Defaulty Towers: How dangerous is the US Debt Ceiling?
Many Happy Returns
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Option Three - Government Bonds and the Debt Ceiling
The debt ceiling law says the US can only borrow $31 trillion. So could we do some financial engineering with how government bonds work to get around the law? The idea is that the Treasury would sell you a one-year $100 bond, and the interest rate on that would be something crazy, like 109%. In a year's time, you'll get back $209. Your original $100 that you paid, that's the face amount of the bond, plus 109% in interest. And Treasury would be willing to sell it to you for $200.
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