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US debt interest payments surge past $1 trillion yearly pace, worsening concerns about massive borrowing
(markets.businessinsider.com)
this post was submitted on 14 Nov 2023
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The US itself owns 38% of the debt, and private US investors own another 38% So, 76% of that trillion either goes back to the Treasury Department or remains in US circulation for further investment. Which is the rest of the story.
You have to keep in mind that borrowing money from the Treasury but then not paying it back is also known as "printing money", and is one of the single most direct drivers of inflation that exists.
If you borrow ten billion dollars but then pay it back (with interest matching the inflation rate), then the net amount of currency in circulation is essentially the same. If you just print that money instead and never pay it back, then you have ten billion more dollars in circulation representing the same collective economy, meaning that every dollar must be worth less.
And refusing to pay back loans from private US investors would immediately tank the government's credit worthiness, making it much more expensive for the government to ever borrow money again and thus causing a substantially bigger problem.
It is always paid back. Not paying it back would be a default.
What is actually going on is that the government currently has a surplus in the fund responsible for Social Security benefits. A few decades ago there was a debate about what to do with the surplus. Some people suggested investing it in the stock market, but the public was overwhelmingly against that idea. Yet leaving it in a non-interest bearing account also seemed foolish. So the money was used to buy government bonds.
The government is literally paying interest to itself. That may sound pointless, but it's a natural consequence of using dedicated funds to pay for projects like Social Security.
Yes, printing money and inflation is good for the ruling class.
It's how they convince people everything is fine while taking them for a ride. Raising taxes on the wealthy impacts their wealth. Printing money impacts the wealth of the working class.
Once it's too late, they leave the country with their wealth and we have to deal with the aftermath.
Inflation directly erodes wealth, so the wealthy hate it more than most people. If you had a million dollars in the bank, would you rather be able to buy 300,000 gallons of gasoline or 200,000 gallons?
Inflation also makes businesses less efficient and reduces profits, so investors hate it more than noninvestors.
However, fighting inflation often causes unemployment, so working people are generally more resistant to inflation than those who don't work (particularly if inflation is accompanied by wage increases). During the last round of inflation, the Fed literally said they wanted to increase unemployment.
Wrong. The wealthy like inflation because they get to raise prices to outpace wages.
It's how they recoup any gains the working class has made, with interest.
When inflation goes unchecked, as it has in many other countries, wages go up at the same rate as prices. Unchecked inflation means everything goes up at once. Even here, wages have been going up.
You are confusing the cure and disease. If wages increase more slowly than inflation, it's because there are policies aimed at keeping them down. Those policies are an attempt to control inflation throughout the economy.
Finally, inflation doesn't "let" anyone raise prices, it's a measure of how much they have already raised prices. And it doesn't "recoup" anything, because investors care about inflation-adjusted gains not nominal gains.
Treasury buys 11% of debt. The US Government owns 27%. When the government borrows money it uses a vehicle like a bond. When it pays interest, it all goes to Treasury. So, actually the government is borrowing money from all the bond holders and creating debt by expenditures paid from Treasury and when it pays interest that also goes to Treasury. But, only 11% of debt is held by Treasury so in the scope of things there is not much borrowing going on with Treasury. But, they do see interest as a book transfer