To whom? When did we start keeping track? What does it practically mean as I image it will never be paid back?
In: Economics
Mostly to American retirement plans and governments, along with the federal reserve. It’s comes from spending more than the government takes in. The big problem is not that it’s over 30 trillion, the big problem is that the interest payments are growing very large. Currently it’s just about what the feds spend on defense, which is a very large number.
Government debt does not work like personal debt.
Most of it is held by the American people in the form of bonds. The interest that the bonds accrue is the interest that the government is spending on the debt. When it matures the gov has paid off that debt.
It’s slightly more complicated than this, but it basically means that there are outstanding government bonds totaling that much. It’s owed to people that bought the bonds and will be paid back as those bonds mature.
It means there are government bonds with total amount of $31 Trillion.
>To whom?
To anyone who owns government bonds. Other parts of the government like Social Security, individual people, companies,…
About 7T is owned by the federal government itself. By different departments.
About 24.5T is owned by the public. Which includes State and local governments, pension funds, banks, trusts, estates, other businesses and investors. Most of those are Americans.
Part of this is also owned by Foreign Governments and investors. US bonds are very save way of storing money and they are pretty liquid.
>When did we start keeping track?
When the government was funded.
>What does it practically mean as I image it will never be paid back?
It’s being paid back all the time. It’s not one big lump sump debt. It’s a lot of smaller debts each of which are for specific length of time.
US federal government pays them back as they come due and borrows new money.
We’re part of a ponzie scheme that will eventually break down. Hopefully you’re not holding the ball, right?
Have you ever bought a US savings bond? That’s government debt.
The government sells a few different kinds of things that essentially mean “Give us this much money now and we’ll give you back this much more later”.
The amount more is the interest.
People and institutions buy these promises and get paid back with interest.
Now who holds these promises? Mostly Americans and American institutions. About 2/3 of US debt is held in the US. A lot of it is held by other parts of government or other kinds of government. US debt is very low risk compared to things like the stock market. When cities or states or parts of the federal government have a lot of money they aren’t spending right away, they can’t just hold the cash. That would keep losing value from inflation. But they can’t gamble on the stock market. So they buy some US debt which is pretty much the safest way to grow money. It doesn’t grow much, but there’s a very low risk they’ll lose it all like money in stocks might.
Retirement and pension funds hold a lot of government debt too. So do banks.
So when we pay this debt back, or pay interest on it, that money circulates back around the US, to other parts of government, to people’s retirements, to banks and to individuals who want to hold some money in a boring place that grows a little.
The 1/3 that’s left is held outside the US. Japan, China, the UK and Luxembourg together have most of that debt.
It’s not conceptually different than a person being in debt – be it credit card debt, a mortgage, or student loans.
The US GDP is about 25 trillion dollars, and it’s 31 trillion in debt. A little more than a year of its income. It would be like a person that makes $50,000 a year having $60,000 in total debt (between car / mortgage / etc).
A fixed amount of US money must go to paying down interest on that debt, just like you have minimum credit card payments.
The way you pay down that debt is either to make more money (ie, grow the US economy) or to cut spending and pay down the principal (ie, cut military or social benefits).
>To whom?
The US raises money by issuing bonds – a promissory note that it will be paid back, with interest. These bonds are sold to the general public, because they are low-risk investments.
They make up a large part of people’s 401k/retirement accounts. Investors buy them, companies buy them, foreign entities buy them.
They’re not really different than any other savings account or stock asset.
>When did we start keeping track?
1835 was the last time the US government had zero debt. We’ve been keeping track since.
That if everyone who owned debt from the US government (mostly retirement plans from people in the workforce) demanded payment now, the US government would have to come up with $31 trillion.
Of course that would result in massive tax payments since most people are too young to retire. But it would also probably require them to print money, which drive up inflation.
In the more realistic scenario on which people retire in their late 60’s and start pulling their money out of T bonds at the exact same time the government needs to foot a larger bill for social security, unless the government agrees to cut benefits they will have to borrow the difference, which will either result in rising taxes or more inflation.
The tl;Dr of both what and why the debt exists. Many comments attempting to explain the former while completely forgetting the latter.
It is fine so long as the USA remains the world reserve currency, as no one is calling them on it. Everyone just plays the ‘Monopoly’ game, and the USA uses their huge military power to crush anyone who challenges that status. (Not sure if you’ve heard of Bitcoin’s Proof of Work (PoW), but the USA also has a (PoW), Proof of War… that’s what secures the USD).
If the world changes their mind, the house of cards comes crashing down.
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