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
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>but how can they do this for basically ever?
1) They can pay off the interest, ( 7.6% of the all US spending, 28.3% for Japan). You could get a $100 loan every year for the next 50 years. You can affords the $5 loan. For every dollar a US tax payer pays, 7 cents goes towards paying off past debt.
2) Governments don’t age and die. They can keep working forever. There is no retirement they have to plan out and can be in debt forever… if they really have to.
3) As long as the economy grows, going deeper into debt isn’t a big deal. It’s the debt-to-GDP ratio. …..Which has also been going up.
4) They can’t. No trend will continue forever. Earth has a limited carrying capacity and we’re well over it. Eternal growth is not possible. Not without reaching out to the stars, but that seems unlikely any time soon. What IS soon is the coming realization that all sorts of economics change when the population isn’t growing. The world just hit that inflection point. The US is going to be okay as we artificially keep it going with immigration.
Deficits matter, but as long as they’re small compared to how wealthy we are, it’s not a huge issue.
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