Question

The United States has almost $25 Trillion in debt of which $20 Trillion trades daily as government bills, bonds, and notes – obligations which in theory have to be retired when they mature. Lately the interest rates have been below 2% reflecting an economy struggling to grow. What impact will that have on the ability to retire the debt?

Answer 1

United States economy has a large number of accumulated debt but these that are highly secured because these are secured by the issue of the treasury bonds which are due to mature in longer period of time and there are are consideration that these issuance are risk free nature because they are backed by the United States Government and United States government has the potential of of payment of their bonds because they have been rated highly secured by various credit agencies and the sovereign repayment ability of the United States has been very high in comparison with its counterpart because the tax generation ability of the United States government is highly reliable.

I think even if there is 2% of growth rate, it would mean that the growth rate is upon a very wide base so there is a higher number of employment in the overall economy in the United States. a large number of people are often paying their taxes and government are always collecting a higher amount of taxes they will always be having the repayment ability in order to the redeem these bonds in the longer period and I think that there should not be much risk related to redemption of those ones because they are backed by the United States Government