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Jarek Steliga

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Who are all the countries in the world in debt to?

I hear everywhere how Greece is in debt, France is in debt, the UK is in debt, Poland is in debt ....
I hear that part of these debts are so called internal debts i.g. governments owe money to their respective citizens, which boils down to us being in debt to ... ourselves. This concept in itself does not boggle my mind as much as the fact that anyone in their right mind is willing to buy it.
Part of these debts are so called external debts. Now, this can basically make sense only can anyone explain to me where does the buck stop i.e. who is the ultimate source of all that enormous credit? Since I am a kind of a redneck, can someone explain this in very simple terms steering clear of the language of economics which of course was developed for anything but explaining things?

Topics: debt global economics goverment debt
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  • Ben Jarvis 50+

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    Feb 26 2013: basically it's in either of 2 forms, the country either borrows from another country or from it's own citizens in what are called bonds. a bond is basically a way of loaning your savings to the country instead of sticking them in a term-deposit. they actually make sense to buy because the government can always sell more bonds to pay you back, so it's a pretty safe investment.

    the other way is to borrow from a central bank, which creates the money out of thin air and loans it to the government at interest. the government could really just keep this money, but doing so would devalue all currency and you'd get lethal inflation, so it's much better that they don't do this. this of course means that people who own these central banks get absolutely filthy rich off doing nothing but collecting interest which is ultimately paid by taxpayers.

  • Craig Hall

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    Feb 26 2013: I am the price system - essay, isn't a bad read either
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    Letitia Falk 10+

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    Feb 25 2013: Debt is relative: it is simply our way of keeping track of where we are in relation to others. I'd highly recommend "Payback" by Margaret Atwood if you want a more philosophical take on debt without economic jargon.
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    Obey No1kinobe 50+

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    Feb 23 2013: I recommend the book "Debt"by david graeber
    Its rather terse at times but explains the history of debt over the last 5,000 years.Touches on money. And some interesting issues such as 3rd world debt, where money is lent to dictators, but ends up being owed by the poor taxpayers or citizens.

    His key point regards the duality of debt. How the positive aspects of being grateful or indebted to others is mixed with a history being employed, enslaved, in servitude, or subject to others and financial obligations.

    He is probably a bit light on the benefits of credit e.g. micro finance in the third world, or borrowing to set up or expand businesses anywhere, where we don;t let our selves become slaves to our debts.

  • Bob Stiglitz

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    Feb 20 2013: Remember debts are imaginary, they are political fictions. States, technically, cannot go "bankrupt". They are the masters of the money game. Only the oligarchy keeps the masses deluded believing debt and money is little more then political fiction.

    If the public was smart they'd take back the central banks of their governments and just print money to pay off the debt, since most government debt is 'illegal' anyway (pushed by oligarchs on nations to subdue their populations).

  • Jarek Steliga

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    Feb 20 2013: Since it is seems to be a common consent (or judgement passed by majority) in this forum that debt is bad, one wonders why people are so enthusiastically getting into it. Don't we all instinctively try to steer clear of debt? We do, hence the usurer's road is a bumpy one and their "job" requires no small wit and presence of mind . As in trapping animals, a whole lot of devices are being continuously invented before would be victims get wise to them. In Europe currently in use is certain tool the principle of which I want to explain here. There exists a system of so called European Union Bonuses or Subsidies. In order to qualify for such EU subsidy the beneficiary must first invest a certain sum of money of their own. Only once this sum of money is organized, the subsidy is paid. So people do not hesitate to borrow the required initial sum seeing how they will later be given (yes, given for free!) twice or three times as much. Borrowing money in order to qualify for these subsidies became a norm. Everybody does this from small businesses to national governments. The stunning thing is that even local governments do this. The usurer triumphs. Where money gets borrowed, interest gets accrued! There remains the question where money to cover the subsidies comes from. That's an easy one. It comes from our pockets in the first place. The whole mechanism looks like this. I pay money to the EU (through tax), then very graciously I get some of this money back (part of it goes to pay the EU exploding administration) but first I must take a loan. The net result is that I not only finance the offices in Bruxelles, but on top of this I stand to pay the interest for the loan which I took in the process of getting my own money (the "subsidy") back. But as I say there is no protecting people from the consequences of their own stupidity.
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    Rustam Eynaliyev

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    Feb 19 2013: they owe money to their own public as well as international investors. Governments borrow money by issuing bonds (promissory notes to payback interest) that different investors buy to protect themselves against uncertainty, inflation, make a few bucks on the side since return on investment usually goes down as the amount of that investment goes up (google law of diminishing returns). This is just another way for governments to make money. Others include: invading other countries and ripping off their resources(not used widely anymore), taxes, printing money(another form of taxation). Governments could default on their debts but that's pretty much a suicide for an economy (check out end of USSR). Also, one of the biggest reasons why U.S. can borrow money at a negative real interest rate (meaning interest rate that's smaller than inflation), is because it's one of the few countries in the world that has never defaulted on their debt.
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    Ward Williams

