I posted this in POLLS, but thik would be better discused here. In polls, the conclusion is that these loans must be paid back. Any arguments? Alternatives?
Stocks rally as Fed mulls end to balance sheet reduction
'Stocks rose Friday as traders looked past a poor Intel earnings report and hoped a government shutdown solution would come soon, as well as a resolution to the U.S.-China trade war.
Speculation that the Federal Reserve may end it's balance sheet unwind sooner than expected also added to the bullish tone, as that's been a major concern of investors.
The Dow was up 240 points, aiming for its fifth consecutive week of gains. The S&P 500 rose 1 percent, while the Nasdaq added 1.3 percent as Starbucks gained on strong earnings.
The Wall Street Journal reported that the Federal Reserve is closer than expected to ending its balance sheet unwind. The Fed's decision is a key consideration for investors as they gauge the extent to which the central bank will tighten its monetary policy.".....
Does this mean the USA must payback US Treasury LOANS/TBills?
I don't Know!
Other, please explain!
Government debt does not get "paid off" and extinguished the same way that private sector debt does. Government liabilities are only extinguished by running a tax surplus. And tax surpluses don't claw back government bonds, they come out of the taxes we pay - which comes out of the active economy, the money that everybody earns and spends. That's why federal surpluses are often a disaster economically.
Governments do not need to extinguish their debt; they can simply roll it over, create more debt, and/or tax away whatever they want. People are happy to hold those government liabilities as assets. Private sector debts, on the other hand, must
be extinguished by being paid off, because banks transfer real assets (reserves) up front, then hope that the loan is repaid, which recoups those reserves, and more.
When a bank creates a loan for $1000, they "expand their balance sheet" by increasing your account balance (a bank liability) by $1000 (or writing a $1000 check in your name, same thing), and they hold your promissory note (for $1000 + interest) as an asset. Because your account balance went up by $1000, the M1 money supply went up by $1000, too. As you pay down the principal, dollars are extinguished; when the loan is paid in full, not only is your promissory note extinguished, but your payments have extinguished $1000 of account balances as well. M1 returns to where it was before your loan. The net result is that you have given the bank some money (the interest) for their service.
The government spends (over and above tax receipts) by simply issuing liabilities, which are held by the private sector as assets. And the story really ends right there.
Treasury issues bonds; the private sector buys those bonds with reserves, via banks; the reserves are transferred from buyer's bank's reserve account to Treasury's reserve account; government spends those proceeds right back into the economy (deficit spending). The net result is an increase in government liabilities (bonds) held by the private sector as assets, plus the aggregate demand due to the spending. No private sector assets are used up or ties up in this transaction; the dollars used to buy the bonds end up right back in the private sector, via government spending.
In this process, the Fed merely buys and sells Treasury bonds in order to adjust the number of reserves in the system. The Fed can't change the number of government liabilities in the private sector, it can only adjust the makeup of those liabilities (bonds, reserves, and cash). When the Fed buys bonds (or MBSs, or any other asset), it does so by increasing the reserve balance of a bank; if the Fed were to buy a bond from you, it would do so by marking up your bank's reserve account, and your bank would, in turn, mark up your bank account. The Fed would then hold the bond as an asset.
The Fed is just a middleman, and really shouldn't be the focal point here. When it buys assets, reserves are added to the system (MB increases), and account balances also increase (M1 increases); when it sells assets ("unwinds"), the opposite happens. But neither one has a big effect on the economy.
"Unwinding" will put some more assets on the market, and pull some money out of bank accounts, but it really doesn't affect consumption and investment much, if at all. They are tinkering with rich guys' money, and rich guys' money really isn't part of the real economy anymore.