How do countrys get in so much debt and why do they keep expanding on ther debt?

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How do countrys get in so much debt and why do they keep expanding on ther debt?

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Anonymous 0 Comments

For anyone interested about this question I would direct you to play Victoria 3. It answers your question quite well.

If you look at a country having a treasury (which they can gather their surplus money) and a maximum viable loan size before they would be forced to default. An important metric to a country is the GDP of said country. It shows you how large the market of a country is. Consequently it shows how strong the economy of a country if you relate it to how big the loans of said country are.

A country should want to increase its GDP as much as possible. They can take quite a few policies or even direct action (like building infrastructure or founding state run companies) to increase it. In this situation money sitting in the treasury is money not spent in increasing GDP. Except emergency situations and some specific reasons a government would strive to have an as little as possible surplus in their treasury. They will even go a step further and even borrow money to grow their GDP faster. As long as their GDP increase outpaces loan interest then they would be increasing their GDP quite fast with little to no adverse effects. Now that is under ideal conditions. Reality is a bitch and won’t let things go your way. This makes such economic expansion quite risky and the source of the woes of many countries these days.

A good advice would be to every few years or decades clear out your debt so your market can actually stabilize. If your market is constantly expanding , it is quite hard to notice and solve problems that might be plaguing it. A good example would be the housing market bubble in China.

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