I just genuinely don’t understand how it works, like couldn’t you realistically just creat more money. Isn’t it just like a number in a bank account? Am I really dumb?
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Money needs to be backed by something like gold for example.
Actual paper money isnt worth anything. Its just a representation of gold. So instead of lugging around a truck full of gold bars, you just carry cash instead.
So that means you cant just create more money. If you do itll lead to inflation, meaning the currency will become less and less valuable.
You could, and it is happening all the time. That is what inflation is. A little inflation isn’t bad, but too much of it can and has collapsed entire economies.
Meanwhile debt isn’t really a bad thing as long as you are able to make your payments
It’s been a long time since I learnt about this in sociology, but I remember its partly to do with countries borrowing off of other countries. So say a poorer country borrows millions from a richer country, they are then in debt for quite a while. Rich countries also borrow from other rich countries, for example during an economical recession or some sort of natural disaster. Eventually over the years, everyone just ends up in debt to everyone. You can’t print a tonne more money as it doesn’t make the country any richer, it just adds more money into circulation. If everyone had more money, they would buy more crap, which means the people selling that crap would stick the prices up far higher. Eventually you’d just end up in the same position as you were before printing the money.
“Ill gladly you pay you tuesday for a hamburger today.”
Gets/eats burger.
Doesn’t pay.
You’re in debt.
If you just keep printing more money, then that devalues all the existing money and leads to hyperinflation… see Zimbabwe as a worst case example, where there are trillion dollar bills that can only buy a load of bread.
So countries instead issue bonds to borrow money from investors, paying them interest in return for the loans. Those outstanding bonds that governments owe back interest and principal are the debt that countries have.
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You cannot create value from nothing. Our dollars are only valuable because they are a stand in for labor.
Think of it this way – imagine all of the value of our labor is a pizza. Printing money would be making more cuts of that pizza without actually adding more pizza to the equation. So you just end up with more and more pieces that are smaller and smaller.
The exact same thing happens to the value of our dollars when they print money. The amount that money in total is worth doesn’t change, but every dollar added diminishes the value of the existing dollars a little bit. Eventually you end up with hyper inflation where people need to wheel in a suitcase of money to buy a load of bread.
If you were to take all of the world’s bank accounts and settle them, there wouldn’t be any debt.
However, a lot of debt is owned by private companies, investment firms, and even people. Think about how a loan works with a bank; they bank gives you a bunch of money upfront, and you pay them back a bit each month with a total payback greater than the money you borrowed.
Doing this to a big country/government is pretty good; it’s unlikely that they will stop paying you, because they rely a lot on borrowing, and if the government collapses, there’ll be a lot more problems to deal with than you not collecting (potentially now-worthless) money.
So the other side of a lot of that debt exists in a lot of private accounts that just aren’t visible to the general public. So while the US government may be in debt, there are a bunch of organizations/accounts that have a surplus that balances it out.
Two tradesmen loan each other tools, one a set of pliers, the other a screwdriver.
Total debt between them = pliers + screwdriver.
Now, substitute money for tools.
For the second part of your comment, no, we can’t.
More money = Less worth. Imagine if there was only one singular dollar in a society with 100 people, that would be a very valuable bit of currency because only one person has it. Now imagine if there were 100,000,000 dollars in that society with 100 people. Everyone would have 1 million dollars, so it’d be a lot less valuable thanks to its reduced rarity
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