Happy to accommodate. Your logic is wrong. The debt still exists whether the nominal interest rate is positive, negative or zero. You, as a debtor, must still return the lender's capital, or the residual in the case of negative interest rates.
I'm afraid you are still not seeing my logic. Obviously the debt is NOT LITERALLY extinct or written off from the goverment balance sheets. The loan agreement is entered when there was debt sold and bought from the auctions at agreed price until agreed deadline.
My idea is to focus on HOW the borrower is paying back the loan. I'm not talking about the lender at all at this point (Anyone lending at 0 or negative nominal rates is retarded, nothing to discuss here)
I introduced an environment of ongoing 0 to negative rates for the future (as we've already seen the past years for some countries and as we are witnessing lower and lower global rates in general). Now, the lower the rates the easier it is for the borrower to meet it's obligations, isn't it ? Up to a point when rates are zero and the borrowers ability to meet it's obligations are the strongest. I'm already PRICING the fact that old principal is paid back with new debt because noone can afford to pay down the principal. Because that is the ongoing practice of how goverments operate, is that correct ? Well, if it isn't then gov debt couldn't be growing, but it is.
Yes, your debt exits, ofc, but SERVICING difficulty is non-existent with 0 rates (Even here, i want you to understand that i know very well that NOT ALL debt is suddenly at 0 rates, only the new auctioned ones, but as this enivironment prolongs...).
No one will lend to you if they think they will receive less buying power back than they would be loaning. Always think in terms of buying power borrowed versus buying power lent. And you'll be able to keep all this straight. No, debt does not vanish if interest rates are negative, but lenders might!
The fact that the opposite of this is the actual reality for years now was the main reason i started even talking about this. You'd be very fcked up, when you were to put money behind this rationale. Buying power borrowed vs lent logic now exists only dinosaur age economic textbooks. This knowledge is already priced in by the markets.
This "next generation" economic environment goes to show you that all the old school economic text books can be thrown to fire place. At least it'll give you warm. That's real value.
I have a question for you:
Do you think it's possible to pay down the debt (let's use the US as an example) and what does it mean for the economy ?
