Marino on Money: April 22
This week we are talking about all of the money our government borrows. Let’s revisit yesterday’s question.
How will we ever repay it?
Good question. I don’t know if we can. But if we could repay it, here are some ways it may happen. It’s up to you to decide if its possible.
First, our government could start making more money than they spend, or running a surplus. Then, they could use that surplus to pay down the debt instead of spending it on another program. Do you think that will happen? If our deficit is almost $1 trillion now, the government would need to increase tax revenue, decrease spending, or a combination of both to make up the $1 trillion.
Or, we just refinance. Maybe we won’t have the money to pay back the debt. But, if investors will keep loaning us money, we can just keep borrowing. How does that sound? What face are you making now? Do you think investors around the world will continue to loan money to us at really low interest rates? If not, they may demand a higher interest rate in order to loan us money. That would hurt our budget and have a negative impact on other interest rates in our economy.
The last strategy is to print money. The fancy term is quantitative easing, meaning the government increases the quantity of money. They don’t actually use the printing press, but the Fed can purchase investments with money they created. This creating of money can lead to inflation, and that hurts everyone as the cost of living goes up for all types of goods and services.
Will these any of these strategies work? We’ll try and answer that tomorrow.
Ross Marino will be answering questions during WWAY’s 5:00 news every Tuesday, Wednesday, and Thursday.
To submit questions, click on Marino on Money.
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