Re:US debt: Federal interest payments could soon exceed mili...
by Ergo19 on Wednesday November 02, 2022 @10:33AM
(#33436454)
The fed is not a part of the US Government financially. When the fed receives cash, it is destroyed. It does not go back into treasury coffers.
Re:US debt: Federal interest payments could soon exceed mili...
by cs702 on Wednesday November 02, 2022 @10:43AM
(#33436633)
Cash received in the form of interest payments (income) is sent to the US Treasury.[a]
Cash received in the form of principal payments is "destroyed" (by debiting outstanding assets with corresponding credits to outstanding liabilities in the Fed's balance sheet).
[a] https://www.wsj.com/articles/higher-interest-rates-fuel-loss...
Re:US debt: Federal interest payments could soon exceed mili...
by landoftheice on Wednesday November 02, 2022 @01:49PM
(#33440032)
And if one ponders this dynamic for long enough, one realizes that there is not enough money in existence to pay all of the debt in existence.
Or in other words, a pressure cooker type system of infinite growth is created. By no fault of their own, a certain number of debtors are guaranteed to default on their loans - the pressure cooker rat race. And in practice the next traunch of currency created through debt in say, a 10 year period, is necessary to pay off the previous 10 years of debt that otherwise would not have enough currency to pay off - the 'infinite' growth dynamic.
In this system the only thing worse than creating more debt (currency) is to not create more debt (currency).
Re:US debt: Federal interest payments could soon exceed mili...
by barsonme on Wednesday November 02, 2022 @10:48AM
(#33436705)
I may be misunderstanding, but from the linked article:
> “We’ve returned close to $1 trillion to the Treasury over the last 10 years. We did not keep that revenue in the Fed,” St. Louis Fed President James Bullard told reporters last month.
Re:US debt: Federal interest payments could soon exceed mili...
by landoftheice on Wednesday November 02, 2022 @01:42PM
(#33439900)
The interest paid on debt is not destroyed but the principal is destroyed.
Re:US debt: Federal interest payments could soon exceed mili...
by walljm on Wednesday November 02, 2022 @10:37AM
(#33436515)
https://fred.stlouisfed.org/series/FDHBFRBN - for the exact number.
Re:US debt: Federal interest payments could soon exceed mili...
by pedrocr on Wednesday November 02, 2022 @10:32AM
(#33436441)
For the first point, why isn't that debt just cancelled?
Re:US debt: Federal interest payments could soon exceed mili...
by Ergo19 on Wednesday November 02, 2022 @10:36AM
(#33436499)
Cancelling bonds owed to the Fed would be literally money printing. When the Fed owns bonds, they can be sold on the open market, or allowed to mature, both of which are a form of quantitative tightening.
* More than a fifth of the treasury bond debt owed by the federal government is owed to... none other than the Federal Reserve, which is financially part of the federal government. Every year, more than a fifth of the debt interest payments made by the US Treasury go to the US Federal Reserve, which dutifully sends them all back to the US Treasury every year.[a]
* If you own any US treasury bonds (whether directly, in a 401(k), in some other kind of retirement or pension plan, or in an index fund), that's your share of the US national debt: It's the amount the federal government owes you.
Our financial system is more complex than most people grasp, due to a general lack of education and understanding of macroeconomics. Be very wary of simple, seemingly obvious, morally appealing narratives. Usually, they're not even wrong.
[a] https://www.wsj.com/articles/higher-interest-rates-fuel-loss...