Beforet his war started there was a little discussion about it costing so much that the US couldn’t pay for their bonds. Is this possible & what happens to bond owners if the US can’t pay them??
I think we’d just raise taxes or reduce spending elsewhere. I’m not an expert on this, but I think the markets really need some government debt because the riskless asset is a pricing benchmark–it tells us what the cash now vs. cash later is really worth in the market, then risk adjustments can be added on. If the federal gov’t. defaulted, then we’d be in a right mess.
I would enjoy reading the thoughts of someone more knowledgeable than me on this.
YOu mean that gasp, Foreigners don’t own much of our debt. It’s certainly not all owed to ourselves.
To pay off the debt, we’d have to increase taxes for a period of time(which is the opposite of what is gonna happen in the next year or two, due to politics). The other way to pay off the debt would be to lower expenses rather dramatically, while holding income the same. But you can’t dramatically reduce expenses when they involve entitlements, defense, etc. It just, can’t, happen.
Yes, you could pay off the debt. But it would take more than a short time frame. It would probably take a national emergency, the like of which we haven’t seen since the self-sacrifice of WWII.
In order for any decent ROI, the interest rate and compounding would have to exceed the annual inflation rate, economic growth rate and government expansion rate.
And where would the US Government invest that cool million? No bank or investment house would touch it. There is only one entity that would. Only the government itself would have the capability.
