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Comment by hippoSquid | Hacker News Reader

China has 1.4B people with a GDP per capita 1/6 as high as the US. There isn't any reason to think the average Chinese person will permanently keep producing 1/6th as much value as the average American. Chinese GDP growth is still about double the US at the moment.

By the 2030s the US national debt will reach about $50T. Interest payments could be up to $2T per year if rates stay high. That would be unsustainable. The US would have to either cut government expenses or increase inflation to deal with the debt, both of which would hurt GDP.

Both countries probably have negative outlooks in the short/medium term but I wouldn't bet against China simply due to their much larger population. Their population could start decreasing and aging but they will continue to have vastly more working age adults than the US for a long time to come.

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>There isn't any reason to think the average Chinese person will permanently keep producing 1/6th as much value as the average American

It's entirely possible given how the current Chinese government has forsaken its previous commitment to economic liberalisation and is moving towards more and more state control of the economy. If it moved close enough to the approach of Maoist China (or current North Korea), it could go decades without seeing any meaningful growth in GDP per capita, much as North Korea doesn't see any significant GDP growth.

I agree with this. China outstripping the USA honestly seems inevitable to me barring state control of the economy crippling their development.

So somewhat ironically, if the USA/West wins their political battle to liberalise China, China would almost certainly become the dominant nation within the "Western/Modern" coalition.

>The US would have to either cut government expenses or increase inflation to deal with the debt, both of which would hurt GDP.

Is the US so broken brained on taxation that we can't even imagine it as an option? You know that's still how we collect revenue, right?

What really are the consequences to the debt?

Interest payment becomes too burdensome. Then it's a raise taxes/cut expenses kind of debate.

Makes sense.

What are the consequences of default?

Either having to balance a budget or a downward cycle where more and more interest is required for debt, leaving less and less for function of government.

To be clear: the consequence is that, the next time around, nobody will lend to us if we need it (which is why we would have to start balancing the budget)?

Next time is every single year because the US, like most countries, need to borrow to run the government.

Yes we would need to immediately start running a balanced budget. It would probably be a long time before we could borrow again. If we ever did borrow money again, we would be paying a higher interest since we've shown lenders that we can default.

It would also mean $33T in assets disappearing from the economy. That's a massive amount that would bankrupt tons of individuals/companies that lent the money. $2.8T of that amount is the social security trust fund which means we need to also instantly cut social security too. $7T of the debt is held by other countries who wouldn't be happy with us either.

Inflation has taken a bite out of the debt.

That's canceled out by rising interest rates

Which was cancelled out by even more inflation in other countries (so while the dollar lost value, the RMB lost even more value).

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