I feel like the United States is always meddling in other countries affairs and yet still climbing further into debt. Kind of like someone giving you advice on a golf course who is terrible themself. Is it the military presence? Economic relationships?
In: Economics
Part of it is that the USA still generates tons of wealth, and other countries aren’t worried about its ability to pay back loans. Countries that are doing really poorly compared to the rest of the world have a harder time borrowing.
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Sovereign debt is really weird for countries that issue it in denominations they control. They can always repay it by creating more money. You should see as more of a way to draw money out of the economy to control inflation, as more money lent to the government means less money chasing scarce goods and services.
It’s not debt like you student loans are, or your mortgage.
If you annoy the US, and that includes not trading with them, they park an aircraft carrier just outside your largest port.
While that sounds like they have a mobile airport hanging around, that doesn’t portray the entire picture.
Imagine an aircraft carrier as a small city, with an airport, that just happens to have a few dozen nukes that it can fire off whenever it’s politically useful. And a few medium sized nuclear reactors that, if anything unfortunate were to happen, would sink, leak, and make the seas around them inhospitable.
Also, the US has some rules in place that would treat any attack on that small city, just outside of your main port, as an attack on US soil that would necessitate reprisals.
One thing is that a big part of the US’s debt is to it’s own people. This doesn’t sound like it makes sense, but if you break it down into how the US Treasury Department sells bonds, and should pay them back, it starts to become clearer.
As in, if you buy a bond today for $1,000, you’d wait the 5 or 10 or 20 years (however long it ends up being), and get paid back $1,000 plus whatever interest rate is on it. Lets say you’d get back $1,250. Technically, the government “loses” $250 here, but there’s a decent enough chance that they’ll make that up with further bond sales, they could use tax revenue to cover the gap, and so on.
Another big hole, as far as debt is concerned, comes down to retirement accounts for government personnel & military, along with social security payouts. Again, this is money that the US government owes it’s own people.
In terms of other debt to other countries or similar non-US entities, the US *typically* pays that off in full and on time. I’m sure there’s been some exceptions and hang-ups, but a few billion owed to a random country is next to nothing compared to the trillions the US owes to it’s own people.
First off the US isn’t that terrible since most countries are in debt. [(list of countries).](https://en.m.wikipedia.org/wiki/List_of_countries_by_external_debt) Secondly, most of that debt is to its own citizens in bonds. You may have heard of a grandma buying a bond for their grand kid when they are born and because of the interest it’s worth twice as much by the time the kid is an adult. Many of these bonds have been destroyed so it will never be cashed in even though the interest for it will keep getting counted. Also much of the international debt was caused by caused by corrupt leaders thinking, “this money will make people love me and the debt won’t be my problem in a few years”.
Debt is not necessarily a bad thing. Money in hand is usually better than the promise of money later. In order to pay for a project, you need a lot of upfront cash. The USA could afford to pay for the project by collecting taxes for the next ten years, but they need the money *now*. So, instead of waiting, they go into debt to raise that money. While in debt, they comfortably make their payments and eventually pay it off.
For example, let’s say the USA wants to build a bridge. This bridge will cost $100 million dollars upfront to get started. The USA does not have that money on hand. Instead, they borrow the money and build it right away and pay it off for the next 10 years. Yes, they would have to pay interest on that loan, but having that bridge in position 10 years earlier means they can also get 10 years worth of revenue from that bridge, which could be more than the interest lost.
Everybody uses this same principle. Very few people can afford to buy a house. However, they might have good jobs and could afford to buy one if they save money for the next 20 year. But, since they cannot live on the street for 20 years, they get a mortgage and buy the house now. Living in that house for an extra twenty years is worth the added cost on interest on that mortgage.
Simply put, it should be viewed as debt to GDP ratio.
Imagine a millionaire, they might have tens of thousands of dollars of active debt, but because their income is so high, it only represents a tiny fraction of their worth.
Where as someone that is living off minimum wage, if they were to have that same debt, it would be crushing and almost certainly defaulted upon.
isnt it mostly issued through government bonds? some1 correct me if im wrong but basically they owe the money to themselves..
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