American Debt

[BJS]

Who does the USA owe all this debt (in the trillions I believe) I thought virtually all the world was more or less in the red.

[Buenchico]

Governments borrow money by selling interest-bearing bonds to anyone who will buy them. In practice that usually means the one country which has got massive amounts of money to invest, i.e. China.

Chris

[maclarencat]

I asked my Hubby much the same question last night. If all the countries in the Western World are in dire straits (no not the group) and most of the other countries need aid from us Dubai etc is finding the bubble has burst Just where is all the money? It cant have just disappeared He didnt have an answer by the way.

[Hymie]

Besides countries (such as China), many banks and other financial institutions are owed the money. They buy government bonds offered at a fixed rate of interest. Besides issued bonds, governments can borrow money on the open market (just like you and me) – this is where their perceived ability to pay back the loan has an effect on the interest rate that the market is willing to lend at. Where there is concern that a loan might not be repaid – the loan is made at a higher rate.

Of course, many financial institutions lending to countries who might default on their loans (where the interest rate has been set correspondingly high) – are hoping that should such an event occur, other countries will bale them out (as is happening within the Euro-zone), thereby preserving their investment at the cost to National Governments (you and me).