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
Debts by definition are real (why count them as debt otherwise) and repayable (or else they would be called gifts, donations or, in the case of governments, taxes). Debts can go “bad” ie when lenders start to believe they won’t get paid back or if the borrower stops paying them back.
In theory, governments can simply stop paying. Practically speaking, they won’t unless it is completely a last resort. Writing it off would mean that the currency value drops by a lot. Not only the government but private citizens wouldn’t be able to trade internationally, inflation would skyrocket, domestic production would be hurt.
Goods like food and basic produce go into shortage, welfare stops, pensions are worthless etc. This commonly leads to the downfall of the government or, in worst case, lots of conflict and death.
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