Why can’t a government forgive it’s own internal debt?
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The government is in debt to people, people like you and me, not itself. We hold government bonds and treasury bills, maybe not directly but through our bank and retirement accounts. We the people would be the ones to have to “forgive” that debt and we would bear the burden as individuals. Or they could just stop paying, called a default, and no one would trust the US Dollar ever again.
Edit for clarity: The government has basically two ways to get money. One is through taxes. The other is through selling debt to people like you and me as described above. Debt is slightly more popular from a political standpoint because it makes the government look incompetent vs raising taxes which makes it seem tyrannical.
It absolutely can, and [has](https://en.wikipedia.org/wiki/Quantitative_easing). The U.S. Government running out of debt is akin to Chuck E. Cheese running out of tokens: It can only happen because they choose to make it happen.
But that doesn’t matter, because the problem is not, and never will be, the debt. The problem is the *spending*, and what you are or aren’t getting for it. The U.S. government could stop taxing people tomorrow, and print new dollars to pay for every program they wanted to. But spending those dollars has a consequence, regardless of what you buy with them: Once they’re spent, they go out to join the rest of private-sector economy. What happens when everyone has more money to spend, and there isn’t enough of the stuff they want to buy? You guessed it, **INFLATION**.
We’ve seen this many, many times, in many, many countries, from Weimar Germany to Zimbabwe to Venezuela, and while the U.S.’s position as a global default currency cushions the dollar somewhat against the adverse effects of inflation, you had better believe the rest of the planet would drop the dollar like a burning bag of dogshit if it were to exhibit a sustained rate of double-digit inflation.
Government doing this is called a bankruptcy and doing this make government issued bonds worthless and destroy the confidence of people willing to loan money to the government.
It could, but then it would make it very unlikely that other parties would loan that government money in the future. It could also be economically catastrophic and devalue the national currency.
The main reason is that in the modern world we use what’s called “fiat” currency, which is basically a currency based on the “trust and value” of the nations’ economic strength.
If a government “forgives” it’s debt (this is actually called Defaulting in the economic world and is very very bad. A normal person defaulting on a debt is called bankruptcy usually) then that trust and value of the economic strength of the nation as a whole tanks.
Which means you can say good bye to the value of its currency and you get rampant inflation that can’t be controlled.
Needless to say, it’s something they try to avoid.
First, a good chunk kof that internal debt is what the government owns to it’s own citizens. So unless every retiree decides to not cash in a SS check
Secondly, the government isn’t so much a monolith as much as a collection of institutions and councils. You can alive this a little bit with some internal shuffling, but it has to be done in such a way that no one is left holding the bag at the end
Third, some of it just interest
Because it would cause riots.
Much of that debt is to American citizens who have bought bonds that are waiting to be paid back on. Refusing to pay that back would be an epic shit show.
There are too many wrong answers. Here is the simple ELI5:
The US doesn’t “print” money by borrowing from itself to pay for things. Internal debt is money that is borrowed from investors to pay for things when there isn’t enough tax revenue. You probably know that at a low enough interest rate, borrowing can be preferable to paying for something up front. The US has the best credit in the world, so it gets the best rates in the world.
If I borrow money from you, sure, I can get away with not paying you back. If I do that, you either aren’t going to loan me money again or if you do, you will ask for something extra (much higher interest) to overcome your mistrust of me.
Higher rates are obviously bad for taxpayers but that’s just the tip of the iceberg. It affects investor behavior and the entire economy. This has happened several times because people politicians are slow learn their lessons. 100% of the time, government default has *immediately* destroyed the nation’s economy.
it can if it prints money but inflation is kept in check by high foreign demand for its currency. This is why US still has world’s top economy still, & why American politicians could care less about austerity or balancing the budget
The question I think you’re really asking is why can’t a government make more money to end its debt.
It can, but it will have the effect of making the money worth a lot less if worth anything at all.
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