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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
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[–] 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.

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  • [–] 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.

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  • [–] 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.

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