Economists made a model of the U.S. economy. Our debt crashed the model

It’s one ingredient that does help prop up the US, but really similar fiscal means are available to countries that fulfil all these conditions: 1. Have their own central bank and currency, 2. Have flexible currency exchange rates and not peg to a commodity or other currency, and 3. Exclusively issue bonds in their own currency (that their own central bank exclusively issues).

Apart from the US several countries meet this threshold, including the UK, Canada, Australia, New Zealand and Japan. On the other hand, the Eurozone countries do not, and this helps some of the member states, but only at the expense of some of the others.

The problem is (whether it's real or not) the majority of the US population feels the economic prosperity is being used against them.

You might say it's a PR problem, others might say it's an actual problem. Either way it's going away now.

The US (well Trump and his supporters) want to make American manufacturing competitive in foreign markets in order to draw more investment into new domestic manufacturing capacity.

A huge hurdle for American manufacturers is that their products simply cost too much, all else being equal, because the value of the dollar is too high.

So their plan is try and devalue the dollar while also keeping it the reserve currency. To put that another way, he wants countries that have invested in the dollar to take a hit on their investments while also getting their population to buy more American goods.

His negotiations will probably center around offering continuation of "America world police" services (people hate it, but governments love it) in exchange for following this path.

Whether or not this will work? Who knows, but at least that is the idea they have chosen.

Can you break down the isolationist streak for me?

The US government seems to want to intervene in every place it can, and doesn't look anything like say old school China or Japan. It seems like some people see anything short of maximally interventionist as isolationism, and I don't understand it.

I need to know way more about this model before taking it at face value that some economists got their math and software correct. Especially since the author talks it up like they came up with a unified model for the entire US financial system. Might as well use it to make billions with that precision.

Economists have no humility.

When the real-world disproves the models of a physicist, the physicist proclaims he has assumed some variables, or maybe the model doesn't apply at all. Newtonian physics, which is very real and constantly "proven" in the real world, doesn't work at a quantum level.

When the real-world disproves the models of an economist, the economist proclaims we must be living in an alternate reality.

How many variables are influencing the US economy right now? Trillions, I'd say, on the low end. Some aren't even measurable - like trust or happiness.

Did this economist track all these variables? Of course not. He assumed a value for 99% of them. He assumed so much he doesn't even know what he assumed.

You have to remember that macroeconomic research is so incredibly hard to do that it is closer to truth telling or philosophy than to actual science. I believe it's called "astrology, but with fancy graphs".

I'm not trying to be mean to economists, just reminding everybody how reliable macroeconomic claims are (try looking for the concepts 'confidence interval' and 'randomized controlled trials' in macroeconomic papers).

I cannot disagree more, having hand waved away economics for 20 years, actually learning it has totally transformed my world view into a dramatically clearer and far more functional one.

The pandemic era fiscal and monetary policy was pretty much a 5x speed (because of the scale of everything) display of economics at work, and understanding all the levers while they were pulled made it clear that no, economics is not bullshit, people just really don't like what economics has to say.

I've taken issue with economics being considered a science since my first econ class in high school.

It can be very useful for quantifying and comparing the past, but there's absolutely nothing scientific about the process and no matter how much modelling is done it can't reliably predict future outcomes.

And we have very rigorous models that confirm that that is true. Perception shapes the economy more than actual fundamentals, specially when predicting the future.

I’ll say that when I read business and economics it often feels like it is starting from the assumption that it is right and then trying to perform the language of science until you believe them.

Add to that the wild level to which economists seem to think their economics knowledge generalizes to telling other disciplines and I tend to approach with distrust.

Economic models that have strong empirically demonstrated predictive power are called finance, not economics, because any economic predictive model that actually works can be used to make money.

Yeah - but mainstream economics is far more a state religion than it is just-a-religion. The priesthood is superficially concerned with the welfare of the masses, theological consistency, etc. - but the actual priority is divining what words, doctrines, and predictions would best serve the interests of the wealthy and powerful, and regularly pronouncing those. And vehemently denouncing any heretics who get too interested in the actual welfare of the masses, or the track record of the priesthood's predictions, or other dirty truths.

So long as you have the right mindset, being a priest of a generously supported state religion is a very cushy job.

There are certainly a lot of apologetics.

That is why there is no nobelprize for economics. Only an Nobel Memorial Prize in Economic Sciences.

US’s effective debt burden, debt * (interest rate - inflation)/GDP, isn’t particularly high right now. Unfortunately some politicians seem to have decided unlimited increases in debt are ok. That makes lenders concerned driving up rates.

It’s unstable because of how quickly interest rates can change. Right now the 3.375% interest on 37.1T of debt - ~2.7% inflation = an effective interest rate of ~0.675% well below long term GDP growth rate. But that 3.36% is a significant increase over even 1 year ago. If it grows to 5% without higher inflation things spiral fast. https://www.jec.senate.gov/public/vendor/_accounts/JEC-R/deb...

Someone probably typed % for percent, and the entire economy runs on modular arithmetic.