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?

Question

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

Answer 1

A lot of good answers above.

Another interesting element that also comes into play is inflation. Debts can get “inflated away” over time.

For example:

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1) let’s say you got an interest free loan in 1950, for 10 million dollars. And nobody was in a hurry to get that money back.

2) You then finally repay the 10 million dollars in 2024.

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Well, the interesting part is that back in 1950, 10 million was equivalent in buying power to 130 million today.

So you got “130 million” worth of buying power back then, and only had to pay back 10 million today!

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Now of course most loans have interest.

But if you had 130 million purchasing power back then, and used it to buy resources and implement infrastructure, and make good investments in a company or nations future, then that likely means:

The 130 million in purchasing power would have generated a boatload (billions!) of money over the years that would easily keep up with the interest payments throughout that time.

And then at the end, it becomes “insignificant” to the debtor to pay back that 10 million dollar debt in the further future. (10 million is peanuts by the time they pay it back.)

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Another example:

Consider how some of the tech giants of today effectively got loans 10 million, or 1 million, or even less in the 1970’s (not sure about the specific amounts), to start their company in a garage.

So then let’s say they never got around to paying it back, and just kept making interest payments.

Fast forward to today, and that outstanding loan on the books would be insignificant for the company to pay.

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So again: while a loan/debt can look scary and huge now, if the country/company uses it wisely, by the time you get around to repaying that loan it’s insignificant. (Hopefully–if all goes relatively well for that nation!)