The USA and Chin have the highest debt in the world but i don’t understand the concept of them being some of the wealthiest countries, does that debt need paying off? How do they get this debt? Ultimately it just doesn’t make sense to me.
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I know it sounds contradictory, but the fact is that government debt is just nothing like personal debt.
Government debt it’s an investment in the future and the expected growth of the economy. Deficit spending can actually be good for a country as long as the economy grows faster than the debt and the government budget isn’t eaten up by interest payments. Governments issue debt by selling bonds. People want to have these bonds in wealthy countries with strong, stable economies because they know they’ll be paid back with interest. The U.S. specifically is has the world’s highest GDP and the U.S. dollar is the de facto world reserve currency. It’s just about the safest investment there is.
So yes, that debt does need to be paid, but as long as the government makes timely interest payments, it can just reissue new bonds to pay off old ones, and the economy keeps growing and everyone is happy. There’s no real risk that the U.S. will stop existing or stop being able to to pay off its debts, so people will keep buying bonds and so on.
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