According to piezoe, that is private debt, not public. And he is correct.
It's true, we can have private debt. There is currently, however, no U.S. government debt. It only looks to us in the private sector as though there is such a thing as government debt. No country that has not borrowed using debt instruments denominated in another country's currency has any debt, nor can it go bankrupt. The worst it can do is make the money it issues worthless.
The money needed to pay the principle on U.S. T-Bills was "printed" and spent, or transferred, into the private sector
before the Bills were auctioned. The transaction, in effect, swaps a T-Bill for transactional money leaving the total money in the economy unchanged but the money supply perhaps reduced by the value of the Bill. (Not sure about this. T-Bills are stored money, but being short maturity they may count as a part of the supply by some measures.) The transaction is reversed when the T-Bill matures and the economy's money supply returns to what it was before the T-Bill was auctioned plus the amount of interest credited. There is no borrowing by the government hence there can be no government debt acquired.*
In real government borrowing, such as occurred during WWI, the government sells securities to finance deficit spending, as opposed to "printing", which is the way we finance our deficits today. In real government borrowing, when a security matures the government increases taxes, or cuts spending, to pay the principle and interest owed, leaving the money supply reduced by the amount of taxes collected or spending foregone. After WWI, President Wilson was anxious to pay off the war debt as quickly as possible. Taxes were increased leaving less money in the economy. Naturally, a recession resulted. Neither Wilson, nor anyone else, realized that being on a gold standard was really little different than using fiat money, just far more cumbersome. The gold for gold-standard money comes from printing gold certificates (yes, out of thin air).
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*From the perspective of an entity in the private sector that buys a T-Bill, the transaction can not be distinguished from actual borrowing. When the transaction is looked at from the government's perspective, however, it is clear that the government is not borrowing, but merely putting some money that was in the private sector economy temporarily "on the shelf". In the meantime the government is supplying securities used by the Fed in pursuing its monetary policy and in demand as an interest paying store of money by the private sector and foreign Central Banks. The U.S. has no debt! It's a crazy myth. But since we've been told by our parents, politicians, and teachers, that government finances are just like our private finances it is going to take a very long time for the myth to die. (Even many older economists, some Central Bankers, and a few former Treasury Secretaries. Have it wrong. Now that you know the truth, just smile, pat them on the back and say "Good Job!"
