I saw this today:
“The United States federal debt is forecasted to grow to a record 202% of the gross domestic product by 2051, the Congressional Budget Office reported on Thursday, reflecting healthcare and debt services cost growth. The national debt for 2021 is estimated at 102%.”
So I’m curious, if the U.S. is in so much dept (I think a lot of countries are?) How doesn’t it run out of money?
In: Economics
The Federal reserve can “print money” to pay for its debt. It does it by borrowing money and then leaving it with the person it borrowed from.
So, for example. You borrow $100 from me and I write you a check. Then I borrow $100 from you but I don’t ask for it right now, you can hold on to it and just give me an IOU. Since this is done in your computer, you can just type into your bank account that you now have $100. I can give you permission to do that because I’m the US government. Now you owe me $100 of money that I just gave you permission to make. Since I know I can always ask for the $100 from you, I borrow $100 from someone else. If that person ever wants their money, I’ll come to you and get it. But I’ll never do that. Instead, I’ll just create more money with someone else, the same way I did with you.
Not really an easy concept for a 5 year old. The best way to do that would be to say that if someone I borrowed money from wants it back, I’ll pull out my ink jet printer and make some.
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