I feel like the United States is always meddling in other countries affairs and yet still climbing further into debt. Kind of like someone giving you advice on a golf course who is terrible themself. Is it the military presence? Economic relationships?
In: Economics
Sovereign debt is fundamentally different from household debt.
If you’re a regular person, debt is a hard limitation – in part because *money* is a hard limitation. Money is something that you have to constantly struggle to acquire. You have constant expenditures required simply to survive. If your debt grows out of control, you’ll lose access to your property, your home, and so on.
A nation does not interact with money or property in that way. Nations create money. Nations declare and define property.
Nations are also more complex entities. Imagine owing money to your own lung, or to a single blood cell; that’s nonsensical for a human, but entirely mundane for nations. Not only is much of that debt to their own citizens, some of it is even from one government agency to another.
Thus, for a sovereign nation, “debt” is just one form of control and distribution of power. It’s not simply that a nation can take more debt than an individual – it’s that the meaning of “debt” is deeply different.
All the functions of sovereign debt are outside the scope of an ELI5, but probably the simplest way to view it is a promise to exert power in the future. The US has a history of not breaking that kind of promise, and has the power to make good on that kind of promise. All the different kinds of power feed into that – economic foremost, but its economy is also backed by military power, cultural power, diplomatic power, and so on.
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