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

Say your Dad needs $50 to fix the car, but he doesn’t get paid for two weeks and he needs the car fixed now. He asks his kids to lend him money from their piggy banks. They won’t. So he offers them the deal that if they each lend him $25 now, when he gets paid, he will pay each one back $26. So they lend him the money. Now the family as a whole owes $52 … to itself.

So now the Dad is the US government, and the kids are the Citizens. The loan is bonds or treasury bills.