Why can’t most countries pay off their debt? by Anthony Andranik Moumjian
Because they
- are afraid.
- don’t have to.
First one. Debt is high. In fact, a lot of that debt is owed to ourselves. The debt that is owned by foreign entities are here:
As of February 2020, this is about $6.8 trillion. Paying this debt off would equate to around 30% of our 2019 GDP. It would seriously cripple an economy’s growth, and, so, the government feels that it’s an amount we can handle over a long length of economic growth.
Some note to support that theme:
As a percentage of our Gross Domestic Product, the deficit each year is fairly stable. With stable growth, the government feels that paying off treasuries and notes and bonds is doable over segments. We don’t need to pay it off right now.
The second point. In my opinion, far more interesting. We don’t have to. In fact, most of the debt is owed to us. We are the creditors.
Intragovernmental holdings mean that the government took excess cash from a governmental department and issued them treasuries, or some similar security, to pay out later. Most of this money came from Social Security — about $3 trillion. That fund is obviously paid for by us, the taxpayer, who the government then takes from and provides with a piece of paper telling them they owe them the principal along with some interest.
Of the public debt held, we know that $6.8 trillion is held by foreign countries. By comparison, the Federal Reserve owns about $8 trillion in securities issued by itself. In total, there is $6 trillion that our own government owes itself and another $11.43 trillion that most of our financial institutions hold.
So about $17.43 trillion is owned by ourselves.
This debt is not a debt in the traditional sense. When we deal with proportions such as an economy producing around $21.5 trillion domestically, debt is redefined. The main focus is on striking a balance between economic health and social welfare. Without these things, no small amounts of debt or large amounts of revenue can exist.
Debt is not something like you hold in a household or the way you process a mortgage.
We very much have the money to pay it all off right away. We don’t have to. Debt is designed to jumpstart things that need help or curb things that need fixing.
These days, the only metric that seems valuable is how the economy itself is doing.
Otherwise, pretty much every major player globally has some varying degree of debt.
