My having dollars doesn't mean I am in debt, nor does it mean anyone is in debt to me. Technically, this is incorrect. Dollar bills are a debt of the central b

My having dollars doesn't mean I am in debt, nor does it mean anyone is in debt to me. Technically, this is incorrect. Dollar bills are a debt of the central bank. Take a look at the Fed balance sheet, you will find that dollar bills are considered a liability from their point of view. This has interesting consequences. If you consolidate the Treasury and the Fed - which is valid from an economics point of view, since they are just different branches of government (no matter what the Fed conspiracy people may tell you) - then both dollar bills and treasury bonds are just different types of debt of the government. It just so happens that dollar bills have zero maturity and zero coupon (interest). Once you understand that, it is only a short step towards asking why the hell everybody is so concerned about the federal government debt. If it was really desired, one could just swap all treasuries for dollar bills - and the only primary effect is that it changes the yield curve for government debt from almost zero everywhere to zero everywhere. I find this fascinating. If you asked a random person (including myself three years ago) what would happen if all the government debt were paid off with paper money, they would tell you - slightly paraphrased - that the world would explode. But when you look into the technical details, you find that it's just this subtle change in the yield curve. So what's going on there?