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?

Question

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

Answer 1

Countries are in debt because their citizens like government services more than they like paying the taxes that fund them.The government sells bonds to investors, who want to hedge the risk of investing in companies. The consequences are that investors get more safety and citizens get more services. Alas, when interest rates go up, the government can’t afford as many services, without exploding the debt. It’s only bad when the government does that and lets inflation run wild.