Why can't the US government just cancel the national debt?

Post by **Winston** » November 23rd, 2012, 9:00 am

This might sound like a dumb question, but why can't the US government or Federal Reserve just cancel the national debt by tearing up the debt receipts or erasing it from the computers? They have the power to do anything right? Wouldn't that solve the economic problems in America, or at least solve the national debt problem?

I know that sounds like a naive question, but I'm just wondering about it and trying to understand how it works.

Thanks.

Falcon · Post by **Falcon** » November 25th, 2012, 11:13 pm

Of course the banks and investors and all the other government creditors have all the debt records too. Cancelling the debts is equal to going into default.

And, if the US goes into default, then the whole world would be doomed into a global financial catastrophe of unimaginable proportions!

gsjackson · Post by **gsjackson** » November 26th, 2012, 6:45 am

There's no reason to cancel the debt. What can, and should be done is to stop creating new money as debt. In that way debt service will decline as a percentage of the deficit, and the deficit, which isn't a particuarly large percentage of GDP in any case, will go down a bit.

Of course, creating money as debt is how the elites exercise control over the economy, so don't expect to see the practice ended.