Re: Niall Ferguson bewails US imperial decline
On Sep 14, 2006, at 8:27 AM, Charles Brown wrote:
They couldn’t dump huge quantities of US paper, no, but that’s unlikely to happen. Debt is rarely ever “collected” - big companies either roll over their debts and even borrow some more, and countries just roll over their debts in perpetuity.
^^^^^ CB: I hear this( and with respect to U.S. domestic debt too ?), and
I never quite understand it. Doesn’t this mean in effect that the lender
has given the borrower money ? A gift instead of a loan ? In the domestic
case it would mean the lending institutions are giving the “people” money.
I must be missing something.
Debt is endlessly self-renewing. Keep paying interest, roll over the
principal as needed, take out fresh loans. If a company hits a wall,
creditors can take losses - and countries too. But those are
extraordinary events. It’s not a gift - if you add in interest
payments, debtors repay their loans many times over.
Doug