The U.S. National Debt: What is it, where did it come from, and how does it work?
"It is measured in US dollars.  The US cannot just print the money because that would cause inflation.  Remember that money is really just a convenient placeholder for the barter system.  Creating more money regardless of whether there is more value in the economy (work, resources, etc.) is a very bad idea, and doing so has collapsed the economies of many countries. Debt increasing means that the US owes other countries more money.  So yes, they are receiving more money from other countries, but the US has to pay it all back with interest eventually. The US government spends more money than it receives in taxes.  To decrease the debt, spending needs to decrease and/or taxes need to increase. Many countries lend to the US.  One of the biggest is China.  These countries do so because of interest -- the US pays back more money than it gets lent, so the lending countries make a profit. If China suddenly called in all its debt to the US, this would severely damage the world economy.  China's biggest trading partner is the US, so it has no interest in harming the US this way; it would harm itself.  Additionally, the US would probably refuse to pay it (not to mention that it can't), and then China would lose all the money it ""invested"" in the US.  It would benefit no one." "For political reasons, almost all governments (including the US) spend more money than they get from taxes etc.  There are a number of things a government can do to cover the difference: Most governments opt for selling bonds.  The ""National Debt"" of a country can be thought of as being the sum of all the ""Bonds"" that are still paying interest, and that the Government hasn't Redeemed. It can all go horribly wrong.  If the Government gets into a situation where it cannot pay the interest, or it cannot Redeem the Bonds it has promised to, then it may have to break its promise (""Default"" on its payments).  This makes the owners of the Bonds unhappy and means potential buyers of future Bond sales are less likely to want to buy the Governments new Bonds - effectively meaning the Government has to promise to pay more interest in the future.  Recent examples of this include Argentina; and may include Greece soon. The US is in the fortunate position that not many people believe it will Default.  Therefore the new Bonds it sells (which it does on a regular basis) are still in demand, even though its interest payments, and promises to Redeem Bonds are huge."
"Well, the one variable you're forgetting is that we didn't have as much debt hanging over our heads as we do now. As I understand it, maintaining that conflict cost so much money, we're still paying for it today, the better part of a century later. Are you sure that the Federal government should undertake that level of spending again as the Fed is poised to raise rates, reversing a decades long trend of cheap borrowing?  Edit: typo, added ""sure""" It's misleading news. Comparing debt levels in nominal terms is completely pointless over a period of more than a few months.  The article you responded to quite literally quoted extracts from the article you subsequently posted and explained why they were misleading or incorrect. "What a great explanation! I was familiar with many of the concepts, but I've learnt quite a lot. Do you happen to know any sources for further reading that are just as understandable to a non-economist? And/Or would you mind continuing / expanding this into whichever direction you find worth exploring? I would love to see this explanation ""connected"" to the debt crisis and how/why the US and europe seem to be in different situations there. Maybe that would be too complex to explain in more detail using your model, but maybe it is possible..?" Every year stories like this come out. Every year the US does not default on its debt. We all should know by now that the US, as a financially sovereign nation that issues its own currency, cannot default on its debt. This fearmongering is just a click-baity waste of time, and yes, a waste of money. So much spin with you.  Kenyes wrote explicitly about deficit spending, and the repayment of those deficits.  The denomination of the currency, floating or otherwise, is besides the point.  Again, you just want to model away the burden and risk of debt.  It's never worked, and it never will. "I'm surprised people don't bring this up more often....if you add together, not just our sovereign debt, but public and private debt, plus our contingent liabilities, meaning FHA, student loans, fannie mae, freddie mac, AIG, etc.  that totals over $100 TRILLION dollars, more than we could ever pay back, meaning literally there is no amount of growth and taxes that could ever pay this money back. (cite my sources do a google search of James Rickards Hopkins lecture it's in the first few minutes)  The reason you need to add all that together is because the economy can't grow if nobody has any money for investment, etc. (there isn't much home equity left after the housing crisis, retirement plans aren't holding as much, etc.) there wouldn't be an easy way to grow this economy, that's why we have ""currency wars"" competitive devaluations....to me we're already over the cliff I don't see us heading back, but I'm not saying that means we're going to collapse, just we'll need to go back to some sort of standard where our currency is backed by something (i.e. commodities or gold or something) and there are going to be A LOT of losses in the near term....meaning I want OUT of dollars....  