Topic: If They Can Pay off their Debts, Why Don't They? - page 7. (Read 1161 times)

You are very much correct on this. I have a little knowledge about international debts based on countries, but I do not understand it deeply I was going through all the comments in order to see the one that aligns with what I have learnt already and luckily I have seen this your comment. When you are indepted in the international standard either borrowing from another country or from the IMF. You have to pay back by producing more and exporting or by printing more money from your local currency and printing more money will have to devalue the currency in the international standard, and that is the option many countries are using, including my own country, Nigeria.

If almost all the big countries of the world are indebted, then who are the creditors and how does the creditor make the money they borrowed to the countries? Naturally, being indebted is a very depressing situation to be but seeing that countries willingly choose to be indebted, as it is looking like, makes me wonder what the motivations are.

It is known that external debt also affect the strength of the currency, could it be that the reason some exporting countries, like Japan, keep this debts is a way of keeping their currency low?

Paying off debt as a country means producing a budget surplus: generate more revenue in taxes than are spent by the government. With how much debt has been generated among these countries, the repayment plans would take some number of decades, with many years requiring large budget surpluses.

Because these countries can print their own money, there isn't an incentive to produce budget surpluses, rather just borrow money and leave it to another generation to pay it back in 30 years.



There can be, yes. If you believe the debt taken on at any given time will lead to future prosperity, then the debt is an investment. For example, if you're the government and you issue 50M USD out in federal loans for young people to go to college and receive specialized education in engineering and medical science -- that 50M of debt could theoretically pay for itself over the lifetime of these young people given that they contribute to the economy with their specialized education and repay the government for these loans.

But the many trillions of dollars that are tied in debt with the countries you mention are far from investments with a positive return. Point being, not all debt is bad debt.

“They are just debts” you can imagine! How they’ve made common the lending services and there stands on payment.
The issue with the government of our time and even in the time past because, these are accumulated debts that continues to accumulate with all succeeding government is that, they don’t have a definite plan to pay off these debts.
The government of our time don’t believe in continuation especially where am from, the relevance of a government is measured in the projects your able to start down to completion and we all know, no government can deliver on that. This results in an unending of initiative which brings about taking more and more loans and the nation ends up in more debts than the previous administration. It’s a huge problem and that’s as huge as the debt figures itself.

So, just how is the government making the payments in a way that it breeds any significance to the accumulated debt when you could still find them taking loans to run projects. The debt idea is just bad!

Countries would always be indebted to each others they always want to develop their country and invest on some area of their countries such infrastructure and many more, i think they pays gradually not to affects their economy growth. Let say for example like Africa particularly Nigeria they are indebted to China and yet they kept borrowing not because they can't pay off those debts but I doubt if there could be a stable economy in country if those debts are being cleared because currently there are lot of inflation and economic crisis where they all depends on each others to survived and sustained their nation.

Secondly, are there any benefits, economic or otherwise of a country being in debt?

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1. https://www.usnews.com/news/best-countries/slideshows/top-10-countries-with-the-heaviest-burden-of-debt?onepage
[/quote] personally, I think being in dept isn't totally wrong as long as you use the money for the right thing that would yield profit in the long run. Most of the developed country that are still in dept are using this fund for there countries infrastructural development which will be of benefit to the m in the long run

This is continuous with each other and also the debtor or creditor countries have cooperation agreements/agreements. Apart from that, debts are not paid even though they are able to for reasons of maintaining the financial stability of the country and even countries that are indebted to other countries also have giving debt to other countries too, this is a little confusing but that is how countries work together and maintain the economic stability of their country.

Japan's a highly developed country, but its GDP in 2022 was around 40% of that debt. And, of course, you can't just literally stop everything and pay the foreign debt because everyone will die without having any money, the country will collapse, etc. What can be done is a plan to gradually repay the debt, say, over 10–15 years. But the thing is that you don't really need to not be in debt. What you need to do is pay debt obligations, some sums of money, by some deadlines.
As for the rest, debt can be a way of interdependencies that show trust and alliances between countries. If you're willing to borrow from a country or give to a country, it shows that there's some level of trust there, and if you're hostile, you wouldn't do any of that. So if you repay all your debt, not only will your economy suffer greatly short-term, you'll also become isolationist in the long run, being all independent of others. So it's not just an economic matter, it's also very much a political matter.

I believe that countries have other priorities in their management, which is why they don't pay off their debt in one go, even if they have the capacity to do so. The most significant immediate impact would likely be on the country's economic stability, as liquidity would diminish. There are indeed effective ways for borrowers to settle their debts while taking advantage of circumstances like inflation.

"Does Inflation Favor Lenders or Borrowers?"

By capitalizing on specific conditions, borrowing countries can actually repay their debts at a lower rate than when they initially borrowed. This approach also allows countries to avoid excessive expenditure on interest payments.

In the end, the government likely has a deeper understanding of their strategy and reasons behind their decisions.

Just because a country is wealthy does not mean they are capable of paying off their debts without resorting to measures that would harm their economy. Most of these countries' debts are in foreign currencies, mostly US dollars, so they can't just print their way out of it and even if they could it would lead to high inflation. When countries don't want to take measures like cutting spending or increasing taxes they will take on new debt to repay the old debt. Often these loans given to them will come with stringent conditions designed to advance the lending country's geopolitical interests. This cycle of debt can be difficult to overcome but it is possible to manage it without having to default.

