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
For a country to be successful, you need infrastructure. To build it out, you need money. But you know once you build it, country will be wealthier, so you can pay it back and still have more left over like if you didn’t borrow them at all.
So they borrow to invest and they get even more money back in taxes, everybody is happy.
If the economy grows, for example, 3% and government borrows at 2%, they are actually making money on this! (because bigger economy brings more taxes) So there is really no reason not to borrow, if you can get low interest rates. It would actually be bad for country not to borrow.
Who do they owe? Mostly funds, which manages retirement money, but also central bank buys some (though this is limited because buying too much would cause an inflation). Funny thing is, that central banks profits is going back to government, so the debt that is bought by central banks is basically free. But government has no control over how much central bank buys.
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