You misunderstand government debt.

Government debt is the creation of the government, and is payable to whoever owns the IOU.

The money doesn't come from ppl, it comes from the government directly.

The American government can make any payment it owes, the amount owed is not a concern.

When government spends, it just changes numbers up in our bank accounts.

More specifically, all the commercial banks we use for our banking have bank accounts at the Fed called reserve accounts. Foreign governments have reserve accounts at the Fed as well.

These reserve accounts at the Fed are just like checking accounts at any other bank. When government spends without taxing, all it does is change the numbers up in the appropriate checking account (reserve account) at the Fed.

This means that when the government makes a $2,000 Social Security payment to you, for example, it changes the number up in your bank’s checking account at the Fed by $2,000, which also automatically changes the number up in your account at your bank by $2,000.

Next, you need to know what a U.S. Treasury security actually is. A U.S. Treasury security is nothing more than a savings account at the Fed.

When you buy a Treasury security, you send your dollars to the Fed and then some time in the future, they send the dollars back plus interest. The same holds true for any savings account at any bank. You send the bank dollars and you get them back plus interest. Let’s say that your bank decides to buy $2,000 worth of Treasury securities.

To pay for those Treasury securities, the Fed reduces the number of dollars that your bank has in its checking account at the Fed by $2,000 and adds $2,000 to your bank’s savings account at the Fed. (I’m calling the Treasury securities “savings accounts,” which is all they are.)

In other words, when the U.S. government does what’s called “borrowing money,” all it does is move funds from checking accounts at the Fed to savings accounts (Treasury securities) at the Fed. In fact, the entire $13 trillion national debt is nothing more than the economy’s total holdings of savings accounts at the Fed.

And what happens when the Treasury securities come due, and that “debt” has to be paid back? Yes, you guessed it, the Fed merely shifts the dollar balances from the savings accounts (Treasury securities) at the Fed to the appropriate checking accounts at the Fed (reserve accounts). Nor is this anything new. It’s been done exactly like this for a very long time, and no one seems to understand how simple it is and that it never will be a problem.

Seven Deadly Innocent Frauds of Economic Policy