[Fourth article in a series. Here are links to the first, second, and third.]
Portions of the national debt are maturing all the time—and the US Treasury is paying it back all the time. This animated graphic shows how the process works.
The process is called debt rollover; it’s a financial practice that is legal, sound, and commonplace. Individuals do it, small businesses do it, corporations do it, state and city governments do it. Should it be a big surprise that the federal government does it, too?
I for one don’t think it should be—but the way some politicians talk, it’s as if they’ve never heard of the debt rollover process. Why else would they always be wondering, in their speeches, how our grandkids will ever “pay back the debt”? If they understood debt rollover, they’d understand that if our economy continues growing at a sufficient pace, our grandkids will never have to pay it back. Never. Nor will our grandkids’ grandkids, either. (Feel free to extend that out as many generations as you want, by the way.)
Any politician or journalist who asserts that our children and grandchildren will have to “pay back” the debt has an obligation to explain why (and when) debt rollover will become impossible for those future generations. Based on those politicians’ and journalists’ track record, I confidently predict that they will ignore the question—because either (a) they don’t understand it, or (b) they do understand it, but think we’re too dumb to get it. However, in the happy event that I am wrong about that, I promise I will be listening intently to their explanation. I will also be preparing some follow-up questions for them.
In any case, next time you hear somebody wondering how our grandchildren will pay back all the debt they’ll inherit from us, do like I do; ask “Why couldn’t they keep rolling it over?”
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UPDATE: Here are links to all six articles in this series:
1 - Money:
The economy’s lubrication
2 - Two
Printing Presses: One at the Fed, One at the Treasury
3 - How the
Fed creates money without creating socialism
4 - How the
US Treasury pays back the debt
5 - The
public’s T-bond supply
6 - Paying
down the debt: Our dubious history, and a startling conclusion
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