USA national debt

[inbetween]

Is apparently at 22 trillion?

Can someone explain to me?

Who do they owe it too?

Will they ever pay it back?

Is it a worry?

Is capitalism just a game of printing money?

And can a mod please move to off topic?

They owe it in terms of bonds etc that get put out to investors to raise money, IE, they put a bond out for say $1 and then expect to repay $1.05, multiply this by tens of billions of course and there is your debt.

The reason for printing money is purely because balance sheets were wiped out in 2008. Banks need money to lend and if banks don't lend then businesses don't grow meaning the economy shrinks. Banks get money from central banks at a national interest rate.

There isn't a reason to pay off the debt 100% providing it remains sustainable and the growth of it is stable. There will always be a degree of necessary borrowing.

Here we have imposed austerity to control the growth of the debt, primarily because the economy is growing far slower than the rate of increase in borrowing. The US economy in contrast is growing far quicker so they can afford it.

 

[Magicpole]

They won't pay you, short arms, deep pockets and all that.

You’ve met them then?

 

[Henkeman]

You’ve met them then?

We've all met them mate. Funny accents and ginger hair.

 

[Tuearts right boot]

Tax cuts don't increase debt. Out of control spending by the U.S. Congress is what is driving the debt.

Sovereign or national debt is made up of two parts.
1. Debt owed held by the public. The public are those that purchase it's bonds, domestic and foreign purchasers.

2.intragovernmental debt or debt it owes to other government departments. For example, the U.S. government is raiding American citizens Social Security retirement accounts for funds. SS retirement has been paid for by taxes from American's pay cheques. Supposedly, it would be paid by with interest upon retirement in monthly payments. The money will soon run out because the government has been stealing it to fund other things.

Sounds like a glorified Ponzi scheme

 

[Magicpole]

We've all met them mate. Funny accents and ginger hair.

Great accents and no ginger hair.

 

[ChicagoBlue]

Not sure how one would attack nor defend an argument like "the entire tax code is pretty much a scam." I can understand how one would feel like that though.

Mutual funds and private pension funds -- designed by their nature to support the financial goals and retirement of average Joes -- own as much in Treasuries combined as the Fed does ($2.5 trillion or so). That doesn't include another $1 trillion in state and local government pensions which support the police, fire departments, social workers, clerks, etc. In fact, private American investors who own the debt directly amount to about 4% of it, or under $1 trillion. So the reality probably is that the financial fate of Treasuries has more impact on the average Joe than the super-rich.

Simply a function of target date funds and broad diversification across tons of millions of holders of those funds...as opposed to thousands of über rich protecting their wealth. 4% of a big number is a big number, especially in so few hands.

Good try, though.

 

[ChicagoBlue]

The reason the US can run such a high debt as a proportion of GDP is because the US dollar is the global reserve currency, and therefore in extremely high demand. Other countries couldn't run it at that level, they would have to get it down. France is more or less in that position currently.

It's not inherently bad. You can finance long term bonds more cheaply than anything else, countries can quite literally make money on them as inflation erodes the cost of the debt. It is to a fair extent free money, which is why just looking at the total can be a bit misleading. To take a simplistic example, if someone loans you £500 at 20% interest over one month (Greece = Wonga) that's far more expensive than someone loaning you £10,000 at 0.5% interest over 50 years (the USA, or indeed the UK). The latter you'll grab because you're going to make a profit on it.

That's essentially why the UK took two and a half centuries to pay off some of the South Sea Bubble debt, and 60 years to pay off the US loans from WWII debt - it made no financial sense to clear them off when they were so cheap and so low.

See the link I posted and look at the UK and Ireland. Report back.

 

[Henkeman]

See the link I posted and look at the UK and Ireland. Report back.

You could always actually reply if there's something you take issue with.

 

[ChicagoBlue]

Another thing to note is the decimation of US interest rates over the last 30 years or more, which has made national debt so inexpensive. With Treasuries running so low, it is extraordinarily inexpensive. I was on the BOD of a bank until recently and we were still brining in dividends from 7% Treasuries from back in the day (decades ago), while paying out about 1% on deposits. Now, it wasn’t a huge part of the investment portfolio, but it helped goose the investment income which was also being pummeled by considerably more 0.6% Certificates of Deposit!

https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart

http://www.multpl.com/30-year-treasury-rate/

Accordingly, long term US Treasury debt has been becoming cheaper and cheaper. Whether that is a good thing for the US borrowing mentality is a judgment call, of course.

 

[ChicagoBlue]

You could always actually reply if there's something you take issue with.

The level of debt to gdp of both the UK and Ireland is considerably higher than the USA. I thought seeing it for yourself from a printed source would make more sense than me simply telling you, and that you might want to correct your initial comments.

Not a big deal.