Is the US capable of paying off the National Debt?

[Mosheh Thezion]

You forget the Government can if it wishes to, borrow from the Fed at a negative interest rate.

negative interest rate??

please explain.

-MEMAT

 

[idiom]

Each period the amount you owe goes down instead of up.

 

[Mosheh Thezion]

Each period the amount you owe goes down instead of up.

THAT sounds very nice... so please.. expalin further.. if this this possible, then, why not make it permanent... eh?

-MEMAT

 

[jclay2]

If the United States stopped all excessive spending and sold off government assets, we would be able to. However, all the politicians plan on doing is digging a deeper hole that will only be avoidable by a ton of pain.

 

[idiom]

THAT sounds very nice... so please.. expalin further.. if this this possible, then, why not make it permanent... eh?

-MEMAT

Long term its hard to get people to lend you money if you promise to pay back less.

Recently however T-Bills went negative for a bit.

Real negative interest rates happen every so often when inflation is occuring too rapidly.

You can do whatever you want to the economic system, you just have to sell it. It may lead to ruin but if you can sell it, for eighty years or so everyone thinks you're a genius.

 

[Zippyjuan]

You forget the Government can if it wishes to, borrow from the Fed at a negative interest rate.

The government does not borrow from the Fed.

 

[torchbearer]

The government does not borrow from the Fed.

The Fed buys U.S. government Bonds because no one else will. The government thus borrows from the Fed.

 

[Zippyjuan]

The Fed buys their holdings, including bonds and Treasury securities, on the open market from people already owning them- not direct from the government. The government is not borrowing from the Fed. The Fed only holds a very small percent of all the outstanding bonds and securities. As of May 13th of this year they had a total of about $1 trillion in securities- with over $400 billion of those in mortgage backed securities which leaves about $600 billion in government securities ($577 billion in Treasuries)while the government debt is over $10 trillon. (see section #9 here
http://www.federalreserve.gov/releases/h41/Current/

 

[Harris4LarouchePAC]

Anyone who selected Yes is a complete and mortal .... Declaration of Bankruptcy and reorganization of the physical economy is the only solution.

 

[torchbearer]

The Fed buys their holdings, including bonds and Treasury securities, on the open market from people already holding them- not direct from the government. The government is not borrowing from the Fed. The Fed only holds a very small percent of all the outstanding bonds and securities.

The fed hold U.S. Bonds/Debt, Yes or No?


If Yes- then the U.S. government owes the fed for money it borrowed.

 

[Zippyjuan]

The quote was

Originally Posted by idiom
You forget the Government can if it wishes to, borrow from the Fed at a negative interest rate

You are technically correct that the Fed does own some government debt but they do not have it because the government wants to borrow from the Fed nor did they aquire those debt instruments from the US government. Social Security and the Department of Defence also hold Treasury securities and government bonds as do other government agencies- much more than the Fed does. Including the Fed, government agencies hold $4.8 trillion of the US debt so the Fed only has twelve percent of the government held debt. State and local governments hold about as much as the Fed does. China and Japan each own more than the Fed does. http://www.stockwire.com/content/view/1439/238/

 

[torchbearer]

The quote was

You are technically correct that the Fed does own some government debt but they do not have it because the government wants to borrow from the Fed nor did they aquire those debt instruments from the US government. Social Security and the Department of Defence also hold Treasury securities and government bonds as do other government agencies- much more than the Fed does. Including the Fed, government agencies hold $4.8 trillion of the US debt so the Fed only has twelve percent of the government held debt. State and local governments hold about as much as the Fed does. http://www.stockwire.com/content/view/1439/238/

I don't think the government cares who it borrows from as long as someone buys the bonds. If the fed will buy up bonds to help with demand or by allowing people to leave bonds, it is effecting the bond market to keep rates where they want it.

The Fed will be the lender of last resort for the government. Even if "Jp Morgan/Chase buys the bonds first then the Fed Reserve buys it from them. It is all the same people.

 

[Zippyjuan]

I don't think the government cares who it borrows from as long as someone buys the bonds..

Exactly.

 

[LibForestPaul]

If the government made a law to issue $10 trillion dollars, boom, debt paid off. The money that it issues may not be worth anything, and the debt holders might be upset that they received worthless paper, but yes, any debt can be paid off, as long as the borrower has a bigger stick then the lender.

 

[devil21]

Correct me if Im wrong, but I thought the "national debt" was one of the main gotchas to the whole Fed fiat system. It's *impossible* to pay off the debt and if it *were* to be paid off somehow, our money would cease to exist, since our money is based solely on that debt. Maybe Im confusing that with something else but that's my basic understanding of it.

 

[idiom]

Its not based on government debt. Its based on bank debt.

If all the banks repaid their debt there would be no money. But the government being in debt is seperate from that. The Fiat system requires that banks borrow, not that the government borrows.

 

[devil21]

Its not based on government debt. Its based on bank debt.

If all the banks repaid their debt there would be no money. But the government being in debt is seperate from that. The Fiat system requires that banks borrow, not that the government borrows.

Got a source that explains that and/or the differences? I was pretty sure that the national debt (currently upwards of $11trillion IIRC) was what kept the gov't afloat and therefore keeps our money afloat. If our gov't crashes, so does the dollar. Not that I doubt you, just want to read it for myself for clarification as I guess Im confusing and mixing certain things.

 

[idiom]

The $11 Trillion is accumulated deficit. It did not need to be accumulated. It is what the government spent beyond its revenues. If it kept inside its revenues then there would be no national debt.

 

[devil21]

The $11 Trillion is accumulated deficit. It did not need to be accumulated. It is what the government spent beyond its revenues. If it kept inside its revenues then there would be no national debt.

Gotcha. Seems Im mixing up two different ways to destroy the dollar. If we can't service the national debt, it destroys the dollar. If all bank loan debts were to be paid, it destroys the dollar.