The United States can borrow an apparently unlimited supply of trillions of dollars at low interest costs. Treasury notes, known as T Bills, sell easily to expand the USA's debt. Federal budget deficits create a need to borrow when federal expenditures exceed income tax receipts.
T Bill buyers can be private American or foreign citizens, foreign or domestic banks and central banks in other countries. Lenders or buyers of T Bills like them for several reasons. The full faith and credit of the United States guarantees them. Many private buyers and sellers compete in a secondary market for the Bills assuring a quick conversion to cash if needed. Up until now, the USA has managed the issuance of debt consistently in line with underlying economic fundamentals. Buyers can buy very large amounts when they need to park billions or trillions of dollars.
T Bill buyers may demand higher interest rates if the USA is less able to manage its Federal budget. Other countries experience this regularly. Those countries sometimes seek loans from the IMF to fund a deficit.
Either paying higher interest rates or seeking an IMF loan will cause real budget problems.
Our ability to borrow lots of money at a low cost depends on our lenders' opinion about our fiscal management.
The current pandemic may interfere with this market. That could cause a budget crisis. That crisis might result in higher taxes and reduced Social Security pensions.
Summary of our fiscal position:
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