The Fed Could Print More Money
This is an unlikely scenario, but one that theoretically could happen. It’s also a scenario that points out one of the immense differences between the U.S. government and the average taxpayer. If you fall deep into debt, you must somehow earn additional money to pay it off unless you choose to declare bankruptcy.
When the U.S. government falls into debt, it can simply print more money to pay off its obligations. It’s really that simple: The government just turns on the spigot and out pops more money. Even so, this is very unlikely to happen for a number of reasons.
The most compelling one is that it would trigger runaway inflation. In economic parlance, this is known as “too much money chasing too few goods,” or “demand-pull” inflation. By any name, it almost guarantees a highly inflationary environment, which is bad for the economy.
