Topic: If They Can Pay off their Debts, Why Don't They? - page 5. (Read 1152 times)

True that but there is no need for that because the contract of debt is not a one-time payment but rather it can be paid in installments.  This is the reason why the debt of a country last of decades.  Since the interest is minimal, a country can take advantage of it and pay the debt without greatly affecting its annual national budget. 

It is true, if the US decided to print more dollars, the value of their currency will deflate due to inflation and their economy will suffer.

The impact of paying international debts all at once will be felt by the people or us as ordinary people if this is done by the state all at once. Usually international debt issues also have a more detailed agreement regarding payment and this is agreed upon before the debt occurs in a country, so the country in debt only has to comply with the rules in accordance with the initial agreement. Because the government cannot make decisions according to its own wishes regarding anything related to the state.

You should not puzzling these things. Debt is essential for a country's development because it is not sufficient for a country to survive only with its income from taxes and other sources. That is the reason government banks take loans from private banks, and private banks take loans from their users and pay interest. Make loans for importing goods, which I don't think is good for long-term sustainability. There should be a balance between the imports and exports of two countries. If imports are higher than exports, then that country should take the necessary steps to maintain balance between them. Loaned money should be spent on country development, which can generate more income for that country.

I understand this in such a way that each country has a budget that they form for a certain period, and accordingly they see how much money they need for normal functioning and development. Obviously, this does not allow them to pay off the entire debt in full, since they will not have funds left for normal functioning, so they pay off this debt in parts. For some countries this debt is decreasing, for some it will increase if their budget is not enough, it depends on many factors, and everything is much more complicated.

I actually thought of this as well. If the government decided to pay for the international debt the country owns, wouldn't the effect fall on us? Additionally, just because a country's economy looks good and on top of the other countries this does not mean they have the capacity to full pay their international debt in one go.

Because it's not like this!
You don't just go to the same bank and ask for money and more money and more money, every single time the USA (well not the country itself but let's skip the details) goes to the markets to issue debt they offer a new contract, a new interest rate a new sum, the USA has closed thousands of engagements of it's former debt, it's not like the first guy that lent them money still has money owned.

If I get $200 from you, then $300 from another guy then I take $400 but I pay your $200 as we agreed, does that mean I'm not paying my debt?
I just did! The USA has always paid its debt, and that's why people are still lending them money because they know they're getting paid back, unlike the ..what do they call it, the new world bankruptcy team?


And it doesn't have to be that extreme example
Let's say you have just lent someone at 8% interest rate, and you can lend to somebody else at 6%, doesn't it make sense to take a loan at 3% and give that guy his loan at 6%? You're still in debt but servicing it is lowe than what you get paid in your turn.
Debt is bad only if you don't have a clue on how to manage it, my family spent nearly 25 years with our business in debt, we still have a few loans mainly for machinery but if we hadn't done so we would have probably never had a business in the first place at all.


As I told Synchronice, things are not that simple.
There is not a single debt there is no single contract, and there are not just two entities here.
The bonds mature every year and sometimes even every month, those have been serviced for as long as the country is, the country pais its debt issue new bonds at different interest, pays those as it issues others and so on, it's not your average bank credit line that you try to pay a bit each month, borrow again and so on!
They are paying the debt, if the USA missed any single of it you would have known, if anybody had their bonds payment at the 5, 10 years maturity mmissed we would already know it as the whole economy would be in the drain, but they have to date serviced every single one of them.

Again, stop seeing this as a single debt, it's made out of millions with different interests and different periods, and yes, all that have reached maturity have been paid to date!

Owing debt is never an issue, even the most powerful country is owing debt too and there is nothing wrong with that.
A country would always look for a way to better it country economy and by doing that, they will keep demanding for natural resources from other neighboring countries around to make sure that they keep up with demand of the citizens.
If you are owning your neighbors and also there are people that are owing you too, I think that can be balance if you debt is equal to the ones others are owing you or what they are owing you is beigger that what you are owing. The concept of debt can never stop because there will also be cross country trades.

One of the problems is that not everyone understands exactly what a country's INTERNAL DEBT is. And they don't understand what is the internal debt of a DEVELOPED country, and others.
If we talk about the external debt - also do not be one-sided, because the external debt is not a BALANCE, it is ONE indicator, but you forget about the second - it is debt obligations to this country, other countries of the world. And there the picture will be much more unpleasant, for those who like to shout "look at their debt"

I also see it this way, surely a country's budget has been planned long ago and surely they will prioritize it more than paying off their debts first. One of the country's income is from taxes paid by each citizen and maybe they have other considerations. I think it's understandable why that happens, because I'm trying to make a problem on a personal scale. For example, I'm in debt, my income is not enough to pay the debt in full every month, and the option is to pay it in installments. It's possible that I could pay off my debt in a month, but of course I can't do anything including basic needs that might not be met.

