4 ms·
Because printing more money isn't an option for one thing. It might be a short term fix for some things, but in the long run it just devalues the currency and l
by mwfunk 8y ago
Because printing more money isn't an option for one thing. It might be a short term fix for some things, but in the long run it just devalues the currency and lowers the US credit rating, with the worst case scenario being hyperinflation.
Also, there's the question of who owns all that debt that the US relies on for its continued existence. For example, China owns a big chunk of it, like ~$1.2 trillion. They buy tons of US Treasury bonds because they're considered a safe investment. China gives the US a bunch of money up front, and the US has to give China a bunch more money back in the future, like over the course of 10 years. A lot of Americans also own US bonds, which help fund the debt, but they own them because they're a safe investment, not because they want to lend the government money.
So, as long as the US is in debt, it's forced to rely on other countries and its own credit rating to keep it going. That's a problem. And at some point, the sheer amount of debt will lower that credit rating, making those US bonds less of a safe investment, and that would be the tipping point at which everything starts falling apart. It will be much harder to fund deficit spending, which could snowball into printing money, then fast forward 5 years and boom, zombie apocalypse (or at least a potential Venezuela or Weimar Republic type situation).
TL;DR: the deficit is an existential threat the US if it's not kept under control.
- spiralx 8y agoThe amount of debt isn't a problem for a country's credit rating as long as repayments are made on time, that's the same as for individual borrowing and their credit score. You have to explain why the US would fail to repay its debts before you can claim there's a problem. China owns just 5.3% of US debt, only slightly more than Japan, which owns 4.8% of it. Most US debt is owned by government programmes such as Social Security.