I’ve once heard that the USA owns most of its debt to itself, how is that possible? How can you owe debt to yourself?

Question

I’ve once heard that the USA owns most of its debt to itself, how is that possible? How can you owe debt to yourself?

In: 252

Answer 1

It means the state owes money to the people. Ever heard of a government bond? It’s essentially something you ‘buy’ from the government and then they promise to pay you back that sum plus some interest at a later point in time.

I buy the bond for $10, and the government promises to pay me back $12 in five years. It’s literally a loan with 20% interest.

That’s debt the government owes to you.