How US Government Accumulates Debts | Why The US Has Debts | Americans Lend Money To The Government


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When the government spends more than the taxes it receives, it borrows money from other sources such as other government agencies and foreign countries.
When they borrow money, they issue treasury bills, treasury notes, and treasury bonds.
For those of you who don’t know, Treasury bonds pay a fixed rate of interest every six months until they mature. They are issued in a term of 20 years or 30 years. Treasury bills are short-term government securities with maturities ranging from a few days to 52 weeks
Some agencies, like the Social Security Trust Fund, take in more revenue from taxes than they spend. These agencies then invest in U.S. Treasurys rather than put their cash in the bank.
They redeem their Treasury notes for funds as needed. If the government agency collects their funds and the federal government doesn’t have the money, they either raise taxes or issue more debt to raise the cash.
Debt owed to other government agencies is called Intragovernmental debt.
The second type of debt is public debt. This is what the government owes to Treasury investors. These investors include people in the U.S., international investors, and foreign governments.
If you invest in a treasury with a plan to redeem that for cash when you retire, that means you just lent your money to your own government.
That being said, many people still wonder, why not just print money instead of going into debt?
The short answer is this – if the government keeps on printing money to fulfill its obligation, we will sink the economy because our money will lose its value.
Here is a more detailed explanation.
Let’s take a potato, as an example. Let’s say it costs $1 a pound. Since Americans love potatoes, each of us buys 1 pound of potatoes a month. That means, the value of $1 is 1 pound potatoes.
Let’s assume that the government prints more money and doubles your salary. Now you can buy more pounds of potatoes. However, others have also doubled their salary. So, everyone wants to buy more potatoes now. The demand for potatoes is up. So, the suppliers of potatoes increase the price to, let’s say, $2 per pound.
You are paying more for the potatoes than you used to.
I know what you are thinking. Let’s just produce more potatoes! I have no doubt that will happen but they’d have to hire people to work in the farms and the higher demand for workers would likely raise their wage.

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