General Question

SquirrelEStuff's avatar

If we paid off the $10 trillion national debt, would there be no more money left?

Asked by SquirrelEStuff (9835points) October 5th, 2008

What happens if we have 0 national debt? Who do we owe the national debt to?

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6 Answers

willbrawn's avatar

you know i really dont know, my question is how do we just make money? why can the government just create money out of thin air? Dosent that make the US dollar worth less. Stupid government and rich people.

zippy91's avatar

The national debt is largely in the form of Treasury Securities (bonds that are issued by the Treasury Deptment and sold for cash. This cash is used to finance the operations of the US Gov’t). See here for a breakdown of who holds these securities.

So, yes, the government can just create money out of thin air, but the difference between this process and literally printing cash is that here the government has promised to buy back the bonds that are being issued. (That’s how a bond works.) When governments just print cash, that can lead to lots of problems, but this process of bond issuance has proved relatively safe (so far) since everyone believes that the gov’t will indeed pay back the money it’s borrowed.

If we were to pay off the debt, that would be great. We’d do so by collecting more taxes (or selling gov’t owned assets) than are necessary to operate the government and use the extra to pay back this debt.

tekn0lust's avatar

Here is a fantastic crash course on how money is created. It’s probably one of the simplest yet most difficult processes on the planet to understand.

fireside's avatar

Here is a great article on how the deficit effects our relations with China

A good site with up to date stats

lifeflame's avatar

I just saw a brillant video here that suggests that actually, if we pay off the national debt, we will actually have no money in circulation. The economy currently is supported by debt, because banks are creating money every time they loan out to people:

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