Hi! I was looking up the statistics about the national debt of my country and the negative implications thereof. I assumed it must be owed to other countries. Pertinently, every major economy I came across has a very high national debt, including the developed countries. Who is this national debt owed to? If it’s owed to each other, why is that a major problem? If it’s owed to the citizens of it’s own country, why is that a major problem?
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In addition to other answers here, countries often owe money to themselves. They “borrow” (print) money in order to pay for new systems such as health care, but also raise a tax in another way to “pay” for it.
Well in most cases, life is unpredictable and the money they estimated they’d receive in taxes turns out to be less than they expected or the system they implemented costs more than they thought. Since ignoring the difference would lead to a lack of faith in their currency from investors, the country writes it off as a debt that they’re going to pay back. This piles up and you have more debt.
Being in debt for a country is typically a good thing, as that means they are expanding in some way. The problem arises when the debt defaults and the currency drops in value.
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