We both default on our debt which hurts both of us and everyone tied to the monetary system.
Just like individuals, nations borrow money and just like individuals, they also have to repay their debt along with interest! And why some nations can’t borrow money? For the same reasons as individuals their expenses are greater than their income. To meet the gap, the country can print currency, raise debt and cut expenditure. Often a country combines the three to tackle its financial hurdles.
There are primarily three ways that a nation can borrow money;
- is by issuing bonds internally to its own citizens,
- is taking a loan from international bodies like the World Bank or the Asian Development Bank etc. and
- third is by taking loans from other countries.
Most Governments issue Treasury Bonds and other Debt Instruments which essentially means that governments are borrowing on behalf of the country from their citizens.
Then the second source of borrowing for countries is from institutions like the International Monetary Fund or the Asian Development Bank.
The third way in which nations borrow money is by borrowing it from other nations. Normally this is also done with some specific purpose in mind and is quite subsidized which means that the interest rates are lower than normal.
These are the three main ways in which nations borrow and lend money to each other or from their own citizens or international agencies. You will notice that most of the above behavior is quite similar to individuals and if you think about it, you will understand that borrowing without the ability to pay it back leads to devaluation, inflation or collapse of our collective monetary system . The only real way out of debt is 1. cut expenses and 2. improve productivity. Productivity increases revenue if and only if there is a market willing and able to consume what you produce.
Consumption cost money. If money cost more well so does consumption and then we may be forced to borrow more money to consume things and the cycle of debt starts all over again. Then again if what you consume doesn’t cost anything but it yields higher productivity could you convert the productivity into money?
Social currency cost time and using it to create value that converts into money cost time. Time is a critical element of productivity. How much time do we have before the old monetary system collapses? Not much and if you try to avoid it then you will be surprised or possibly destroyed when it hits you.