debt to GDP doesn't really matter. In the 1990s during the time when Clinton was destroying welfare and trying a budget surplus, the amount of sov debt to GDP was much lower than it is currently, yet they did austerity anyways, it was more ideology than any arbitrary ratio. And even if the Government ran so much surpluses (say, due to external surplus which will not happen with the U.S.), the capitalists will still demand their risk free assets, since 2008 that has been interest on reserves, but reserves and treasuries are equally risk free (longer term ones have interest rate risk but if you hold till maturity you will get paid).
what i'm saying applies to all countries with their own currencies, not just the U.S. U.S however has a special privilege of the rest of the world 'wanting' to accumulate Dollars. However, most first world currencies are extremely privileged w.r.t. rest of the world wanting to accumulate them, i.e. high on the 'currency hierarchy'. this isn't just about the exchange rate movements but the structural power that comes from geopolitical situation. Among third world countries, larger ones have more privilege e.g Indian Rupee, Indonesian Rupiah, Brazilian Real etc while say, Mozambican metical would be much lower in the hierarchy.
oh yeah very much agree with all that