Sigh, Bloomberg how far you have fallen. In the article this is the IMF talking, so we're talking about sovereign debt not commercial debt like credit cards or

Sigh, Bloomberg how far you have fallen. In the article this is the IMF talking, so we're talking about sovereign debt not commercial debt like credit cards or mortgages or car loans. Sovereign debt is nominally repaid through the execution of the economy. A country borrows by selling debt securities, with fixed maturity dates and then redeems those securities once they mature. Consider this really simple example in the US; The treasury department sells a note that has a face value of $10,000 and a maturity date 10 years from now, to Alice for $8,188. If you figure out what interest rate you would need to have $8,188 equal $10,000 in 10 years (monthly compounding) you would find that the "equivalent" interest rate or yield to be 2%. So they have "borrowed" $8,188 dollars from Alice, who, 10 years from now, will turn in her note and they will give her $10,000. They might end up selling two notes to Bob and Charlie just before Alice shows up at the window in order to have cash to give Alice but in either event the note that Alice bought gets "redeemed" (or retired) and it is off the books, it has been "repaid." Over the course of the year revenues come in, and sometimes there is already enough cash in the drawer to pay off Alice without selling any more notes, in which case the total amount of notes out there goes down. The amount of revenue is proportional to the economic output or GDP of the country because, well everything gets taxed a bit. This is easiest to understand when looking at income taxes since the more income (the more people working the more people have incomes or more income) the more taxes you get. So more economic activity results in more revenue for the state, which means selling fewer notes. If spending levels are kept constant, and the economy grows, then you reach a point where you don't need any note sales to pay your bills. So the IMF is responding to the news that the US deficit (which is that the US sold more notes than they had expected revenue) for the month of November was a record[1] to $205B. What does it mean to you and me? Well it probably means a some point someone in Washington DC will have to raise taxes if they want to keep the debt ceiling down. [1] (warning autoplay video) http://fortune.com/2018/12/13/us-budget-deficit-record-november/ http://fortune.com/2018/12/13/us-budget-deficit-record-novem...