“Any debt reduction paid to the Federal Reserve would equate to deleting that amount on the Fed’s balance sheet, sending it back to the ether. The debt would shrink, and the current and future interest cost savings could be significant.
Paying off foreign, domestic, or Federal Reserve debt holders presents a paradox: handing over vast sums to those who value holding that debt. Maybe that’s why Henry Hazlitt remarked that he’d never seen an article on debt repayment.
It’s troubling because debt is easily created, but difficult to extinguish. Perhaps the simplest solution is best. When it comes to government action, the answer remains the same: do nothing.
Should the US government miraculously achieve a year-end surplus, direct debt repayment might be unnecessary. Instead, it could focus on reducing expenditures and preventing future debt increases. Over time, debt requirements would decrease, leading to a reduced supply of new debt. This could influence factors like credit scores and lending rates.
The USA is lucky and good in many ways, but in a world of ever-increasing uncertainty and monetary inflation, a US government that spends less than it takes in would only get stronger and maintain its de facto gold standard by being the cleanest shirt in the dirty pile.”
