This is simple: What are Treasury Bonds payable in? US Dollars. Who makes US Dollars? The US Government. Can you find any flaw in that reasoning?
Salty Walty's claim that the United States can't be broke because the government can print more Treasury bonds payable in dollars to avoid default is not entirely accurate.
While it’s true that the U.S. government has the ability to issue Treasury bonds to raise funds and prevent immediate default, this does not mean the country is immune to severe financial difficulties.
Let’s explore why this oversimplifies the situation.
For a country to be "broke," it typically means it cannot meet its financial obligations, such as paying off debts or funding essential services. Salty Walty suggests that by issuing more Treasury bonds—essentially government IOUs payable in U.S. dollars—the U.S. can always cover its debts.
However, this approach has significant limitations and potential consequences.
Issuing Treasury Bonds: A Temporary Fix
When the U.S. government issues Treasury bonds, it borrows money from investors with a promise to repay the principal plus interest later. This can indeed provide funds to pay off existing debts. However:
- Debt Doesn’t Disappear: Issuing new bonds to pay off old ones is like taking out a new loan to cover an existing loan. The total debt doesn’t decrease—it just shifts to new creditors.
- Investor Confidence Has Limits: If the government keeps piling on debt by issuing more bonds, investors may worry about its ability to repay. They could demand higher interest rates to offset the risk, increasing the cost of borrowing. This could spiral into a situation where the government must issue even more bonds to cover rising interest payments, potentially leading to a debt crisis.
Printing Money: Not a Free Pass
Since Treasury bonds are payable in U.S. dollars, and the U.S. government (via the Federal Reserve) can influence the money supply, one might argue it could print dollars to pay off these bonds. However, this isn’t a simple solution:
- Inflation Risk: Printing more money increases the money supply, which can lead to inflation—reducing the dollar’s purchasing power. Excessive money printing could even trigger hyperinflation, where the currency loses value rapidly, devastating the economy.
- Dollar’s Global Trust: The U.S. dollar’s strength relies on confidence in the U.S. economy. Reckless money printing could erode this trust, weakening the dollar’s status as the world’s reserve currency and raising costs for imports.
Broader Economic Concerns
Even if the U.S. avoids default by issuing bonds or printing money, it can still be "broke" in a practical sense if its debt becomes unsustainable:
- Fiscal Imbalance: If government spending consistently exceeds tax revenue, debt accumulates. Over time, this can strain the economy, crowd out private investment, and burden future generations with higher taxes or reduced services.
- Political Limits: The U.S. has a statutory debt ceiling, and while it can be raised, political disagreements can complicate debt issuance, as seen in past government shutdowns.
Conclusion
Salty Walty’s claim overlooks these complexities. Yes, the U.S. government has tools—like issuing Treasury bonds or managing the money supply—to avoid immediate default. But these are not limitless solutions. Overreliance on them can lead to higher debt, inflation, loss of investor confidence, and long-term economic instability. Thus, while the U.S. may not "default" in a technical sense, it can still face serious financial trouble—meaning it can effectively be "broke" despite its ability to issue more bonds.
Just because the U.S. can print more bonds or money doesn’t mean there are no limits or consequences.
The real constraint isn’t default—it’s inflation, currency devaluation, and economic stability.
If the government floods the system with too many bonds or dollars, demand for them could drop, interest rates could spike, and the dollar’s value could tank. This wouldn’t be "bankruptcy" in the legal sense, but it could wreck the economy. Think Weimar Germany or Zimbabwe: printing money didn’t save them from collapse; it accelerated it.
The U.S. benefits from trust in the dollar and its institutions, but that trust isn’t infinite.
Data backs this up. As of March 15, 2025, the U.S. national debt is likely around $35 trillion or more (it was $34 trillion in early 2024 and growing fast).
Interest payments on that debt are ballooning—projected to hit $1 trillion annually soon, per the Congressional Budget Office.
Yet, the U.S. still borrows at low rates compared to other nations because investors see Treasury bonds as a safe haven. If that perception shifts, the "print more bonds" strategy could hit a wall.
@Grok
