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What happens when the US needs to start paying off the trillions in debt? I remember the last time things were good. It stopped being good quite rapidly. I don'

What happens when the US needs to start paying off the trillions in debt? I remember the last time things were good. It stopped being good quite rapidly. I don't know much about monetary and economic policy but I'm optimistically cautious. I can't imagine the US borrowing several trillion dollars to keep credit from freezing again.

malandrew 9y ago
My understanding is that most US debt is held by US citizens or US organizations.
- xiphias 9y ago
  And the Chinese government which is building a massive army for totally unknown reasons /s
  - Clubber 9y ago
    The wonderful thing about owing so much debt is it really makes the financial incentive for war against you that much lower for your lenders.
- Clubber 9y ago
  Yes, as opposed to intra-governmental debt. Also of the public debt, the breakdown is: As of September 2014, foreigners owned $6.06 trillion of U.S. debt, or approximately 47% of the debt held by the public of $12.8 trillion and 34% of the total debt of $17.8 trillion.[42] The largest holders were China, Japan, Belgium, the Caribbean banking centers, and oil exporters. https://en.wikipedia.org/wiki/National_debt_of_the_United_States https://en.wikipedia.org/wiki/National_debt_of_the_United_St...
tootie 9y ago
We pay off our debt constantly.
- 0xbear 9y ago
  We just pay it off with borrowed money.
  - tootie 9y ago
    The federal government had $3.3T in revenue and all our debt is denoted in our own currency. That's how we're able to borrow.
itissid 9y ago
With debt it depends who the debt is owed to. US owes a lot to other govts. Greece owed it to bond buying private firms. China's debt is owed by the people and local corporations to the local bank. And debt is typically a problem when recession strikes.
devrandomguy 9y ago
A CEO once told me, "If you owe someone $1 million, then they own you. If you owe someone $1 billion, then you own them." I think that the orgs who are owed by US are primarily concerned with maintaining the status quo, rather than gutting the golden goose.
- bluthru 9y ago
  We're still using real money to pay interest on our debt, yes?
  - jbarciauskas 9y ago
    Real money that we print, yes. Edit: Since this was down voted, I want to be clear: this is not snark. This was meant as a very real commentary on how important it is that we have the ability to inflate our way out of debt. It's critical to understanding the power dynamics at play here.
taysic 9y ago
I don’t see why you’re getting downvoted. This is a good question I don’t know the answer to. Id also like to know what the consequences are of the gov buying back bonds with quantitative easing... which at the very least to me seems to pump value into these bonds that aren’t a really there - esp if the buyback is because the government is not equipped to pay them back.
hidenotslide 9y ago
Tldr: Government debt isn't like household debt. If anything you should be worried about growing deficits outside recessions, and even that just leads to some inflation. There is no need to pay off the debt, as long as it grows slower than the economy it is shrinking in real terms. Furthermore it serves an important purpose as a "risk-free" investment of US dollars and as a tool for monetary policy through open market operations. In fact there isn't enough outstanding debt for the second role, which is why during the financial crisis the Fed expanded its balance sheet to include mortgage backed securities. Finally any country with its own currency can't really default on payments, except in a technical sense like the "debt ceiling". Instead if the government continues to run expanding deficits then inflation will rise and smooth things out, statistically reducing the debt. Think of it as everyone who owns dollars pays off a bit of their share of the debt. Severe inflation like in the 1970's or worse is clearly harmful, but deflation is more harmful than moderate inflation. We have been running below policy maker goals of about 2% inflation for a while, despite the cries from deficit hawks that massive inflation is right around the corner due to QE.
everheardofc 9y ago
As long as it's not foreign debt and the country in question is not dependent on imports then it doesn't matter. They can always just borrow more.

malandrew 9y ago

My understanding is that most US debt is held by US citizens or US organizations.

xiphias 9y ago
And the Chinese government which is building a massive army for totally unknown reasons /s
- Clubber 9y ago
  The wonderful thing about owing so much debt is it really makes the financial incentive for war against you that much lower for your lenders.
Clubber 9y ago
Yes, as opposed to intra-governmental debt. Also of the public debt, the breakdown is: As of September 2014, foreigners owned $6.06 trillion of U.S. debt, or approximately 47% of the debt held by the public of $12.8 trillion and 34% of the total debt of $17.8 trillion.[42] The largest holders were China, Japan, Belgium, the Caribbean banking centers, and oil exporters. https://en.wikipedia.org/wiki/National_debt_of_the_United_States https://en.wikipedia.org/wiki/National_debt_of_the_United_St...

tootie 9y ago

We pay off our debt constantly.

0xbear 9y ago
We just pay it off with borrowed money.
- tootie 9y ago
  The federal government had $3.3T in revenue and all our debt is denoted in our own currency. That's how we're able to borrow.

itissid 9y ago

With debt it depends who the debt is owed to. US owes a lot to other govts. Greece owed it to bond buying private firms. China's debt is owed by the people and local corporations to the local bank. And debt is typically a problem when recession strikes.

devrandomguy 9y ago

A CEO once told me, "If you owe someone $1 million, then they own you. If you owe someone $1 billion, then you own them." I think that the orgs who are owed by US are primarily concerned with maintaining the status quo, rather than gutting the golden goose.

bluthru 9y ago
We're still using real money to pay interest on our debt, yes?
- jbarciauskas 9y ago
  Real money that we print, yes. Edit: Since this was down voted, I want to be clear: this is not snark. This was meant as a very real commentary on how important it is that we have the ability to inflate our way out of debt. It's critical to understanding the power dynamics at play here.

taysic 9y ago

I don’t see why you’re getting downvoted. This is a good question I don’t know the answer to. Id also like to know what the consequences are of the gov buying back bonds with quantitative easing... which at the very least to me seems to pump value into these bonds that aren’t a really there - esp if the buyback is because the government is not equipped to pay them back.

hidenotslide 9y ago

Tldr: Government debt isn't like household debt. If anything you should be worried about growing deficits outside recessions, and even that just leads to some inflation. There is no need to pay off the debt, as long as it grows slower than the economy it is shrinking in real terms. Furthermore it serves an important purpose as a "risk-free" investment of US dollars and as a tool for monetary policy through open market operations. In fact there isn't enough outstanding debt for the second role, which is why during the financial crisis the Fed expanded its balance sheet to include mortgage backed securities. Finally any country with its own currency can't really default on payments, except in a technical sense like the "debt ceiling". Instead if the government continues to run expanding deficits then inflation will rise and smooth things out, statistically reducing the debt. Think of it as everyone who owns dollars pays off a bit of their share of the debt. Severe inflation like in the 1970's or worse is clearly harmful, but deflation is more harmful than moderate inflation. We have been running below policy maker goals of about 2% inflation for a while, despite the cries from deficit hawks that massive inflation is right around the corner due to QE.

everheardofc 9y ago

As long as it's not foreign debt and the country in question is not dependent on imports then it doesn't matter. They can always just borrow more.