Or does the government already do this? If so, can anyone explain like I’m five?

  • Sonori
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    10 months ago

    About 22 percent of the US government’s national dept is money one department of the government owes another part.

    Offhand, the majority of the government dept is in government lines and bonds. While the government can buy back its own bonds, people tend not to sell said bonds for less than their worth and so you would need more money than what it takes to just pay off the bond. Moreover, said bonds are generally low interest, and so often get smaller with inflation.

    In addition, most banks, mutual funds, hedge funds, large corporations, etc… tend to have rules that say that there is only so much financial risk they can be exposed to, so if they want to make a high risk high reward bet, they need to have a certain amount of low risk of investments aswell. Government bonds are seen as about the lowest risk investments possible, and so can often be more valuable than just the money the bond itself is actually for when used as the bedrock upon which the modern risk based US financial system is built on.

    Given that bonds have an limited lifespan, it’s almost always cheaper for the government to let it time out then to buy it back.

    Similarly, a not insignificant part of it is in pentions. Basically when you work for the government your paycheck says you get X part of your pay now, and Y when you retire. The idea is that no matter how bad you are at managing money or if you get a bunch of medical dept or such, you have a guaranteed retirement fund. Meanwhile, from the governments perspective, thanks to inflation Y is going to be worth a lot less real money when you take it out then if they gave it to you now. Y is dept, and since the government employs a lot of people, Y is actually quite a lot of dept.