Although this is macro, I think that in this case we could make an analogy with the microeconomic cases of many households and extremely simplify the reasons. With all the differences, if we can think about a family with 150k in savings or investments and a credit of 100k, why is it so hard to understand when the subjects are countries instead?

As others said, paying means a cost of opportunity: would it be a good idea if that family liquidated their investments (a house in rental, for example) to pay the debt? or losing their savings when we all should know that fungibility is valuable? Nobody wants to be rescued if they can avoid it.

There are a lot of differences between both cases (particular debt vs national debt), but the example above can help to easily understand what at first sight seems counterintuitive.

They can’t actually. There are two ways of paying debts.

1- Produce more, sell (export) more, then pay your debts.
2- Print money, pay

I am not sure about Japan but every other country in your list is printing money instead of producing more. Japan is (or used to be) the only country there which export more than what they import.

The truth is, They are losing their jobs to China. China produces, they print and buy China’s stuff. China is making money, they are making debt.

Positive mind: The country are making more money by using their debts, they use the debts to invest in order generate more money.

Negative mind: There's a lot corruption and they don't mind to see their country going to bankrupt as long as they're become rich, so they can travel to other country if the worst thing would happen.

This is why don't trust your funds with centralized sites/entity including banks.

Its a business mindset a business man prefer to buy that stuff on an installment basis instead of cashing it out because the money that should be used to pay it on cash that stuff will be used as capital to other businesses, which if it is a success then that business will pay that installment payment or even fully pay it. That's the mindset of businessmen they diversify their assets even if they can pay for them once but they can't gain anything from them.
 
Countries also aren't able to pay it in full because all of their resources would be gone as they are more focused on paying that debt, so instead of paying it all, they will do it in installments, and the other money will be used to improve the country.

The first thing you have to understand is what the concept of debt is and its uses, because by knowing the basics you will better understand why a country has debt.

Please note, as long as the country's debt and income are balanced then it can be said to be fine. Meanwhile, in countries such as Japan, US or Singapore, the debt ratio is 2x the country's income. However, the economic growth of these countries is much faster than the amount of their debt, so their debt status can still be said to be safe. National debt is not always bad, in essence, national debt is used as a reference as a source of economic growth for the country for the development of building facilities, housing, roads, schools, hospitals and other infrastructure. In this way, the economic turnaround which was previously slow can now be accelerated with the existence of debt options, economic growth can be accelerated and profits can be obtained from the facilities that have been built. On the other hand, debt can also have a negative impact on a country, for example countries such as Venezuela, Greece and Ecuador whose management of state loan money is not used properly for the welfare of infrastructure development.

BTW, I'm not someone who really understands economics so is my opinion not accepted?

I agree.

Corruption is the biggest reason why they don't pay their debt instantly, and that is called "default debts". They always prioritize their greed and to make their power more big than before, ignoring the other needs to boost their economic growth to generate revenue that could help them to pay their debts in a short period of time. Not only mismanagement of funds but a corrupt government also messed up when it comes to helping it's own country and people.

Maybe others would say "why don't just print out more money to pay their debt?" Well, it will just make the inflation worse.

In my opinion, debt is not a top priority for developed countries to pay off because they prioritize economic growth. So if they pay it off, their economic growth will stagnate, because their debt is greater than state income. but because there is a period of time that can be negotiated between allied countries so it's not that urgent to pay off. It's different with countries that do not have cooperation with the debtor country, they will be pressured to pay immediately on the period.

For me the question is the opposite. If you are a politician who loves to keep spending like there is no tomorrow money that you are not going to have to pay back, why are you going to do it? More so since increasing public spending on the basis of debt serves as a covert vote-buying scheme.

Here it must also be understood that as outrageous as the debt figures are, part of them are also due to the fact that money is worth less and less. As states keep printing, also as a strategy to keep paying debts in an easy way, money becomes more and more devalued, so the constant increase in debt that we see is due to two factors: the increase in spending and the devaluation of the currency.

Wow so let put it this way. It is never in the best interest of a country to completely pay off their debt and that's because they have other duties and needs in the country to attend to with money. So they can service an entire debt at ones while the nation be in penury.

It's like with an individual for example, having $1k as the only money in his name while owing a friend a debt of $800, in economics you're not supposed to pay the $800 debt at one payment just because you have $1k with you.

 For the fact that you have other responsibilities and demands to meet you need to pay in instalments so you don't put yourself at a disadvantage to running into a new debt immediately, it makes no sense at all. So for the avoidance of such you need to consider the impact economically in paying your debt of $800 at ones with only $1k in your purse.

To make it clear and easy for understanding you can check with top and bigger company around the world, they have bigger debt and their income every years increasing up more than with how much debt having. But why they don't pay of their debt in once time? its called with balance financial system and company have keep working and take debt for making more profitable in the future and all their debt allocating for productive not as consumptive.
Many countries take debt to build up their infrastructure and will paying debt later after consistency earning with infrastructure build. They can take all state budget spending for building infrastructure because have many urgent needed to pay from healthy insurance for their citizen until to make balance with their economic country condition.