The UK’s debt is apparently now over 2 trillion, but it’s not clear where this money comes from or if they ever actually pay it back.
Is the debt real/repayable? Could we just write it off?
In: Economics
They borrow money by selling bonds. Anyone can buy them. The bond might cost something like £100 and it will do something like pay the buyer £1 a year for 20 years and then pay back the £100. This is the same as borrowing £100 and paying 1% interest for 20 years and then paying it back.
You can also buy bonds second-hand from people who bought them from the government. That’s what people mean when they talk about the ‘bond market’ (which also includes bonds sold by businesses).
> Where do governments borrow money from?
Anyone who wants to buy bonds, including their own citizens, businesses, foreign citizens and foreign governments.
> if they ever actually pay it back.
Yep, each year they pay back whichever payments the bonds specify. They will also issue new bonds, so the level of debt might increase or decrease depending on if they’re paying out faster than they’re borrowing more.
> Is the debt real/repayable?
Yes.
> Could we just write it off?
Yes, but it would make people not trust us so we wouldn’t be able to borrow again in the future. Also it would make other countries angry and they might sanction us in some way. Also it would be bad for UK citizens who had saved using bonds, so it would be a bad move politically to harm them.
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