I’ve been wondering, do we ever have to actually pay it off? Seriously, who’s going to call for it, China?This is a common misconception. The vast majority of US debt is held by Americans. A large chunk is so-called "inter-governmental" holdings, i.e. The Social Security trust fund, wherein we have spent the payroll taxes into the general fund and filled the "trust fund" with T-bills. Another big chunk is held by the Fed, which some serious funny money given the Fed can basically create money since they control our fiat currency. A very large percentage of our debt is held by ordinary Americans as T-bills in pensions, retirement accounts and mutual funds.
China only owns about $1 trillion in US debt. Japan owns the most at $1.2 trillion. So, defaulting on the debt would be a minor inconvenience to China, but downright catastrophic to the United States. In addition to wiping out trillions in American savings, it would destroy the fiscal reputation of the dollar and eliminate its status as the de facto reserve currency of the world, as well as the closely related benchmark currency for trading oil.
Thank you.