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?
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The US makes its own money. When the federal government pays for a service (eg military contract) it simply gets federal banks to increase the money in those accounts. Money retains its value from tax (it has value because everyone needs enough of it to give back), but does not directly go to paying for government services (at least on the federal level), it is removed from circulation.
This is the case for pretty much any governing body that owns their own currency. The ‘national debt’ that the US owes to itself is the difference between how much tax it has collected/removed, compared to how much currency/value it has generated (or promised).
As long as inflation remains stable and the US dollar has appreciating value, the system works. Most of the national debt means functionally nothing and can continue to increase indefinitely.
Our money is created based on a promise to pay it back with interest, so it’s not actually based on anything besides a promise.
As an example, when you go to the bank and take out a loan to buy a house, the bank just types that money into existence, and you pay it back with interest. It doesn’t actually exist until you pay it.
It’s the same for the Federal Government. It borrows/creates money with a promise to pay it back with interest. It borrows that money from the American people.
It gets interesting when you realize that if we only have money because we borrowed it, and everything we borrow has interest, clearly it’s impossible to pay back. Just something to consider every time you hear someone complain about national debts.
This monetary system is also the reason infinite growth is an absolute requirement under our current capitalist system.
I know it’s not the US minting money, but money is created in debt… Just s guess, but that may be a fsctor
“Hey, let’s allow a small group of billionaires to make a central bank money printer that we’ll pay infinite interest to forever!”
– The US government about the Federal Reserve
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