Simple reason why debt keeps increasing and increasing...

Discussion in 'Trading' started by crgarcia, Jun 30, 2007.

  1. The reason is that the government can easily print money and lend it at very low rates, or even just give it away.

    But the government can't "unprint" money. Now the money belongs to someone, and they will not like to have their money taken away.
    The only theoretical way to unprint money would be rising taxes dramatically -with all the consequences-, while spending only a fraction of it, therefore having massive budget superavits.

    So the realistic solution is to offer interest rates on money that the government really doesn't spend, in the form of Treasury bonds and bills.
    But this really doesn't really "unprints" money. In fact more money is printed to get the money out of circulation, for a while. Thus creating a larger and larger debt.

    Trade deficits also remove some money from circulation, altough this also has political and economic consequences.