Charley and Paying Down the Debt

We passed the bank on our way to the donut shop. A large sign on the front urged us to take out a loan for low interest rates.

"You owe any money to the bank?" Charley asked.

"No. Got everything paid."

"Wish our government did. All that debt.... We've borrowed trillions from China and spent it on government projects."

"I guess they're like the international bank," I said. "They keep us going".

"We're spending more than we're making, and we're borrowing from China and places like that to stay afloat. That seem right to you?"

"No, of course not. If I did that, the bank people would call me in and ask me how I planned to pay off my loans."

"Guess it would be nice if you didn't have to put up any collateral. The US don't have to put up collateral."

"That's right".

A pause followed. I could almost hear the little wheels in Charley's head going round.

"What would happen," Charley asked, stopping on the sidewalk outside the donut shop, "if the Chinese government called a meeting with the President and asked us how we're gonna repay our loans?"

"What a thought!" I said, laughing.

"Ain't no joke, really. They got a right to know what we're gonna do. There's no collateral they can collect, they got no protection for that loan. They could call the loan and force some kinda payment, but we'd collapse and they'd never get their money. I guess we could print a lot of worthless money and pay 'em with that, but that would cause the worst inflation since Germany in the 20's."

"Good point," I said. "They can't afford to collapse us. What would a bank do in that situation?"

"Well, they could demand a payment schedule where we pay the interest as we go and some on the principle. Give us a certain number of years, like 20 years. Like a mortgage. But there'd have to be a condition, that the payments would be tied to inflation, so if the government printed a lot of money to pay 'em with, it wouldn't get us out of debt."

"Where would the money to pay the Chinese come from, in this scheme of yours?"

"We could have a new income tax added to the old one. It would be a graduated tax, high at the top income levels and high for corporations, low for the poor. I read somewhere we would have to come up with almost $40,000 each. That's a lot, but spread over 20 years like a mortgage, we could maybe handle it."

"With money going out of our economy and into theirs, we'd get a lot poorer. There would be a depression, I suppose."

Charley nodded. "That's what happens when you spend your way into debt and don't have enough income to pay your bills. It'd be hard on the American people, but we've let this happen, and there really ain't no easy way out, 'cept to buckle your belt tighter, work harder, get another part-time job or something. And quit spending what we don't got!"