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Started By
Message
International finance guys...question about world debt
Posted on 10/12/17 at 11:12 am
Posted on 10/12/17 at 11:12 am
I was perusing the world debt website and noticed fairly quickly that every country is in debt.
China, Austria, the US, pretty much everyone that has an operating government, right?
OK here's the question.
How does country A lend money to country B when Country A is also in debt up to its ears and beyond?
China, Austria, the US, pretty much everyone that has an operating government, right?
OK here's the question.
How does country A lend money to country B when Country A is also in debt up to its ears and beyond?
7
Posted on 10/12/17 at 11:13 am to roadGator
Because when you print your own money, the numbers don't matter (until they do)
Posted on 10/12/17 at 11:14 am to CorporateTiger
It's all just bullshite in other words right?
There's nothing really backing all the debt any longer, right?
Giant shell game is what I'm sensing here.
I guess I'll just enjoy the ride.
There's nothing really backing all the debt any longer, right?
Giant shell game is what I'm sensing here.
I guess I'll just enjoy the ride.
Posted on 10/12/17 at 11:16 am to roadGator
quote:
It's all just bullshite in other words right?
Basically.
quote:
There's nothing really backing all the debt any longer, right?
Nothing except our common understood acknowledgment that if you pull on any part of the system it unravels entirely.
Posted on 10/12/17 at 11:50 am to roadGator
Think of it this way - Only about $6 trillion of the US debt is held by foreign governments. The rest is held by Social Security, Medicare, and other retirement accounts, the Fed, banks, insurance companies, mutual funds, etc. So we're really borrowing money mostly from our own public and private institutions to fund the government.
This post was edited on 10/12/17 at 11:51 am
Posted on 10/12/17 at 11:50 am to roadGator
Mostly because the governments don't lend the money, individuals buy up bonds as an investment. Basically the governments borrow money from the people.
The point at which it will crash is when the government becomes so indebted that it cannot make interest payments on the bonds. So then investors lose confidence, the bonds become worthless, and the Govt cannot borrow any more money
The point at which it will crash is when the government becomes so indebted that it cannot make interest payments on the bonds. So then investors lose confidence, the bonds become worthless, and the Govt cannot borrow any more money
Posted on 10/12/17 at 11:51 am to roadGator
Mutually assured economic destruction.
That’s why I laugh at the $17 trillion number or whatever it is.
It doesn’t matter. Especially since we’re the hegemonic military power as well.
That’s why I laugh at the $17 trillion number or whatever it is.
It doesn’t matter. Especially since we’re the hegemonic military power as well.
Posted on 10/12/17 at 11:55 am to roadGator
It's not all that different from people having a house mortgage, a car loan and/or a credit card balance (debt) but they also have money deposited in their bank (they are loaning the bank money) or having a treasury money market account with their broker (they are loaning the government money). 
This post was edited on 10/12/17 at 11:58 am
Posted on 10/12/17 at 11:57 am to roadGator
quote:This is why the debt on the national and global becomes almost as abstract to me as an infinite v. finite universe. I get why the concepts mean at a literal level and in theory, but their conceptualization on the practical level is oddly abstract and confusing. Usually it's the other way around.
How does country A lend money to country B when Country A is also in debt up to its ears and beyond?
Posted on 10/12/17 at 12:09 pm to buckeye_vol
Another point to consider is that the US government may be $20 trillion in debt but it still has a large amount of assets too, though not $20 trillion.
And when you factor in all assets and debt (both public and private), the US has a net worth of over $200 trillion thanks to households, businesses, and local governments.
And when you factor in all assets and debt (both public and private), the US has a net worth of over $200 trillion thanks to households, businesses, and local governments.
This post was edited on 10/12/17 at 12:11 pm
Posted on 10/12/17 at 12:12 pm to cahoots
I have no idea how but I skipped over private/public bonds and I even have a stack of them somewhere. 
Posted on 10/12/17 at 12:37 pm to cahoots
quote:
Another point to consider is that the US government may be $20 trillion in debt but it still has a large amount of assets too, though not $20 trillion.
Oh, they know where to come knocking for the rest of that 20 trillion in assets... Beleee dat.
Posted on 10/12/17 at 12:41 pm to cahoots
quote:
And when you factor in all assets and debt (both public and private), the US has a net worth of over $200 trillion thanks to households, businesses, and local governments.
What are you saying here? What difference does it make to the US, in this context, if Bill Gates or whoever has a $100 billion net worth?
Posted on 10/12/17 at 1:07 pm to uway
Projected future revenue for the U.S. is synonymous with future tax revenue.
Your tax revenue is based on the effective tax rate multiplied by your tax base. So the larger the U.S. tax base, the larger our future revenue, the safer our debt is.
Your tax revenue is based on the effective tax rate multiplied by your tax base. So the larger the U.S. tax base, the larger our future revenue, the safer our debt is.
Posted on 10/12/17 at 1:39 pm to roadGator
Countries don't really lend money to each other in the manner you are alluding to. Financial institutions and individuals own the debt in the form of bonds, t-bills, etc. Yes, China is our largest creditor, but they are still a minority holder of our nation's debt. They themselves own a bunch of our Treaury securities that can generally be traded on the market. And it's not like they are taking money out of their treasury and giving us a big loan. It's all generally part of the same system. That's why it's stupid when you hear someone like Trump suggesting that we default on our Chinese debt because screw them. It would unravel our financial system and likely that of the world.
This post was edited on 10/12/17 at 1:44 pm
Posted on 10/12/17 at 2:48 pm to uway
quote:
What are you saying here? What difference does it make to the US, in this context, if Bill Gates or whoever has a $100 billion net worth?
Because the government can shake down the citizenry to pay off the debt if need be
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