How is the US in trillions of debt but still able to spend more money and deepen said debt without having to repay anything?
In: Economics
Because countries last forever (yes, I know countries cease to exist on occasion) so the timescales involved are completely different then your personal finances.
Next up, as long as the debt is managed appropriately and growth continues, you can keep going into ever further amounts of debt, and this isn’t a bad thing.
For example, in country X, a new bridge will generate $20 fun bucks a month in economic growth. Government debt will “cost” 10 fun bucks a month. So the debt and servicing costs are more then made up for by the increase in the economy. Next month, the country can add additional debt that will again, increase the economy by $20 fun bucks with the associated debts costs of $10 fun bucks. The government is paying debt costs of $20 fun bucks a month, substantially more then a couple months ago. But the corresponding economic is at $40, so the government’s finances are actually in better shape then if the country had taken on no debt.
The total *amount* of debt in this case is completely meaningless, unless you want to get elected or write a click bait article.
Now if this country takes on debt to buy a bridge that only has a return of $9 fun bucks a month, and does so month after month, year after year, you eventually come to the point where you can no longer pay for additional debt. A good example of this is Greece, though that is a very simplistic explanation of that issue.
TLDR: The ***total*** amount of national debt doesn’t really mean anything. It’s about the quality of debt, and US debt is considered very high quality.
The US Government pays all its debts in full and on time, always.
It’s just a lot of people are constantly lending it money.
Basically imagine the debt as the lines for a fast food restaurant.
The lines are moving consistently, nobody is complaining about how long the lines are, everyone is getting attended to by the server well and get to the register.
It’s just that there are a lot of servers, registers and lines at the same time, with more servers opening up new lines all the time.
When you measure the debt, it’s like counting all the people in all the lines.
Each person is getting served, there are just a lot of people,
Because at the same time you’re borrowing money, you’re also paying it back on a fixed schedule.
Borrowing 100bil from the people today, pay it back on a fixed schedule like say 10 years and not a day before. In a month, borrow another 100 bil. Pay it back in 10 years and not a day before.
Why should we loan the gov money? Because the US gov has NEVER EVER defaulted on a payment. Ever. Period. So it’s pretty safe bet that in 10, 20 or 30 years, the gov is gonna pay back each loan.
To put it like this:
You have 20 money. Now you borrow 5 money from Marc and Karen.
You now have 30 money and 10 debt.
You now borrow 20 money from Joe. And pay back 5 to Karen.
You now have 45 money and 25 debt.
What I am trying to get is, that debt and your ability to spend money are seperate concepts.
You are never interested to pay your debt before it’s due and instead of paying back from your “starting pile” you try to pay debt with new debt.
Who’s going to come collect lol?
Because debt doesnt actually mean anything on the grand scale of anything.
They put the world at 260 trillion in debt.
You really think we all pay 260 trillion back in debt to eachother?
It doesnt mean shit and it never will.
Don’t worry, the citizens repay it. Their dollar goes down in worth and then Uncle Sam says “oh just pay back $200 instead of the $100 we used to need!” 😂 lmfaoooooo
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