What would happen if the U.S. actually paid off the national debt? Where would the banks, big financial institutions, and government foreign and domestic put their cash? | Homework.Study.com (2024)

FAQs

What would happen if the U.S. actually paid off the national debt? Where would the banks, big financial institutions, and government foreign and domestic put their cash? | Homework.Study.com? ›

Answer and Explanation:

The US national debt is mostly owed to the American people. If the ~$17 trillion national debt were all paid off tomorrow by printing the money, then the American people would suddenly receive ~$13 trillion dollars which the US government owes them.

Answer and Explanation: If everyone stopped getting in debt and paid off all their credit cards, saved for everything and spent what they earned this will increase the savings excessively which will decrease the circulation of money in the economy.

By January of 1835, for the first and only time, all of the government's interest-bearing debt was paid off. Congress distributed the surplus to the states (many of which were heavily in debt). The Jackson administration ended with the country almost completely out of debt!

If current policies persist without change—a big “if”—the Congressional Budget Office projects that deficits and the debt (as a percentage of GDP) will rise as more Americans become eligible for Social Security and Medicare, as health care costs continue to increase faster than the economy, and as interest rates rise ...

The economies around the world would go into massive depressions as well. The great depression affected economies around the world. The entire economy works off government debt, because government debt is everyone else's wealth. Eliminate the debt and you eliminate the economic energy of the economy.

What would really happen? The economy would slump. Consumer spending is roughly 70 percent of GDP.. Since, according to the Federal Reserve Bank of St. Louis, the savings rate is currently 3.7 percent, increasing the savings rate—a corollary to paying off debt—would mean a decrease in spending by 26.3 percent.

Avoiding payment also means that creditors can sue you for unpaid bills. In some states, you could get your wages garnished or have your assets seized. You're still paying your outstanding debt even if you aren't making the payments directly.

Economic recession or slowdown: A default could undermine investor and consumer confidence, leading to reduced spending and investment. This could also result in an economic slowdown or even a recession, affecting businesses, job creation and overall economic growth.

The United States pays interest on approximately $850 billion in debt held by the People's Republic of China. China, however, is currently in default on its sovereign debt held by American bondholders.

What country is in the most debt? ›

Japan has the highest percentage of national debt in the world at 259.43% of its annual GDP.

We began accumulating it before our constitution was ratified. Debts incurred during the Revolutionary War period totaled a little over $75 million. President Andrew Jackson paid off the original national debt in 1835 because he didn't trust the paper money we issued. It was the only time it happened.

Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation).

Nearly half of all US foreign-owned debt comes from five countries. All values are adjusted to 2023 dollars. As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).

One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money.

The national debt is the total amount of money the U.S. owes its creditors, which includes “the public” (individual investors, businesses, commercial banks, pension funds, mutual funds, state and local governments, the Federal Reserve System and foreign governments) as well as other parts of the federal government, ...

What countries does the U.S. owe money to? The United States owes money to many countries, including Japan, mainland China, the U.K., Ireland, Luxembourg, Brazil, Switzerland and Belgium, among others.

It's 22% higher than the U.S. gross national product as of June 30 (about $27 trillion). It's six times the U.S. debt figure in 2000 ($5.6 trillion). Paid back interest-free at the rate of $1 million an hour, $33 trillion would take more than 3,750 years.