eli5: Why is the US commonly called the “wealthiest country” if we have 30T in debt?
In: 5
That’s referring to the people in the country, not to the government of the country. Actually, probably the people and/or the corporations of the country.
Looking at [https://en.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult](https://en.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult) the US is second to Switzerland in *mean* wealth per adult and 26th in *median* wealth.
There’s probably a bit of American exceptionalism mixed in, too.
Debt is not a bad thing if you are paying it off. The USA does indeed pay off their debt and in time, all the time. They may owe $30 Trillion, but they pay off about $300 billion per year.
It’s the same with a person buying a house. You can be a wealthy person with a high paying job, but still have hundreds of thousands to pay off on a mortgage. That’s not terrible because you making the money to pay off that house.
Individual wealth, government debt.
Also, wealthy can have debt… is a lawyer with a $1m mortgage on his McMansion wealthy or not?
This usually refers to GDP or Gross Domestic Product. This is how much “stuff” and “services” the country produces in a year. Another way to think of it is as the amount of money that gets exchanged within the economy.
The US has a GDP of about $20 trillion in 2020, and has had the highest GDP for some time now.
I’ll make this one a bit longer since auto moderator is kind of rubbish and only seems to care about sentences.
A good chunk of the debt is owned by other Americans. So while it’s debt on the government books, it’s an asset on someone else’s ledger.
Further, government debt is not like debt that you or I might incur. They have both powers and responsibilities that an ordinary citizen never would. This is not to argue that government debt is fine and unlimited borrowing should not cause any worry. But that’s a whole other discussion.
Finally, if one adds up the value of everything in the USA, land, parks, cities, it dwarfs the debt figure. So it’s kind of like worrying about a home equity loan of a few thousand bucks when the house is worth millions. Yes, it could cause problems, but it’s not run for the hills trouble.
It refers to how much of the world’s total wealth is held by citizens from that country. This has nothing to do with how wealthy the average citizen is, nor how much money the government has.
A few hundred Americans own more wealth than the citizens of any other single country.
The US government is able to incur so much debt essentially because its creditors know that it’s good for it. They’re confident that the government will not default on its debt or declare bankruptcy… nor collapse and cease to exist.
Most of that 30T sovereign debt is held by Americans, who own that debt and consider it a valuable asset, because the US government reliably pays off the debt on time.
Cause we print money whenever we feel like it and tell the rest of the world to deal with it. And then that’s exactly what the rest of the world does… I’d say it has to come to a tipping point eventually, but we are so far past the point I thought would be the doomsday amount that I just give up trying to act like the world of economics is actually based on numbers.
Have you seen all the aircraft carriers and nuclear submarines we have?! And the stealth bombers and intercontinental ballistic missles?! We are the richest country and we’ll “send democracy” to any country who says otherwise.
But no, for real. The vast majority of international trade is conducted in the United States dollar. We can print all the dollars we want. Trillions upon trillions of them for any random bank run or pandemic or whatever reason that comes up. You want dollars?! We got em!
So other countries send us real valuable consumer goods and we send them dollars. Dollars that we just make up. We’ve really got a good thing going for us.
To make it even better, united states treasury bonds are a fantastic low risk place to store wealth. Like if you’ve just gotten a boat load of dollars in exchange for a boat load of oil. You don’t want it to just sit in the bank doing nothing. But it needs to he somewhat liquid because you have a business to run. Might as well buy us treasury bonds. After all the u.s. has all those aircraft carriers and nuclear missles to make sure they can always print dollars.
We really have a good thing going for us.
The wealth of a nation is quantified by its gross domestic product per capita, which is equivalent to to the average income taken home by a person in the country. U.S. GDP per capita is the highest in the world with exception to some very small states which are tax havens (e.g., Switzerland), and countries which have immense oil stores and are small (e.g., the Nordic countries). For a large, ethnically diverse country, there is no richer country out there. For comparison, France has the per capita GDP equivalent of West Virginia, which is considered to be a relatively poor state in the U.S. People just don’t realize how much richer the U.S. is than even other rich developed countries.
The $~20 trillion number refers government debt, which is indeed relatively high in absolute terms. But generally speaking GDP-Debt ratios up to ~100% are actually fine. We’re starting to push the limits and we should have a plan for long-term debt reduction, but in the short-run we’re fine. And as others have mentioned, what really matters for the short-term is the interest rate the government pays on that debt, because that determines how much the government is obligated to pay out each year. U.S. debt is extremely cheap – investors are willing to loan the U.S. government very cheaply because we have never once missed a payment, **because** our GDP is extremely large (2021: U.S. GDP was $23 **trillion**), and because where else are they going to put that money that’s as low risk?
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