reply to post by CPYKOmega
"National debt" is essentially credits of indebtedness the government hands out for bonds and other securities.
The debt is not paid off until it is matured, and at maturity, the fund is paid. The US can be in such massive debt because it holds the power to pay
off said debts. I believe debtness is 34% of the GDP right now.
The absolute security for the securities exchanged for funds is backed by Congress's unlimited power of taxation. That is to say, if debt was a
burden taxes could be raised to meet the needs of the securities. If the government wanted it, it could "buy back" the bonds and other securities
they exchange. However, there is no reason to, and the government makes more money selling indebtedness then they do any other way.
Municipalities have the same exact form of indebtedness as the Federal Government, however, because a State is limited to it's people, and very
volatile in population if taxes are raised considerably, they they should not create to much debt.
Then there is another type of debt, one which the US Federal government does not have a problem with. Some states, like Michigan and California spend
beyond what they can possibly tax without adverse economic effects, so the Federal government has to give them grants to pay down debts. The Gov does
this because if a state goes bankrupt, it would be a disaster.
If you ever buy a Federally backed bond or other form of security, you are buying National Debt.
The other form of National Debt is "credited" to corporations. For instance, in a war time economy we have many contractors. The contractors and
corporations may not however be paid "in full" but rather in payments. Thus they own national debt.
Countries like Japan and China own a lot of National Debt as a way to keep their currency with America's. Because securities from the US Government
have to be trans-actioned in Dollars, you take X amount of Yen, buy Y amount of Dollars, invest Y amount of dollars in Federal Bonds, and create z
amount of dollars to convert back into Yen.
Countries buying up American corporations do so for investing purposes, to make money off the world's largest economy, and it is not national debt.
The United States also remains the most secure backer of debt in the world, above all other countries.
