Who are we in “world debt” to?
In: Economics
I assume you mean, for example, the US national debt.
Imagine that you and your spouse maintain separate bank accounts, yet you share responsibility for paying bills, mortgage, etc. you effectively share finances. At dinner you forget your wallet and “borrow” $100 from your spouse. It’s technically borrowed by you, and technically owed to your spouse. At the end of the day it’s all shared money anyway, so what does it matter? It matters when you write it down and record it.
About 30% of the national debt is owed to itself. This is just like the scenario above – one government agency borrowing from another and the transaction being recorded.
Around 60% of the debt is owed to foreign countries. Likewise, those same foreign countries continue to borrow from the US. Back to that circular shared money analogy.
The remaining 10% is the government borrowing from citizens in the form of various types of bonds. And guess what – if you own one of these bonds and you cash it out, the government may very well borrow from itself in order to pay you – thereby escalating the whole circular thing.
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