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.
In: Other
It’s a debt to itself.
In ELI5 terms, if you have an allowance, it’s like asking your dad for an advance now to get a bike so you can make money delivering newspapers and return it back to him sometime later. You owe a “debt” to your dad and you’re working hard to pay it back, so your dad is probably never gonna call it in.
National debt is a good measure to know how much of an advance you’ve taken and what you’ve done with it so far.
The more you make, the higher debt limit they give you. That’s true for people, companies, and countries. When you first apply for a credit card and make 40k/yr, they give you a $500 credit limit. Once you start making 100k/yr, you suddenly have a 30,000 credit card limit.
Imagine a homeless dude. Dude has no assets but maybe 10k of debt. Imagine a dude in a suite making 400k a year but has 2M of debt being reclaimed at 200k a year.
The same reason nobody worries too much if a person that makes $500,000 a year takes out a loan for a million dollars, but someone that makes $40,000 a year can’t get a loan for more then $200,000 or so.
Rich countries have lots of money and can barrow lots of money without it being a serious problem.
Latest Answers