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> Yes, they are free to sell debt. Doesn't mean it's a good idea to just get yourself in ever increasing debt. A state is not a person and can get in debt inde
by pjerem 5y ago
> Yes, they are free to sell debt. Doesn't mean it's a good idea to just get yourself in ever increasing debt.
A state is not a person and can get in debt indefinitely without never reimbursing capital since a state is immortal and can easily reimburse its previous debts with new credit.
The only reason you, as a person, can not have that much debt is because the bank knows that you'll die, but rest assured they would gladly loan you millions if they knew you'd have revenues (taxes) forever.
As a rule of thumb, it's wrong to think that a state should be managed like a home budget or like a company. They are very different (and complementary) economical actors with extremely different properties and goals.
One could even argue that a state with too much spare assets can be seen as morally incorrect as long as unresolved socioeconomic issues exists. And they exists everywhere.
- nybble41 5y agoStates are no more "immortal" than corporations. Plenty of states have either ceased to exist or repudiated their debts, leaving their creditors without recourse. If a state allows its debt to keep compounding, eventually it will find itself spending every cent of taxes it's capable of raising just to service the interest on that debt—and if anything should happen to shake creditors' confidence in its ability and/or willingness to repay those loans then the government becomes unable to borrow new money to repay its old debts and the entire Ponzi scheme collapses in on itself. Oh, and issuing new currency to repay the loans is functionally equivalent to defaulting on the debt. Creditors will not lend to you if they expect that you may attempt to pay them back with money which is worth significantly less than what you originally borrowed. A smart creditor will just index the payments to something you can't easily manipulate.