Does country’s debts affect anything in that country? Why some have trillion dollars debts that look like it’ll never going to go away yet they can chill about this fact?
In: Economics
Honestly, to keep it super simply, rich countries tend to be fine because they take out debt in their currency and are too important to the worlds economy, and poor countries tend to have their debt in the wealthy counties’s currency and don’t impact the worlds economy as significantly.
For example, the US’s debt to China is in US dollars so if China demanded we repay our debts, we’d just print more money in US dollars. Additionally, because the US/wealthy countries are integral to the world economy, calling in their debt would likely harm if not cripple not just the world’s economy but also the economy of the country calling in the debt. Also, powerful countries can just say no, I’m not repaying you deal with it, should push come to shove.
However, if a poor/developing countries whose debt is owned by another country, like say the US and their debt is in US dollar, they do not have the ability to just print more money bc 1) they can’t print US dollars, and 2) printing more of their currency would likely destabilize their economy by causing inflation to sky rocket. Additionally, they have no power to say no. And powerful countries don’t care if they crashing the poor country’s economy by calling in their debt because it likely won’t hurt the world economy, just the local/regional.
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