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Iowa | Japan has much higher debt to gdp ratio than the USA - HOWEVER they do it with high internal savings rates - people save and put the money in low interest government bonds. This has worked for them because they do not need higher interest rates as their population is aging and shrinking so they have been borderline deflationary for 30 years. The USA is much different in that we have a consumption based economy so we have to have the ability to move interest rates to slow inflation. The biggest concern is not the debt/gdp ratio at current - it’s the rate at which it is increasing- I think pre war in Iraq we were talking about 2-3 trillion in debt vs a 14 trillion economy.
The other concern is that we’re not the only ones - I mentioned Japan, but China is also doing the same thing - their only at about 90% debt to gdp right now, but pre covid they had very little debt - so their growth curve is even faster than ours.
As far as how this affects farm - I think I’d go farther and say it will affect asset holders. All governments around the world are not looking for budget cuts - they are looking for additional revenue- look for VAT, asset taxes (see California), wealth taxes. So imagine your cost structure change having to pay a yearly 5% tax on total wealth valuation (one senator is already proposing this). One old guy told me there were more farms lost in the 30’s from not being able to pay the tax bill (property) than the bank bill (mortgage) - because governments raised their levy’s to pay their bills. I’d assume history will repeat to a certain extent. | |
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The US Debt conversation from below
