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
Short anwser a country is in to much when it cant pay the debt back.
When that happens is diffrent for each country. But idealy we would want to know that it happens befor it happens, so we try to use diffrent metrics to figure out when it is likely that a country wont be able to repay its debts.
A few metrics are debt to gdp so how much debt has a country compared to the value the country produces each year. Another on is debt increase to gdp growth, so is the gdp growing faster than the debt is. If debt growth faster than the gdp that means without any changes the debt will at somepoint be to much for the economy of a country to handle. Another metric is debt payments to goverment budget, if the debt payments are a very big portion of the goverment budget that means it will most likely not be able to full fill other duties a goverment has, so it has to increase income (ie taxes). What is to much is very much debated and depents on a lot of thinks and there are no easy anwsers.
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