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    Feb 18 2013: Money is manufactured out of thin air. It costs the manufactures nothing, and they collect the interest. They could forgive the debt and it would cost them nothing, but why would they? If they did, they'd be giving away free money. These are not government entities, but have official sounding names to lend a certain credence. The money is imaginary, and so is the debt. We buy into it's reality because someone with an official sounding title told us we should, and this mantra fits right in with the values we were taught as children. We're being scammed. Read a book called "Secrets of the Federal Reserve". Seriously, our entire monetary system is based on a hoax. All this talk about redistributing wealth is for real, but once you start paying attention to it you will realized that the redistribution is from the bottom up.

    • Jarek Steliga

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      Feb 19 2013: Fascinating stuff. Funny how people living half way around the world see some things eye to eye . Respect instilled in kids for entities with official sounding names is nothing but someone's business plan. Horrible but true. Boy, am I grateful to have seen the light. I chucked my silly (though well paid job) some years ago. True, I have no money now, but I have ... sunshine, wind, birds chirping, my own cucumbers and all the time in the world to do what I like doing plus satisfaction that no freaking millionaire usurer is able to enjoy life more than I do. I advise everyone to do the same before the whole world goes berserk again.
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        Ward Williams

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        Feb 19 2013: It's interesting, there seems to be a lot of bitterness about millionaires being millionaires. I don't hold that particular bitterness. Like you, my disdain comes from the usurer part of your statement. Many (certainly not all) of these people (with our help) hold themselves in superiority while their fortunes have been made through opportunities that the rest of us don't have. I hold no wish for equality in outcome, but do think equality in opportunity should be a goal of any civilized society.

        • Jarek Steliga

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          Feb 20 2013: ...their fortunes have been made through opportunities that the rest of us don't have ... but if we had them none of us would ever resist the temptation to make full advantage of them and thus become part and parcel of that global canker gnawing mercilessly the global economy.

          ...equality in opportunity should be a goal of any civilized society ... that's utopia. I am not aiming at this ideal world. What I am trying to do is to mitigate the economic polarization of the global society so as to defer the unpleasant moment when the rich come and get me (make me leave my house and seek shelter under any bridge brrr we have bad climate for camping year round :-) )


          But we digress. The point in question is DEBT. I believe the present will be looked at (if there is anyone to look back on the present) as the period of rampant debt.
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        Ward Williams

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        Feb 20 2013: I guess utopia means different things to different people. Regarding debt, the money we use (In the US) is imaginary, it's backed by nothing at all except that someone says it exists. By definition then, the debt is imaginary too. We ought to be able to imagine a solution.

        • Jarek Steliga

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          Feb 20 2013: I am sometimes imaginning a solution. Since the monetary system in place is surreal (as you believe it is), people should build from scratch a new one side by side with the old one, but never mutually connected. One such system does not even require money. It's barter. You bake bread for someone, someone in turn gives you poultry, you build someone a house, someone in turn repairs and maintains your car. Of course the parity of these mutual services must be somehow figured out, but does it not when money is used? By doing this you do not fall foul of any laws (as long as money does not change hands the inland revenue office can get stuffed) Go barter and laugh at billionaires!

  • Craig Hall

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    Feb 14 2013: You are right to smell a rat. We do indeed owe most of the money to ourselves. Two thirds of UK Gvt debt is owed to the pension and insurance funds. More of a private Gvt playing with our money. The rest is mainly owed to China. Mainly on the back of a cheap labour force.
    The Capitalists or the 1% are desperate to maintain this false debt, it's good for them, it works rather well because we do all the work.
    We all need a sense of purpose in life and to be able to enjoy the fruits of our labour. There are currently 200 million unemployed around the world, not much purpose for them.

  • Scot Wilcox 10+

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    Feb 13 2013: HMMMM....looks like we've got some problems don't we. Money seems increasingly to be an imaginary number in a computer somewhere. I certainly wouldn't rely on a fat bank account for your prosperity and security.
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    edward long 100+

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    Feb 13 2013: Countries are in debt to the IMF. A Monetary Fund which exists to manage International trade deficits. It is called the International Monetary Fund, known most widely as the IMF. The hidden agenda for the IMF is to replace the gold exchange standard with "Fiat Money", which is money printed at-will, or more crudely but accurately called counterfeit. The IMF loans money to nations through The World Bank. Loans are most often to LDC'c (Less Developed Countries). Founded by The Fabians (Keynes and White) in 1944, the program has one unified goal which is to establish global Socialism. It is this program that funds the "social reform" going on every day under local dictators living lavishly on the borrowed counterfeit money. (Read chapter 5 of "The Creature From Jekyll Island", by Ed Griffin).

