So, I know that debt in general is a good thing for a country to have, but I’ve also heard that the U.S. sometimes makes money off of its debt. How does it do this?
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I need 1 Trillion dollars. So I issue bonds at a low percentage rate. You buy 1 Trillion dollars in debt.
I pay it back over 30 years. Very low interest. In that time, inflation rises MUCH higher than the interest than I’m paying you. So I get the money immediately in current dollars, but I get to pay you back with ever decreasing value of currency.
Under the federal reserve system – every dollar that exists is a dollar of debt. When the government “borrows” money, this means that more money is literally made at a printing press. These extra dollars increase the money supply by multiples and cause inflation.
Everyone should have a basic understanding of modern monetary theory as atleast a lense for understanding “borrowing” and “taxes”
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