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
>So the US is borrowing money because it can’t pay for the money it already owes?
Yeah pretty much, although it’s borrowing for a lot of reasons not just loan interest. This keeps the lights on.
> it’s not a bad thing?
Oh it’s a problem and it’s a growing problem but it’s not as bad as you owing money to the mob. It’s more like the mob boss not being able to pay money back to you right now. Huhhuh, whacchu gonna do ’bout it, punk?
The US government will assuredly pay off its debts eventually. At the very worst when they’re up against the wall, everything’s in a panic, without a dime to their name, they can always strong arm the FED into printing more money. That’s also kind of a bad thing it’s like a consumer like you or me cashing out investments to pay off debts. The value of the dollar goes down and the US diminishes.
Loans aren’t fundamentally bad. If you take out a loan and use the money to go make more money it’s a good thing profitable even. Ie the GDP grows faster than the debt. ……buuuut Congress has gotten used to spending debt and spent it on stupid things. The GDP has not grown faster it hasn’t even kept pace.
If this keeps up we will end up like Japan where half the taxes go directly to the bank just to pay off the loans. The government can’t do anything or get out from under the debts and the nation suffers decades of lost prosperity. It won’t be their end because the bank of Japan lives there and won’t let the nation go under. US debt is held by cities and states and foreign powers which might choose otherwise.
>Also “The legislation will result in $1.5tn in savings over a decade”, How does that work?
It’s just them promising not to spend 1.5 trillion.
>Do you not pay interest on national debt or something?
Oh no the US government pays interest like anyone else. I expect my federal bonds to grow as promised. It is a little different because the government can just print money. The number of dollars the bond is worth grows but are those dollars worth as much?
>Also, where is the money coming from?
Taxes. Also future loans.
Latest Answers