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