Why do people still lend money to the US Government?

Several reasons.

1) when wondering about any investment, you have to consider the alternatives. People have to put their money somewhere. For low-risk bond-buying among international investors, US Gov't bonds are as good as it gets. You may not get it, but what else can the low-risk bond market invest in that could absorb 10 trillion dollars? (which is the actual public debt not owned by the gov't itself).

2). And it IS low risk. If you think the increasing national debt means the US is in danger of defaulting on the terms of the bonds, you're wrong. The chance of that happening is as close to zero as any such thing can get. If for no other reason, then because the US (unlike Greece or Spain) can create its own currency with which to pay liabilities. But we're far away from needing to resort to that (aka monetizing the debt). If you feel the urge to doubt me, I'll just point out that the bond market is collectively infinitely smarter than you are, ant they're accepting record-low interest rates. No offense intended. You have to have some humility when approaching the markets.

3) The US imports an amount of product each year that's greater than the entire GDP of Canada. These products are generally paid for in US dollars. That means foreign exporters acquire trillions of US dollars in trade each year. Such a merchant or corporation isn't going to shove that cash under a mattress. They'll either want to keep some US dollars (for their own international operations), in which case they're likely invest those funds short-term into US Bonds ... to keep that money in the form of US dollars while gaining interest. OR, that foreign company goes to its bank and coverts to their local currency.

The bank then sends the US dollars up to its central bank. The central bank may trade away some of those dollars on the markets for its own currency -- but they have to be careful not to weaken the dollar versus their own currency, or else that hurts their exports. Often, the central bank wants to keeps US dollars on hand -- by of course investing them in US gov't bonds.

In short, US Gov't bonds are how you store US dollars for later use, if you're some sort of big-money international player. Even if you don't much like US Gov't bonds, that's a hard-core reality if you export to the US.

Three short reasons....

Yes, I guess someone could go on for much longer, but that would just be detail...

1. The USA (although perhaps now tied with China for the current year) is still the worlds 'biggest economy'. So, if the USA goes down everyone knows they'll probably go down too.

2. Since the end of WWII (1945) the USA unscathed and prosperous from the War has been the 'economic engine' of the world (1950-1990's) through it's 'consumer spending'. If this engine stops...so does the economic heart of the world.

3. The USA is not going anywhere....Whoever wins the election in 2012, or 2016....The USA will still be here for 1000 years, in some form. With currently 330 million people, right in the center of the globe between 2 oceans, controlling the whole North American continent, and armed with nuclear weapons and advanced technology.....you can't ignore it.

It's a 'good' risk.

P.S. No disrespect to Spain or Italy....but....1 or 2 of 50 American states...could match those guys.

Because the risk:reward ratio is low, and thus helps balance an individual's portfolio. Also, it increases the stability of many investment pools.

The weakness you or I might see in the US government is far less important to people with access to additional information and analysis that you and I don't have.

People in business and government understand that debt is useful. Acquiring debt (for a business or country) is a natural consequence of believing that the debtor can get a better return than the interest it costs.

When a company borrows money, they calculate that the interest they pay is LESS than the profit they will make. Educating children and doing research in renewable energy is a much better use of money than using it to pay off the debt. Outside investors (purchasers of US debt) understand this.

We are the last surviveing superpower, that should mean something... Of course it wont crumble! what people fail to see is that They depend on us! the US citizens are customers of the world! we buy more garbage from countries than we export, only because its "cheaper" than american made products... but believe me if we bought all american products the world would look alot alot different. And heck what if we started chargeing for the help we provide to other countries? Ha, the governtment would have so much more money, we could afford to blow it! Read the article not just the headline dork

Well some people believe that if we start inputting help now it will make things a lot better. Also the U.S. Treasury bond is very secure and thats why even foreigners wants to buy them according to my financial advisor.

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Have a nice day

Because we want to. Why are you worried about what Americans do? Keep your cash in Canadian industries if you're bothered by it.