Why Are So Many Nations in Massive Debt? Who is Lending Them All This Money?
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Nations have become like a company.
They use the money generated inside and outside. And when they need (are forced) to spend more, private banks lend them money.
That loan has to be paid and you pay more than what you get.
So you keep spending money for your country without taxing where you should and you end up needing money to keep on existing.
Regular people are, as well as banks and other companies.
Owning sovereign debt is usually a safe investment. Governments borrow money a lot, so they will try to ensure they have good credit; that means paying back those debts (with interest) reliably and on time. So if you want a safe space to put money with little risk but also not great gains (like a retiree), you can buy government bonds to lend the government money.
Banks and companies will do the same thing. If there’s no good use of funds right now, might as well invest them so that they’re making a bit of interest.
You do, but indirectly.
Pension plans, banks, and to a lesser extent everyday people (looking at you Japan).
A pension plan has a mandate which often will prescribe things like “you shalt own between 30% and 40% of AAA rated bonds or similar financial instrument.” So, if the consensus rating on a country drops outside this mandate, the pension **must sell** them and buy another country’s debt (see “financial contagion” or “panic”).
https://en.wikipedia.org/wiki/List_of_countries_by_credit_rating
Banks sometimes must hold a percentage in these instruments as well to prevent them from investing too much in riskier assets – this is often called a capital requirement.
So a sizable chunk of the housing market is backed by government debt. And because of pension plans, so is a good slice of the stock market.
It isn’t necessarily that people are lending them money. Debt is simply money owed. For example, if you retire, the government will pay you $X/month. Multiply that by all the people retiring daily, and the government now owes a lot of money. This is then paid for with people buying bonds.
> Why Are So Many Nations in Massive Debt?
Several decades ago taxes were higher so a Nation expenses was covered by taxes. As conservative movements took root in the West, taxes were reduced. As countries need money to pay for education, health care, military, police and other investments in the population well being independently of how low the taxes are, a gap is created between the money that goes into the public treasure and the one that goes out.
> Who is Lending Them All This Money?
In a touch of irony, the same people that used to pay taxes. As the rich have more money available they can lend that money to the state in exchange for interests. So, Nations are mostly in debt with rich people from the Nation itself. That is why you will hear that “the country owns money to itself”.
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