If all countries increase their debt in difficult economic times, they can’t be borrowing from each other, so who do they borrow from?

Question

If all countries increase their debt in difficult economic times, they can’t be borrowing from each other, so who do they borrow from?

In: Economics

Answer 1

Countries sell bonds as investments. These bonds have a fixed time period before they’re paid out. They get invested in by many different groups, including some foreign governments. For instance, the Social Security program in the US holds ~$5 Trillion dollars in bonds.

Unlike other forms of debt, these bonds are fixed term. They cannot be cashed in against the government until they have fully matured. Even though Japan holds a few trillion dollars in debt, they can’t just turn around and cash it in when they want. They typically take ~20 to ~30 years, depending on the term of the bond.