STK1200
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| U.S. Debt |
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Why won't the United States ever have to repay its debts?
I just cannot understand this.
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Mon Mar 28, 2011 11:38 pm |
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oldguy
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The governments of the 190 nations of the world each have the responsibility to build and maintain a monetary system. Each country has a Central Bank that is in charge of distributing the currency to the populus to be used as a method of internal trade. The currency is fiat money - ie, it is worth what that government dictates. In most nations the villages, towns, counties, districts, burroughs, states, must maintain financial accounting to the national gov't, ie they must repay their debts. But the national gov't is the lender of last resort - if the nation cannot repay a debt via production/sale of goods (usually due to war, famine, disaster), they must print more fiat money to facilitate commerce within the nation. The newly printed money makes the nations currency less valuable - that is inflation.
Most nations resist de-valueing their currency because the populus dislikes inflation, and because the nation appears weaker to other nations. So they tend to carry national debt on the books as long as practical, hoping for boom that will repay it.
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Tue Mar 29, 2011 12:38 am |
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coaster
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| Re: U.S. Debt |
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quote:
Originally posted by STK1200
Why won't the United States ever have to repay its debts?
I just cannot understand this.
Where did you get this idea?
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Tue Mar 29, 2011 5:44 am |
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STK1200
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| Re: U.S. Debt |
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quote:
Originally posted by coaster
quote:
Originally posted by STK1200
Why won't the United States ever have to repay its debts?
I just cannot understand this.
Where did you get this idea?
It seems that it would be impossible. Is the assumption that they will not have to repay incorrect?
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Tue Mar 29, 2011 5:45 pm |
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STK1200
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| Re: U.S. Debt |
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Sorry about the double post.
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Tue Mar 29, 2011 5:47 pm |
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littleroc02us
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The U.S. will never be able to do it, they are living off a credit card. It hasn't happened yet, with all these CHANGE platforms.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Tue Mar 29, 2011 7:42 pm |
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STK1200
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That is what I am asking. Why won't they have to? Or what will happen?
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Tue Mar 29, 2011 9:34 pm |
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coaster
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Your assumption that it's a given isn't justified.
Do you wish to rephrase your question as a hypothetical?
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Wed Mar 30, 2011 6:55 am |
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RichS
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Where did you get the idea that the US won't have to repay it's debts? 
Rich CFP(r)
Writer/Publisher/Speaker
Author "Your In Simple Language Guide to Basic Investments"
www.insimplelanguage.com
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Wed Mar 30, 2011 8:28 pm |
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littleroc02us
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quote:
Originally posted by RichS
Where did you get the idea that the US won't have to repay it's debts?
Has it up to this point? I haven't seen it in my lifetime. Aren't we like 14 trillion dollars in debt?
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Thu Mar 31, 2011 1:47 pm |
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RichS
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The United States has been paying interest ( part of our huge debt) to all the foreign governments that own our US Treasury bonds, notes, and bills since these financial instruments have been in existence.
China gets an interest check from us on a regular basis. So do a lot more countries. The problem is we keep borrowing more and more and the amount of the interest payments keeps getting higher and higher. But the US is still paying on their financial treasury bonds, notes, and bills to everyone, including foreign countries.
If the US didn't honor these financial debt instruments then we would go into default and bring the world economy to its knees. What else they are paying on, if anything, only they know.
Rich CFP(r)
Writer/Publisher/Speaker
Author "Your In Simple Language Guide to Basic Investments"
www.insimplelanguage.com
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Thu Mar 31, 2011 2:14 pm |
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littleroc02us
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So, it's kind of like having a high balance on a credit card (X's 1,000,000) and only paying the interest? Funny stuff. Sorry scary stuff!
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Thu Mar 31, 2011 2:23 pm |
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STK1200
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Thanks for the answers everyone. From what I understand, the U.S. government is just putting out new T-Bills in order to pay the interest on older ones. What will happen when investors start going to other countries for bonds?
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Fri Apr 01, 2011 1:10 am |
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coaster
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Investors have been going to other countries for bonds for hundreds of years.
Governments have been buying and selling each other's bonds for hundreds of years.
STK1200, I think that from your questions and your assumptions, you know next to nothing about bonds. That's not to belittle you yourself in the least. But a person's knowledge aquired on a topic needs to start at the bottom and work up in steps, lest you gain a faulty understanding of the topic. I hope this series of articles from Morningstar's online investing classes help:
http://news.morningstar.com/classroom2/home.asp?colId=167&CN=COM
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Fri Apr 01, 2011 6:43 am |
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shanecurran
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Too much debt can be a problem, for both individuals and countries.
The reason we have debt is so that we can have a higher standard of living. Imagine a world where you are unable to borrow money. Most of us would not be able to buy a car. Buying a house would be something only the super rich could afford. Want to start a small business? Next to impossible. Having credit available is essential for an economy to prosper. The same is true of governments, we need to borrow money in certain times to get things done. The problems arise when we are forced to take on more debt than we can afford. RichS makes the most important point: The service of our debt (interest payments) by and in large is going to other countries and that outflow of money could hurt us in the long run.
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Fri Apr 01, 2011 8:00 pm |
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