This sounds quite similar to the arguments made by Anders Aslund in "Russia's Capitalist Revolution." He further emphasized that in the late 80s state enterprise managers used their influence to redirect all attempts at economic reform in order to maximize their opportunities to rent-seek. The real, worthwhile economic reform mostly took place in a window of a few months after the August '91 coup, when Soviet conservatives were temporarily unable to resist. Afterwards those factions regained the upper hand, and reforms didn't resume until the early Putin years. Lesson: don't expect the US political system to deal with the debt issue until and unless it causes an acute crisis.
I'm quite sympathetic to this view, and the perhaps stronger view that it was oil vol specifically that did the most damage. Chernobyl is not part of the story?
My read of Chernobyl is similar to my read on nationalism. Alone it was not fatal. Even in combination it might have been survivable. But the debt obligations and increasing fiscal disaster made it so much more profitable for people to defect it became an accelerant.
Well the same nuclear scare stopped the USA from developing the most advanced energy production source known, it would of also given us a hedge against the oil instability and reliance of the middle east.
Therefore acting as a geopolitical defense.
Any sane mind would of thought that deterrence would be better then satisfying hippies and the populace.
Though probably legally impractical at this time, one idea I really like is giving government bondholders a voice in the legislature.
Bond prices and yields contain valuable information about the economic health of a state. Bondholders, therefore, are better positioned to guide policy than most elected representatives.
Elected representatives think in 2-6 year cycles. Bondholders are thinking in 30-year cycles. Huge difference.
Excellent piece. I agree completely with everything in it.
I can vouch for the general accuracy of the USSR bits because I live in the former Soviet Union and I like picking the brains of people who lived through it, particularly the period in question (65-92).
Would be interesting to do a side-by-side comparison of the debt burden of US and China and from their make predictions about their respective trajectories. I know the US' is bad, but have no idea about China's aside form there's a lot of bad debt floating around from their recent real estate crash
It would be interesting but near impossible to complete. There isn't, from what I have seen, a clear delineation between "local government debt" and the debt carried by LGFVs and state-owned banks.
There have been multiple attempts to clean up the debt, including debt for bond swaps, debt for equity swaps, etc, with some degree of success. But this also makes it harder to follow the trial because the type of debt shifts over time.
Suffice to say that China's debt will not cause a crisis, in the traditional sense, because the govt has a lot of levers to pull. Still, it's certainly a problem.
This is the fiscal version of a broader civilizational failure mode: legitimacy becomes an obligation stack.
Military commitments, imperial subsidies, welfare promises, domestic consumption, debt service, each begins as a tool of stability, then hardens into a non-negotiable claim on future execution capacity.
Collapse begins when the regime can no longer fund the legitimacy layer without degrading the machinery that makes it credible.
> When a government's debt is denominated in its own currency, inflation erodes the real value of what it owes.
Not always. Bondholders have got wise to that trick a long time ago. The UK now issues inflation linked bonds and a significant amount of gilts are inflation linked in this way. Printing pounds therefore doesn't let them escape their national debt.
Of course there are other tricks available. Fudge the inflation statistics, or print money and then immediately use it to pay off the inflation linked bonds before the new money has a chance to re-enter the economy and affect prices. We'll see what they do.
Maybe our problem is that swing voters in the US can be broadly considered cultural conservatives (tough on crime, down on minority preferences, etc.) and fiscal liberals who kinda like government services that rich people pay for for us. Whichever party comes closer gets the swing vote.
This sounds quite similar to the arguments made by Anders Aslund in "Russia's Capitalist Revolution." He further emphasized that in the late 80s state enterprise managers used their influence to redirect all attempts at economic reform in order to maximize their opportunities to rent-seek. The real, worthwhile economic reform mostly took place in a window of a few months after the August '91 coup, when Soviet conservatives were temporarily unable to resist. Afterwards those factions regained the upper hand, and reforms didn't resume until the early Putin years. Lesson: don't expect the US political system to deal with the debt issue until and unless it causes an acute crisis.
I'm quite sympathetic to this view, and the perhaps stronger view that it was oil vol specifically that did the most damage. Chernobyl is not part of the story?
My read of Chernobyl is similar to my read on nationalism. Alone it was not fatal. Even in combination it might have been survivable. But the debt obligations and increasing fiscal disaster made it so much more profitable for people to defect it became an accelerant.
Well the same nuclear scare stopped the USA from developing the most advanced energy production source known, it would of also given us a hedge against the oil instability and reliance of the middle east.
Therefore acting as a geopolitical defense.
Any sane mind would of thought that deterrence would be better then satisfying hippies and the populace.
Though probably legally impractical at this time, one idea I really like is giving government bondholders a voice in the legislature.
Bond prices and yields contain valuable information about the economic health of a state. Bondholders, therefore, are better positioned to guide policy than most elected representatives.
Elected representatives think in 2-6 year cycles. Bondholders are thinking in 30-year cycles. Huge difference.
Excellent piece. I agree completely with everything in it.
I can vouch for the general accuracy of the USSR bits because I live in the former Soviet Union and I like picking the brains of people who lived through it, particularly the period in question (65-92).
Thanks!
Would be interesting to do a side-by-side comparison of the debt burden of US and China and from their make predictions about their respective trajectories. I know the US' is bad, but have no idea about China's aside form there's a lot of bad debt floating around from their recent real estate crash
I’ve never seriously dug into Chinese debt. Would be very interesting
Chinese debt is structurally different; its held primarily at the local government level. It's difficult to get a full accounting of it.
It would be interesting but near impossible to complete. There isn't, from what I have seen, a clear delineation between "local government debt" and the debt carried by LGFVs and state-owned banks.
There have been multiple attempts to clean up the debt, including debt for bond swaps, debt for equity swaps, etc, with some degree of success. But this also makes it harder to follow the trial because the type of debt shifts over time.
Suffice to say that China's debt will not cause a crisis, in the traditional sense, because the govt has a lot of levers to pull. Still, it's certainly a problem.
This is the fiscal version of a broader civilizational failure mode: legitimacy becomes an obligation stack.
Military commitments, imperial subsidies, welfare promises, domestic consumption, debt service, each begins as a tool of stability, then hardens into a non-negotiable claim on future execution capacity.
Collapse begins when the regime can no longer fund the legitimacy layer without degrading the machinery that makes it credible.
Neat name for a substack! I subscribed
> When a government's debt is denominated in its own currency, inflation erodes the real value of what it owes.
Not always. Bondholders have got wise to that trick a long time ago. The UK now issues inflation linked bonds and a significant amount of gilts are inflation linked in this way. Printing pounds therefore doesn't let them escape their national debt.
Of course there are other tricks available. Fudge the inflation statistics, or print money and then immediately use it to pay off the inflation linked bonds before the new money has a chance to re-enter the economy and affect prices. We'll see what they do.
Enlightening and entertaining. Thank you — and continued success in your important work.
Maybe our problem is that swing voters in the US can be broadly considered cultural conservatives (tough on crime, down on minority preferences, etc.) and fiscal liberals who kinda like government services that rich people pay for for us. Whichever party comes closer gets the swing vote.