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Because the dollars have not been permanently pumped into the economy, and the world has faith that the Fed will shrink its balance sheet. Printing money and l

Because the dollars have not been permanently pumped into the economy, and the world has faith that the Fed will shrink its balance sheet. Printing money and lending it out, and then burning the money when it's repaid, is very different than printing money and using it to buy goods and services.

KaoruAoiShiho 6y ago
I think this thread needs an ELI5 for how the whole process works from the ground up as there seems to be a lot of popular misconceptions.
- alexjray 6y ago
  That would be incredibly useful
- gen3 6y ago
  This Planet money episode addresses the whole topic of where the Fed is getting all the money from, and how inflation fits into the picture. I found it pretty helpful. https://www.npr.org/transcripts/821787090 https://www.npr.org/transcripts/821787090
alexjray 6y ago
That's a best case scenario and feels overly optimistic. What are the chances it gets fully repaid?
- lotsofpulp 6y ago
  Assuming society continues onward, it doesn't really need to be fully repaid. The value is in the organization and structure of society. However, war, environmental catastrophes, population decline, and loss of trust between citizens of a nation can cause a decrease in the predictability of actions and consequences in society, and that would be a problem for any debt issued with rosier assumptions.
- Qasaur 6y ago
  It cannot be repaid, ever, because the interest exceeds the amount of money that is currently in existence, which means they will always have to borrow more money (which is created out of thin air) to service the debt.
  - deleted 6y ago
    [deleted]
  - comicjk 6y ago
    Interest on the national debt is $400-$600 billion per year depending on what you count (a lot of it is paid to the federal government itself). It's a lot of money, but it's a small fraction of the federal budget. It's also less than the amount of money in existence - M1 is $5.5 trillion and can easily be expanded, as mentioned. (It also wouldn't necessarily matter if the interest per year were greater than the total amount of money in existence. If the money supply were $20, that wouldn't make it impossible for me to pay you $21/year; I could pay it in 21 $1 payments.)
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KaoruAoiShiho 6y ago

I think this thread needs an ELI5 for how the whole process works from the ground up as there seems to be a lot of popular misconceptions.

alexjray 6y ago
That would be incredibly useful
gen3 6y ago
This Planet money episode addresses the whole topic of where the Fed is getting all the money from, and how inflation fits into the picture. I found it pretty helpful. https://www.npr.org/transcripts/821787090 https://www.npr.org/transcripts/821787090

alexjray 6y ago

That's a best case scenario and feels overly optimistic. What are the chances it gets fully repaid?

lotsofpulp 6y ago
Assuming society continues onward, it doesn't really need to be fully repaid. The value is in the organization and structure of society. However, war, environmental catastrophes, population decline, and loss of trust between citizens of a nation can cause a decrease in the predictability of actions and consequences in society, and that would be a problem for any debt issued with rosier assumptions.
Qasaur 6y ago
It cannot be repaid, ever, because the interest exceeds the amount of money that is currently in existence, which means they will always have to borrow more money (which is created out of thin air) to service the debt.
- deleted 6y ago
  [deleted]
- comicjk 6y ago
  Interest on the national debt is $400-$600 billion per year depending on what you count (a lot of it is paid to the federal government itself). It's a lot of money, but it's a small fraction of the federal budget. It's also less than the amount of money in existence - M1 is $5.5 trillion and can easily be expanded, as mentioned. (It also wouldn't necessarily matter if the interest per year were greater than the total amount of money in existence. If the money supply were $20, that wouldn't make it impossible for me to pay you $21/year; I could pay it in 21 $1 payments.)

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