So apparently pretty much every country in the world has a national debt that is ever increasing. Different elected governments try to enact savings to stall the debt growth with varying degrees of success, yet always the debt grows. Often I hear it said “we cannot afford these social changes, the national debt increase is not sustainable” etc.
So please, if you can to me how national debt works and what is too much?
In: Economics
The short answer is “it’s a problem when the country is no longer able to make its debt payments on time”, and the longer answer is “well it depends on the country…”
You’ll sometimes see people suggest things like particular debt to GDP ratios or whatever as tipping points, but really if a country has a strong economy and investors are confident that the country will be capable of paying back the debts and interest, then they’ll generally be happy to continue to buy more of that debt regardless of any specific numbers.
For example, the US can get away with a large amount of national debt and investors are generally still confident that they’ll get paid back because the US economy is massive and generally strong and the US government has been very consistent in making payments on time. Smaller countries with smaller economies are typically seen as more risky because their smaller size makes them more vulnerable to global market conditions.
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