U.S. Government shuts down.

[eppie]

Thanks for the explanation.

What are you referring to when you say "pay that back"? You don't have to pay back printed money, although you do have to accept it as payment for taxes.

I was talking about the national debt. It is true that this increasing enormously and is a very big number now right?

If you're referring to the debt, that's a different issue. The US debt has to be paid back on its schedule - bonds come due, and they are paid. Most of those bills are 1-year obligations, but some are 3, 5, 10 or 30 year. The average maturity for a US bond is about 5 years, up by almost a year since the crisis.

Most of the debt, however, is "rolled over" - that is to say, an equal number of new 1-year bonds are sold to replace the old ones cashed in (plus some new ones to cover the deficit). That way, the "quantity" of the debt stays close to the same, although the interest paid might change.

Yes but the amount of debt is changing right? And there again is a ceiling reached at the end of this month right?

Each year, new debt has to be financed at the market rate. Right now, that rate is hilariously cheap. (Yes, that's right, the government can borrow money for 1 year at an interest rate of 1/10th of a % interest. That is not a typo.)

I know, the germans have received interest when putting out loans (even the dutch for a few weeks earlier this year if I'm correct, because it was the safest thing to do with your money at the time.

The nightmare scenario that Kandrathe describes, wherein interest rates rise, is mostly about refinancing this rolled-over debt. During the crisis, this has worked in favour of the government budget, lowering borrowing costs on short-term debt to practically zero. But if it were to ever go up sharply, in response to inflation, economic growth, or the threat of default, it might require extra taxation to finance. I don't think this is a big problem, but it apparently keeps some people up at night.

-Jester

And this is where my question is really about. Why do you think it is not a real problem? Huge debt and printing of money will eventually lead to inflation right? And it also hopefully leads to a better economy and both things will give higher interest rates.