The national debt surpassed a record $39 trillion on Wednesday, a milestone that comes just weeks into the U.S.-Israeli war in Iran.
The unprecedented figure highlights competing administration priorities, from passing a massive tax law and boosting defense spending and immigration enforcement to chipping away at the debt itself — the latter of which Donald Trump promised to do as both a candidate and as president.
Why do people keep lending to them when the total loss of value is the most likely outcome?
Because the US is still the most trustworthy of the main currencies, like the Dutch we’ve never missed a payment. All other currencies are kind of tethered to the dollar in some ways.
Because goverment debt isn’t like household debt. They don’t go to the Bank of China or the Bank af America and apply for a few billion! The fed issues securities - fixed yield, fixed term bonds. Anybody is free to buy these securities and hence, the biggest holder of US gov debt is the US people, through investment funds, pensions and personal holdings. The fed promises to pay the holder the value of the security after the fixed term expires, as well as small dividend payments for the duration of the term. As the fed prints the money used to pay the bond, they are seen as a safe investment, a hedge against more volotile financial instruments.
As the other reply stated, gov debt isn’t necessarily detrimental, it’s an important tool for regulating the economy. If a government ‘borrows’ 5 billion but grows the economy by 7 billion, that’s sound economics.
When is the last time the US borrowed money to make or save money? Not in our lifetimes to any major degree. We are borrowing to pay expenses, to give tax breaks, to subsidize mega corporations.
Borrowing to make an interstate freight and passenger rail, roads that don’t have to be rebuilt, infrastructure that lasts, that would pay for itself. We are doing none of that. If anyone thinks we are to any large degree, check your sources for credibility.
Because so far the fed has remained independent, and national debt matters far less than most people think it does. Take a look at Japan - theoretically in debt WAY over their head, but the Bank of Japan is actually trillions of yen in the black and mostly invested in the Japanese economy, getting yields of 6-7% on their holdings far above their debt service. Their pension fund is a majority stakeholder in basically all internal infrastructure, and despite stagnant “growth”, Japan’s real wage growth is like 4-5% YOY.
As with anything economics, a single metric usually tells a bad story. Whether we like it or not, the US economy is pretty robust and even a moron like Trump can’t really kill it totally in 4 years without messing with the currency directly. The downfall will be long and drawn out.
Isn’t the whole fact Japan’s basically had a 0% interest rate been a massive bandaid on the global economy and with them actually removing that quickly fucking everything.
Uh, vaguely, yes. They’re essentially pinned to 0% because they need to get their inflation up, but that’s not really caused by their national debt. They’re definitely not in an enviable position overall, but their 260%+ debt:gdp ratio isn’t really why.
How did you get the impression that default is the most likely outcome? Borrowing costs for the US are likely to rise, but there isn’t any particular reason to expect outright default.
Because up until very recently that hasn’t been the most likely outcome. In fact, that change is so recent a lot of people still haven’t realized it yet.