It seems that most if not all advanced economies (US, Japan, UK to name a few) have been running budget deficits since basically the last 20 years. I understand that current debts lose value over time because of inflation and economies grow, but how can they do this for basically ever? I can’t wrap my head around the maths that makes this possible, and the markets don’t seem all that worried
In: 316
Countries with good credit scores can borrow for cheaper rates than individuals. Countries done die, go bankrupt (usually), disappear into the south American jungle etc. In the last 15 years if you take for an example the UK government, borrowing money was as close to free as makes no difference. Any return at all above the interest rate borrowed at makes the debt valuable to that country. Where a country borrows money for capital spending – govt salaries, food or power imports, that’s a much more worrying sign. These don’t necessarily create a return compared to building useful infrastructure, investing in education or industry which will help generate a trade surplus.
Latest Answers