Why don't you understand? Let's say I took $100 loan from you, paid $20 back, then I took $100 again, paid $30 back, then I took $200 again, then $300 again and paid $50 back. Am I paying my debt or am I increasing debt? When my debt increases all the time, that means that I am not paying debt back but instead I am taking even more. That's what America is doing, check how much they paid recently and how much they took afterwards, you'll be amazed.

That's a really good point! I admit!

The subject of national debt is very interesting topic of discussion among prominent economists, reflecting different viewpoints and opinions. The complexity arises from challenging choices that governments make between allocating resources towards ongoing infrastructure development projects, funded by their revenues or start reducing their national debt. The leading economies of the world like USA and Japan often prefer to continue with their national debt as due to lower interest rates in these counties the cost of servicing debt is low, therefore it makes financial sense to continue borrowing rather than paying off their debt.

I don’t understand why it is assumed that government can pay their debts. In the case of the US, even if they could make money magically appear without any added debt, inflation would cause prices to go up by like 175% overnight given the increased cash in circulation. We have reached the point where governments paying off debt is not possible.

I want to speak from the perspective of the lenders. We lend because we want to really help and indirectly gain a control of the country or organization we lend to, because when they fail to pay back as at when due, interests will increase, our influence and products will be easily flooded in their markets and we will be mostly able to dominant their business, lands, and own a greater part of their GDP annually until we consider the debt fully settled.

The truth is most debts cannot be repaid because it was used for development of humanity and preservation of  civilization.

You know why they can't pay debts in full? You and me will be affected by it.

Where the government is getting their funds and budgets? From us, from our taxes, from any other services that's put on top of the price so it becomes more expensive.

That means, higher tax might happen, higher price will certainly occur and that's not something good for most of their citizens. Although it is doable, they can't just do it on an instant.

I am not an expert in economics but when I look at the performance of a government I think they must also be aware that when they pay off the debt they have immediately it will disrupt the financial system they have because after all stability is important and rather than doing something risky by immediately paying off large debts they must have a basic budget that is used as a benchmark and they have other priorities such as in infrastructure or other things that they think so surely they will prioritise the agenda they set up rather than immediately paying off large debts in cash.

Maybe there are only a few countries whose foreign debt is not large, but this is not always the same for every country. Because some countries that are not yet developed or developing countries have debts that are larger and almost comparable to the debts that people have in their own banks. And there is something that makes sense from what you say, namely that the government can benefit from the development of infrastructure, health services and education.

Because it was built with existing funds in the country obtained from several sectors for development, while I think the people who are in debt are only burdened with the amount of interest determined by their own banks with written provisions. So the relationship with the government is not that close or much because they are only related to the bank.

Well, the US probably can pay off their debt by printing some extra $40 trillion (money printer go brrr) but what will be the aftermath? That would kill the US economy and potentially drag the Global economy into the abyss too. 

Seem a good reason not to pay after all even the countries with bigger economy is not even paying their own. The rest of the world is doing the same so why can't they do it too?
It's easy if their currency is the reserve currency though just like the US. But even the US does have a huge debt as well which to this day the FED is trying to solve in order to have a soft landing.

Governments can do what they want and Not paying is among them. They won't pay.
That's just it and most of the time, they tell to their citizen that each of them has a share of debt to pay.

A big chunk of this debt is from their own people and banks. Actually, they pay off these debts with interest, but it's not like they pay everything at once. These funds circulate from one sector to another, and the government and banks earn profits by investing a lot of them in developing infrastructure, healthcare, education, and foreign trade. External debt is also included in these figures, but that is not that big.

Why would they? Many people make it their dream in life to borrow as much money as possible without having to pay it back and face any consequences, which is effectively what these countries are doing. They are walking the tightrope act of borrowing money while still being able to pay interest payments on those demands, which effectively allows them to get much richer and if they were to use that borrowed money effectively it could be extremely advantageous to them (but they rarely do). Take Greece for example, a lot of credit was extended to them but they are a fairly small economy that is largely dependent on tourism, most of the populace live a relatively easy life and aim to keep it that way, which is part of what caused the Eurozone crisis a while back when they were inclined to default on that debt and undermine the Euro in return.