Why is the World in debt, how do we pay it off, and why should we care?
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Debt is great, it’s fundamental to the way our economies work. As the old adage goes, you’ve got to spend money to make money. But how do you get that money in the first place? You borrow it, and go into debt. For individuals that might be something like starting up a company, or buying a house (which doesn’t *make* money, but saves you a fortune on rent).
For a governments, it’s often building infrastructure. Roads, schools, hospitals, power plants etc. are all really expensive. You might be thinking that’s what taxes are for, but it’s hard to justify charging people taxes when there aren’t any roads or schools. So you borrow the money first, *then* build the infrastructure to bring people in and charge them taxes.
So where does the money come from? A lot of the time it’s the counties citizens, in the form of government bonds. Basically a promise that the government will pay you back, with interest, in some set amount of time. People can also invest more directly in a project for a share of the profits. These bonds and investments can be made by foreign citizens, companies, or governments as well.
It only becomes a problem if people stop paying back debt. If the government stops honouring previous bonds, nobody is going to buy any more; all of a sudden they can’t afford to build anything new. They could “save up” tax money, but that’s a very slow process.
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