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The US debt has the following consequences: 1. The US will be paying interest on it forever. 2. The US is chained to maintaining low interest rates forever no
by whatshisface 5y ago
The US debt has the following consequences:
1. The US will be paying interest on it forever.
2. The US is chained to maintaining low interest rates forever no matter what unless it wants to bankrupt itself. The Fed is not so independent from the rest of the government that it can set policy to bankrupt the US.
3. This game can go on basically forever as long as the economy keeps growing faster than the debt. That will happen as long as every dollar in spending creates (one dollar times the interest rate) in recurring tax revenue. So, the government can spend... as long as it spends wisely.
If you want some financial science fiction, imagine a world where you can borrow money directly from the Fed at an interest rate that exactly balances your disk of defaulting. In that world, the USG can borrow at 0% interest because it structurally can't default. That's the world we're heading towards.