I cannot get my head around it, what is it? I have heard it is not like debt we go into, who are the government in debt to exactly? And what are the consequences of not paying said debt? Could another country claim our assets or something?
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To explain it at a simpler level than the other people here.
Imagine if your town wants to build a bridge, and it would cost 50 million dollars. Your town could now borrow this money from various sources including banks, a bigger government, or more likely by issuing a bond.
In a bond, the government might make 500,000 bonds for $100. If you buy a bond for $100, the city might promise to pay you back $3 a year for 50 for years. Over 50 years they would pay you back $150 for each bond.
Now the city might not be able to afford 50 million today. But they might be able to afford $1.5 million a year to pay back that bond.
The same is true for a whole country – you might buy a fighter jet for your country using loans or bonds.
A big country though can print more money to pay back the loan.
However if they do print money to pay the loan, this can cause major inflation.
The person you paid that money to now has a lot of money and they can afford to pay more for things than many people in your country can.
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