Why are most countries in debt, who do they owe, and what are the consequences? Why do they go into debt in the first place?
In: Economics
Because they get absolutely fantastic terms for their loan. Cheap enough loan is basically free money and of course a government being a rather reliable debtor with guaranteed income base is going to get very cheap loans. Often the debt is auctioned off, government borrows from whoever gives the best rates. But as the mountain of debt increases, then they become less credit worthy, they don’t get that good terms anymore and borrowing gets expensive so that’s the soft ceiling to how much a government can enjoy cheap money.
Latest Answers