    • Jarek Steliga

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      Feb 13 2013: Many thanks for this. I find your answer as exhaustive as I find it grim. Also I have for some time suspected as much, but thought that perhaps I was being paranoid. I believe the world slides yet again down into a global disaster. I picture humanity to myself as two guys in a boat on Orinoko river, busy exchanging blows and quite oblivious of their boat drifting ever closer to a big waterfall. Do you know of a good place to hide away and weather the impending storm?
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        edward long 100+

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        Feb 13 2013: Sure Jarek. Get down to your elected representative's local office and make a pest of yourself by impressing upon the minions there that you see what is happening to our once great nation and that you will vote for the candidate who shows similar awareness and is dedicated to changing our course before we go over the falls. Do not give up!

        • Jarek Steliga

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          Feb 14 2013: I have every intention to follow your advice except that I will not be expressing my concern over the once great nation of yours, but rather over my own which is in the same plight as yours if not worse. I live in Poland :-)
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        edward long 100+

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        Feb 14 2013: No surrender Mr. Steliga. Thanks for the reminder that there are still some nations remaining that have not been completely converted to Socialism.
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    Krisztián Pintér 200+

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    TED Translator
    Feb 13 2013: funny isn't it? you barely hear about the countries that are lending the money.

  • george lockwood 20+

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    Feb 13 2013: This is part of life, but if a country is too irresponsible, there can be real problems. IF I'm owed money I want it back sometime.
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    Fritzie Reisner 100+

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    Host
    Feb 12 2013: I might misunderstand your question.

    As I understand government bonds, when a person buys a government bond, that is a "loan" to the government in the sense that if you hold it for its term and then cash it in, the unit of government is obligated to pay back the face value on the bond.

    When a country, like the US, owes money to another country, right now it might be China who has made the loan. ($1.2 trillion in US debt is held by China).
    Is that what you were asking?

    • Jarek Steliga

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      Feb 13 2013: Yes and no. Does it not bother you that your government borrows money from you. IMO governments only dispose of your (and other citizens') money. Therefore when you lend money to your government you as good as lend it to yourself. Does this make sense? Lending or borrowing anything to/from oneself? I repeat, government's money is YOUR money. When the government pays interest on loans which it received from you, where is the money to pay this interest coming from? My guess is from your very own pocket!

      BTW are you the type of person who likes to live on borrowed money? If you are not (as I am not) are you not enraged (as I am) that your government makes you effectively live on borrowed money (borrowed as per your explanation from China)?
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        Fritzie Reisner 100+

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        Host
        Feb 13 2013: Many know more about this than I do, but you do not have to buy government bonds. Only people who want to buy them do so.

        I personally do not like to owe money. But many people borrow money to buy a home. The price of the house needs to be paid up front though the family will use it over time and is best able to pay for it over time. Those who do not like to carry mortgage debt can either pay up front, if they have the cash available to do that, or rent. As you say, many homeowners borrow for that investment and pay it off over thirty years.

        Businesses also often borrow money as a matter of course to invest in something that pays off in the future.

        So borrowing is common in the private sector as well and is often considered good strategy.

        • Jarek Steliga

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          Feb 14 2013: Quite right. Borrowing is a good strategy on condition that it is an investment i.e. the borrowed money is used to buy tangible assets like means of production or a house in which you and your family is going to live for many years to come and untill well after such time when the loan will have been paid back. Borrowing is NOT a good strategy when the borrowed money is just used to temporarily improve the standard of life as if there was no tomorrow. I fear it is the latter kind of borrowing that my country, Poland, is helping itself to. I also view this strategy as some kind of a trap. Once the time to pay it all back comes and days of grace are over, the goverment will be forced to raise taxes and bills untill more and more citizens are no longer able to afford to pay. People will then be evicted from their homes and land and will become tenants and slaves in the country which they once called their own while that country will be owned by whoever it is that lent us money in the first place. Hence in my view borrowing money by governments (without asking the consent of the nations which those governments were elected to represent) is a CRIME. It makes my hair stand on end when I realize that each day gets me ever deeper in debt to somebody I do not even know, when I have always made sure that I have never owed money to anybody and never have lived beyond my means.

  • Scott Koenraadt

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    Feb 12 2013: I figure that the debt is owed to other nations, who hold the bonds (for the debt). What I don't understand is why you can't mutually forgive debt, ex. if Greece owns some of Italys' debt and italy owns some of Greeces' then why not mutually forgive, effectively reducing debt between the two making things better.

    • ZX Style 10+

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      Feb 13 2013: I think they can't mutually forgive because the interest rate varies per loan.
      So Italy owes Greece 2 billion with 5% interest rate
      Greece owes Italy 3 billion with a 3% interest rate

      Different numbers see?
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