I guess I'm dumber than a 14 month old toddler. If we print enough dollars to pay off the debt in what we're calling "the largest monetary debasement event in history", doesn't the printing (borrowing) of that money just create yet another loan on which even a greater interest payment will be owed?
Unless we can somehow generate enough in tariffs, it seems that defaulting on the debt is the only way out. Am I wrong?
You could print without borrowing.
The government is endebted to the bond market, but the federal reserve/central bank (through quantitative easing or similar) could buy all the bonds with money that is simply created, not borrowed.
That way, the government's debt would be owed to the fed, at which point it could simply be cancelled.
The fed would not have to buy all the debt at once, but could do this in stages. To me, it looks like (and please fact check me if anyone knows) the dips in the graph overlap pretty well with previous QE periods or, as was the case in other crises like covid, the slashing of interest rates (which is abother way of printing money).
So, the Fed can buy up existing debt, which in itself doesn't increase the debt, but does increase bank reserves, and, most crucially, can serve as a market signal to bring interest rates down, as it shows investors that there's a bid on those treasury securities. This in term can allow the Federal government to roll its existing debt out at longer tenors (the Yellen treasury notoriously issued almost entirely T-bills), as well as at a lower rate of interest, to at least slow the bleeding.
The Fed can't in and of itself fix this, but it does have a roll to play. It'll probably also need a recession to push money out of equities into bonds, and perhaps most interestingly, things to sweeten up sovereign debt, such as the bit bonds we're hearing more and more about being proposed, where bond holders are given exposure to the upside of Bitcoin through a kicker made up of a portion of the bond's revenue going to buy Bitcoin, which gets split between the bond holder and the Treasury itself. The treasury thus recapitalizes (needing to issue less debt to stay afloat), and the bond holder is willing to take a lower nominal fixed rate on the bond as it'll no longer be the only source of upside. Meanwhile Bitcoin catches a steadier and steadier bid itself.
Might want to buy some, just in case it catches on.
