Why is the World in debt, how do we pay it off, and why should we care?
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People have already explained several aspects, such as debt not being that big a deal, or people owing debts and being owed debts, so I’m gonna approach another angle, and say something may sound a bit bold:
**Debt is good.**
People panic over debt because, when you as an individual have a debt, your entire thoughts are consumed by paying it back. Being in debt is bad and dangerous, what if you can’t pay it back, and it’s a big fat red minus on your money… Point is, we don’t want to be in debt. So for a country, it must be the same, right?
Not really.
*All debt is, in practice, is a way to move money from the people who have it but aren’t using it, to the people who need it but don’t have (enough of) it.*
Why would governments choose to take on debt? Because you need money to make money, and *having more* money lets you *make more* money. Suppose you want to build a bridge over a river. That bridge will encourage trade, and the toll booth on it certainly won’t hurt. Over the course of (for the sake of the example) a year, it will have completely paid back for itself. But you don’t have the money to build it, so what do you do? Well, you borrow money, and then use the money the bridge made to pay back the money you owe.
Obviously, the government has enough money for one bridge…But now multiply across the entire nation. The more money a government has, the more projects like these it can undertake, the more money it will make. Borrowing money lets it undertake more projects that make money to pay back its debts (and then pure profits baby!). So taking on debt is common sense!
(Mind you, this is essentially the same logic as borrowing money from the bank to buy a house rather than trying to save every penny yourself while also paying rent.)
But let’s say we decided that debt is bad. What would happen if suddenly everyone stopped taking on (or issuing) debt, the world economy would grind to a halt. The money would still be there, valuable as ever (in fact, probably getting *more* valuable under deflationary forces), but it’s being held by people who don’t want to spend it, while the people who *would* want to spend it (and thus keep the economy going) don’t have the money to spend. Heh heh, we’re in danger.
This is what happened during the 2008 banking crisis. The subprime collapse was bad enough on its own, but what *really* fucked everyone over was that the banks suddenly didn’t trust *anyone* to not default on their loans, and so stopped issuing them almost completely. Therefore nobody can take out a loan to buy a house, houses remain unsold, investment is at an all-time low, and the world machine grinds to a halt.
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