combined with our lazy/entitled generation (don't tell me creating some website where you can order artistic candy on a stick is going to save our economy...we need to produce and innovate again to lower our trade deficit and so people actually bring their capital here), and dwindling resources I'd say it's already game over, the pieces just need to move into place" The debt is absolutely real. China loans money to US via buying the US treasury bonds. The bond is essentially a promise to pay back the money with interest, just like a loan. As you point out, the US can print money. If this were to happen, then the USD that the owner of a treasury bond receives when the bond matures are worth less that than the USD used to purchase the bonds. There are lots of reasons why the US doesn't want to print lots of money, so the purchaser of the bond is probably confident it won't happen. If for some reason they think it is possible, then they will want to cover that risk by only purchasing bonds that have a higher interest rate. The higher interest offsets the risk of the USD being worth less. Of course, there are lots more details, e.g., the bonds themselves are bought and sold before maturity, but this is the basic idea. "I think a big part of the issue is ignorance. For instance, the US govt cannot default on its loans, yet you keep hearing people speak as if it could. The US govt also does not have to borrow to pay for anything, it creates its own money whenever it wants. These 2 facts often evade many people, and they feel the US govt should act like a household, business, or a state govt. This disconnect leads to a lot of confusion, and things like ""fiscal crisis"". Just remember Rahm Emanuel - don't let a crisis go to waste.  Disclaimer: this is not to say the US should create money whenever it wants without thought. However, the simple fact is it can. For those interested in more, check out Modern Monetary Theory (MMT). Its economic study in a world not based on gold standard, or convertible currency (fiat currency)." It's a persistent myth that the US has any trouble whatsoever selling its debt. No country with it's own fiat currency has trouble selling debt.  Of course there is a limit to it and that limit comes in the form of inflation via currency weakness. The dollar is, in fact, still near historic highs even though it has come down some recently.  I would not be the slightest bit concerned until the DXY is down in the 70s. "&gt; but the other countries are just decline stage.  I think you have a typo. Could you please explain what you mean?  If I understand correctly, you are saying that the US produces ""value"" and other countries do not. As the US has tended to run a high deficit since the Reagan era (i.e. it increases its debt every year) this seems a contentious statement." The higher the debt, the higher inflation needs to be to wash the debt away.  This is why the debt and US equities move upward hand in hand. The same goes for US housing. Just as homeowners borrow money through mortgages so that house prices rise, the banks borrow the money for mortgages through the central banks. Thus, the cycle circulates. The more debt, the higher the prices!  Everybody makes money from debt. That is why the US has the highest external debt on the globe, yet they are considered one of the wealthiest countries in the world. I still don't fully understand how gold is debt. I get that you made the connection that gold is money, and previously explained how money is debt. But that doesn't make gold debt.  Gold is a commodity just as oil, apples, deer, shoes, etc. It might not provide any utility, but is still something people have come to value in and of itself. &gt; Your question is expressed as a run-on sentence, which I'm having trouble parsing. Maybe you could restate.  The one in the title? If yes, here it is restated:  *As I currently understand, we owe much of our national debt to ourselves. The reason for this is that people are being charged interest that does not exist in the system. Therefore, if we tried to pay the debt (like some conservative politicians are fighting for) it would be a massive transfer of wealth from the 99% to the 1%, since most of the debt is owed to the 1% (banks).*  So I was wondering if this conclusion/summary/understanding is flawed in some way. &gt;The US government debt is how much USD the government has paid the US non-government in excess of what it's taxed them. Correct?  Incorrect.  The US debt/savings is the balance of credit the US government maintains with US banks, and foreign sovereigns/banks.  Why do you need to say it another way?    WTF is 'non-government' savings?  Other than an academically retarded way of saying  'debt' of course?  Its not a bad thing...  unless interest rates rise.  But this time is different, so that'll never happen.  I'm sticking to my initial assessment.  Fairyland. Your score is real-time, updating every time new data hits the reporting agencies. Dilip is correct, go over 20%, and it will hit the report, but then the score returns to normal after the next bill shows a sub-20% utilization.  Say your average spending is $1000, but your limit is $5000. There's no harm in asking for a small increase in the limit, or simply pay a bit toward the bill before the statement is cut. The bill and reported balance will be lower and your score, unaffected.