How does national debt work?

Question

Relevant news story: [https://www.bbc.co.uk/news/world-us-canada-65781359](https://www.bbc.co.uk/news/world-us-canada-65781359)

So the US is borrowing money because it can’t pay for the money it already owes? As a consumer I’d think that is a really bad sign but apparently raising the borrowing limit has historically been “a formality”, so it’s not a bad thing?

Also “The legislation will result in $1.5tn in savings over a decade”, How does that work? Do you not pay interest on national debt or something? Also, where is the money coming from?

In: 3

Answer 1

The federal government is issuing US treasuries for every dollar it spends because of some arcane law that makes little sense in a fiat monetary system. The federal government can’t run out of US dollars– it has a monopoly on US dollars. The Fed never waits for the US Treasury to sell the treasuries. Two separate operations.