If the US Treasury sells/auctions bonds because their regular revenue (tax) already isn’t enough to fund the government, where do they get the money to pack back those debts?

Question

The only thing I can think of is that they pay old bonds with income from new bonds? Isn’t that a ponzi scheme?

Google talks about securities, bills, notes, and bonds. But I don’t really understand what those are.

In: 0

Answer 1

There are two main sources of revenue that aren’t bonds. Taxes, which you are probably familiar with. Those include sales tax, import tax, income and inheritance tax. The other source of “revenue” that the US government has(and all governments with their own currency) is that they just print money. Yes, that’s right, most governments can just clap their hands and create more money to pay off their debts

Now you don’t want to print too much money to pay these debts off, printing money generates inflation which can increase interest rates, causing the government to further need to print money, a process that can spiral out of control. A considerable amount of government money printing to meet debts is completely normal though.