We pay it back all the time. Our debt exists in the form of Treasury bills and bonds, which are dutifully paid when they mature (anywhere from a month to 30 years later).
The total debt goes up because we keep issuing new bonds. But bondholders are satisfied that we do pay back our debts, so they're willing to loan us more money. They're so confident that we get the lowest interest rates; every other interest rate is pegged to that.
It's important not to be misled by analogy to personal debt. You will die some day; countries do not. If somebody loans you money they have to take into account if you will die before you pay it off. That's not a problem for the country. (Or a company; many corporations also have permanently revolving debt.)
Now, if we ever fail to pay back a debt, that entire house of cards collapses very, very quickly. We're currently at no risk of that; we make enough money to pay our debts as they come due. But a government could decide to fix the "debt problem" by failing to pay them, and that would be so unbelievably bad that it's hard to imagine why politicians even suggest it.
You'd have to not understand anything, to understand it. "Qualified" people are the most unqualified, and "unqualified" people are geniuses. Just believe what the "unqualified" people say, and you can be a genius too.
The hedge is the Russia '98 play, which is already in various stages of progress.
1. Default on ruble-denominated debt (replace with dollar-denominated), and trigger a recession and currency crisis.
2. Military attack on a border state to fight secession (replace with narco-terror) and advance nationalist agenda.
3. Vote in a strongman who promises to take the country back from evil capitalist influence (replace with communist) and restore their rightful place in the pantheon of great civilizations.
4. Come to power and intimidate/co-opt independent media into docile acquiescence, convince corporations to do your bidding in exchange for favorable treatment, restructure elections to your advantage.
Sad part is that, you can basically pick any random date over the past 50 years and this headline would ring true at that time. Our debt always seems to be at an all time high.
I mean, that’s how growth works. Like, if the economy normally grows, the economy is always the biggest it’s ever been. Debt’s always the highest. Human population is always the largest. Number of companies is always increasing. Amount of important economic infrastructure financed by debt is ever growing.
To be fair, I’m not saying our debt is in a good place. But just that we should expect it to always be the most it’s ever been, just like we’d always expect the economy to be the largest it’s ever been.
By itself, it doesn’t mean anything if it’s always increasing, what matters more is how quickly debt is growing and if we aren’t keeping up in how we pay it off
That’s just not true. At the end of the 90s the US had a budget surplus and there was a discussion of how we were going to handle it.
Then George W. Bush enacted a big tax cut in 2001 that no one remembers because it was heavily weighted toward the top 1%. Suddenly we didn’t have a surplus problem anymore.
12 comments
[ 1.8 ms ] story [ 30.2 ms ] threadNobody lets you borrow 8 trillion dollars without paying some of it back.
As far as I'm concerned, it's a made-up number, it's only gotten bigger every moment I've been alive, and nothing ever comes of it.
When the universe dies, the US national debt will be at one gajillion...
The total debt goes up because we keep issuing new bonds. But bondholders are satisfied that we do pay back our debts, so they're willing to loan us more money. They're so confident that we get the lowest interest rates; every other interest rate is pegged to that.
It's important not to be misled by analogy to personal debt. You will die some day; countries do not. If somebody loans you money they have to take into account if you will die before you pay it off. That's not a problem for the country. (Or a company; many corporations also have permanently revolving debt.)
Now, if we ever fail to pay back a debt, that entire house of cards collapses very, very quickly. We're currently at no risk of that; we make enough money to pay our debts as they come due. But a government could decide to fix the "debt problem" by failing to pay them, and that would be so unbelievably bad that it's hard to imagine why politicians even suggest it.
Cash. So you can buy into the dip. It’s historically a losing position, however.
1. Default on ruble-denominated debt (replace with dollar-denominated), and trigger a recession and currency crisis.
2. Military attack on a border state to fight secession (replace with narco-terror) and advance nationalist agenda.
3. Vote in a strongman who promises to take the country back from evil capitalist influence (replace with communist) and restore their rightful place in the pantheon of great civilizations.
4. Come to power and intimidate/co-opt independent media into docile acquiescence, convince corporations to do your bidding in exchange for favorable treatment, restructure elections to your advantage.
To be fair, I’m not saying our debt is in a good place. But just that we should expect it to always be the most it’s ever been, just like we’d always expect the economy to be the largest it’s ever been.
By itself, it doesn’t mean anything if it’s always increasing, what matters more is how quickly debt is growing and if we aren’t keeping up in how we pay it off
Then George W. Bush enacted a big tax cut in 2001 that no one remembers because it was heavily weighted toward the top 1%. Suddenly we didn’t have a surplus problem anymore.