basically when the federal government goes into debt, that basically means that the federal reserve which you can imagine like a big bank hands out a loan to the government.

the government doesn't really have to pay back that debt, ever. (it technically has to but that can be avoided by simply taking out a new loan at a later time).

i hope i explained that correctly.

[–] omega_x3@lemmy.world 7 points 5 days ago (2 children)

It does have to pay interest on that debt to all the bond holders, if it doesn't then the bonds lose value and everyone that owns them trys to offload them.

[–] bennieandthez@lemmygrad.ml 7 points 5 days ago

Which they print too.

[–] gandalf_der_12te@discuss.tchncs.de 9 points 5 days ago

if the interest is just as high as the general inflation, then the government can just take out extra loans to serve the interest without actually increasing the real total debt, because the nominal increase in debt is just eaten by the inflation.

[–] humanspiral@lemmy.ca 3 points 4 days ago

the federal reserve which you can imagine like a big bank hands out a loan to the government.

No. Debt goes directly to markets. Federal Reserve QE operations are acts of imagining new money to buy bonds from the market. You are describing QE operations, not debt. Past QE operations have forgone interest on Federal reserve holdings, gifting it to Treasury such that the bonds that Fed holds become interest free. The accounting magic is that when the bond is finally due, the Federal reserve does get paid in order to erase the imaginary money they created to buy the bonds. But a given QE balance sheet level, they just buy a new bond from the market with new imagined money.