I just don\'t understand public debt!
 

Why can't we just stop paying the debt (currently like $8 trillion, 67% of GDP)? Would somebody declare war on us or would the government just spontaneously implode? Will the debt EVER be paid off, like in the lifetime of the USA? Can the debt holders demand for all $8 trillion in debt to be called in? What happens if they do that and we don't have the money?

Re: I just don\'t understand public debt!
 

http://www.haowen.net/chenggong/Inte...ting_money.jpg

OR

http://www1.istockphoto.com/file_thu...flower_pot.jpg

perhaps?

Re: I just don\'t understand public debt!
 

[ QUOTE ]
Why can't we just stop paying the debt (currently like $8 trillion, 67% of GDP)? Would somebody declare war on us or would the government just spontaneously implode? Will the debt EVER be paid off, like in the lifetime of the USA? Can the debt holders demand for all $8 trillion in debt to be called in? What happens if they do that and we don't have the money?

[/ QUOTE ]

As someone else also pointed out, the US Government effectively control the currency the debt is denominated in, there's no real reason not to pay the debt. That does not mean they cannot default on the debt, but that would force the government to fund all government spending internally going forward, which, given our budget outlook, would be extremely inflationary. Oh yeah and just about every major bank in the world would go down and the entire global economy would freeze.

Re: I just don\'t understand public debt!
 

[ QUOTE ]
Why can't we just stop paying the debt (currently like $8 trillion, 67% of GDP)? Would somebody declare war on us or would the government just spontaneously implode? Will the debt EVER be paid off, like in the lifetime of the USA? Can the debt holders demand for all $8 trillion in debt to be called in? What happens if they do that and we don't have the money?

[/ QUOTE ]

1. Inflation will run rampant. The prurchasing power of the dollar would decline, especially for the working man and those on fixed income or social security.

2. Secondly, we would lose all credibility as a sovereign nation, and confidence in the US would decline sharply, spurring on further decline of the dollar, and chaos in the financial markets.

3. the debt may be paid off, if goverment spending would decline, and govermment revenues could be increased. There is great political difficulty in accomplishing this though.

4. The debt can be called in if there are specific demand notes. However, the US Treasury issues trasury bills constatnly with various payment due dates, so that there is some sort of order. If the goverment can't pay it off, then they print more money.

Understand it now?