How Does a Country’s Debt Affect its Citizens?
Currently my country, Philippines, has tons of debt and it keeps increasing every year.
There’d be stats like, each Filipino has 120k php (around 2.3k usd) of debt. But of course the individual doesn’t directly pay for the debt but rather supposedly taken from the taxes we pay.
So how does it actually work?
If that comforts you, the debt per capita index is pretty much meaningless without any other external factorSwitzerland has one of the worst debt per capita and isn’t a poor country by any means.
Still vague to me. Care to explain on the external factors that make it meaningful?
Tbh more or less matters on an intra-country scale, as US could borrow a shitload anytime and pretty much everyone would be happy to take that investment. Investing in the Philippines is much less attractive, and so gives them less spending power
ok, so. the way I see it the same as in investment. As long the debts can create revenues, you can pile up more debts.
That’s the way I see it as well. And probably why we don’t see that metric often. GDP is more an accurate indicator of financial stability / purchasing power (although also flawed)
As usual the world is a complex place. But with a focus on simplicity rather than accuracy:
Responsibly used debt is a useful tool to grow your economy both today and in the future.
Irresponsible use will buy you something useless today that tomorrow’s tax payer will have to pay for.
Your government may build a bridge to transport goods from one place to another so business can grow and generate more tax longer and a school to educate the kids and a port to sell your stuff to foreigners. You could do this with taxes but if you are to pay for all of that with taxes you’ll have to raise taxes so much that people can’t afford to live for the 5 years it takes before they get the benefits from your projects.
Irresponsible use would be building all of this despite there being no need for it or if you take on more government debt to pay for the maintenance cost year after year. (Running a deficit on maintenance cost for a few years during bad economy can be less bad than raising taxes as long as it’s temporary).
Well, if your country has a lot of debt, it has to spend a lot of money maintaining that debt (paying interest off). Ofc, you can always refuse to pay your debt, and nobody can really force you to, but that means no one will lend you money ever unless you pay a massive interest
