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rdappa
Lv 4
rdappa asked in Social ScienceEconomics · 1 decade ago

Since the US Gov only issues 30 year bonds, isn't our national debt only max. 30 years old?

Doesn't the $14T+ only represent deficits of the last 30 years? Or am I misunderstanding this?

Because 30 year bonds mature, isn't the debt higher due to higher yields? I must believe that this is only part of the answer, what is the rest?

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  • 1 decade ago
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    Technically yes but in reality no. It is true that essentially all the current debt is in the form of a bond, bill, or note issued within past 30 years. Most of it (I think) more short-term than even that.

    But what you are missing is the effect of "rolling over" the debt. When it comes time to redeem an existing batch of bonds coming due, the government often issues new bonds to raise the cash for that. And so, let's say that in 2005 some 30-years bonds came due on debt that was issued in 1975. Suppose the government issued a wave of 10-year bonds to raise that cash. In that case, today we carry that debt on the books as debt newly taken on in 2005 ... but in reality that debt accumulation began in 1975. In that type of action -- swapping new bonds for old bonds -- the national debt does not increase or decrease on net, but nevertheless the government borrows new money while paying off an old debt. The result is that the debt is technically "new", but the debt balance is old and a continuation.

    Fair to say that each piece of the debt currently outstanding is 30 years old or less, but the total accumulation of debt is much older. I.e., 30 years ago, as 1980 ended, the U.S. had a certain amount of national debt, and that total debt balance was certainly not paid off, and has only increased. (Of course by modern standards the debt then was very low, and yes the large majority of the current $14 trillion total was added in just the past decade).

    So it depends on how you look at it. Another twist is that since much of government borrowing is very short term (say 30 days and 90 days), the government actually borrows MUCH more each year than the increase in the national debt suggests. Might have an increase in national debt of $1 trillion, but actually borrow $4 trillion through the year (meanwhile paying off $3 trillion in short term notes). The bright side is you can say hey the government paid off $3 trillion in debt this year! The government actually DOES pay off lots of debt.

  • Anonymous
    1 decade ago

    The government will also replace the old bonds with the new ones.

    Source(s): Anjaree
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