Eli5: How can some country have trillions of dollar in debt like Japan but still functional without any consequences?

Question

Eli5: How can some country have trillions of dollar in debt like Japan but still functional without any consequences?

In: 101

Answer 1

Because debt isn’t bad, and scale matters.

Debt is simply a promise to do something in the future. Nations can afford to make lots of promises to a lot of people, because nations have vast economic and military power, and they can make good on those promises.

It is very useful to exchange promises instead of just physical goods or immediate services. Especially when you’re planning 5, 10, 20, 50 years down the line, which is what nations do.

Promising something you can’t fulfill is bad. That’s why huge individual debts are bad – because often individuals make promises they can’t fulfill. But these nations *can* fulfill their promises, and as long as that continues to be true, it’s not a problem for them.