408
The U.S. government is spending $88 billion a month in interest on national debt, equal to its spending on both defense and education combined (fortune.com)
submitted 7 months ago by to c/aboringdystopia@lemmy.world
42 comments fedilink hide all child comments
you are viewing a single comment's thread
view the rest of the comments
[–] 6 points 7 months ago (9 children)

Interestingly enough the country can actually make money by being in debt, as long as the interest rate is below inflation. Imagine: you owe $1000 in 2026, one year later you owe $1010 (1% interest rate) but inflation is 3% so it's only worth $980 in 2026 dollars.

Question is, what is the current interest rate that the state has to pay, and how much is the current inflation?

  • permalink
  • fedilink
  • source
  • hideshow 9 child comments
    •
  • [–] 7 points 7 months ago (4 children)

    I feel like your explanation is missing some details. Because if you owe $1010 in 2027, what good does the comparison to 2026 do you? You can't pay with last years currency...?

    I'm not disagreeing, mind you. Economics is rather arbitrary, after all. Just confused (which does not surprise me).

  • permalink
  • fedilink
  • source
  • parent
  • hideshow 4 child comments
    •
  • [–] 5 points 7 months ago* (3 children)

    There is more currency every year because of inflation, which means more available to pay back the debt which is growing slower (in this scenario). Imagine being on the other side of this, you are earning interest on your treasury bonds and planning on using it to buy gas for your car, but in 2027 can buy less gas than 2026 because you got ripped off by the government indirectly.

    One problem with this is, at some point people may realize loaning money to the government is a bad deal and stop doing it.

  • permalink
  • fedilink
  • source
  • parent
  • hideshow 3 child comments
    •
  • [–] 1 point 7 months ago* (1 child)

    One problem with this is, at some point people may realize loaning money to the government is a bad deal and stop doing it.

    People (actually, institutions) keep buying government bonds because they're typically very low-risk. So you're losing actual wealth, yes, (a small bit), but it's the safest form of carrying wealth into the future at all. Like, you could buy gas for your car for $1000 in 2026 instead, but then you risk the price of gas dropping and losing value that way too. Government bonds have a small predictable negative profit, but are virtually risk-free, which makes them attractive nevertheless.

  • permalink
  • fedilink
  • source
  • parent
  • hideshow 1 child comment
    •
  • [–] 2 points 7 months ago

    So you’re losing actual wealth, yes, (a small bit), but it’s the safest form of carrying wealth into the future at all

    That's how it has worked, but if we're talking about the government using inflation as a strategy for getting out of a debt they keep expanding at a faster rate, the assumption of a small, predictable loss won't necessarily hold. IIRC treasuries suddenly becoming a worse deal was a factor in many US banks being forced to consolidate in recent years.

  • permalink
  • fedilink
  • source
  • parent
  • [–] 2 points 7 months ago

    I got got this way with some bonds that my grandmother bought me when I was born. They were some kind of long term bonds that took a very long time to mature. I had no idea that I even had them, they were in my parents closet or something, and my parents completely forgot about them as well. I was like 35 when they gave them to me. At that point they had been fully matured for a very long time, but because of inflation, the buying power of the money earned actually made them worth less. I forget the exact numbers, but it was like:

    $100 matured to $200

    But a quick lookup with an inflation calculator, $100 from the year I was born showed that it had the same buying power as $280 now. So the $100, while going up in number, actually went down in value. Certainly better than keeping the $100 under the mattress, but that sucked.

    Oh and it was significantly more than $100. Nothing near life changing amounts of money, but probably money that I could have used earlier in my life - to help with student loans or something. When there was less inflation.

  • permalink
  • fedilink
  • source
  • parent
  • [–] 3 points 7 months ago

    You're describing this like it's a life-hack, and not the entire reasons major economies moved away from the gold standard. To be able to take on debt "for free"

  • permalink
  • fedilink
  • source
  • parent