better world · Real Life Economy

National debts, the real problem of the average person. Part 1 – What is a national debt?

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What is a national debt? It is not a secret that life in the west becomes progressively more complicated. People need to work more to earn less, while the cost of living is growing constantly.  The reasons for that can be divided to two. The structure of our current economy and the international relationship that has been created between the world countries. To learn more about the first reason, you can click here and read more about the vicious cycle of your current economy.  A this series of posts I will concentrate in talking about one of the most important factors that is making the economic life of so many people extremely complicated.

The reason for the increasing burden in the daily lives of many people is not as obvious as we would like to think, it is called the national debts. We hear about it all the time and take it as a reality that is bigger than us. We leave it in the domain of the abstract facts that are painting the background of our society, letting it be handle by “The professional people in charge”. The truth is that this subject is one of the most relevant to our lives and need to be addressed as a top priority in our political and social conversation.

Lets start by understanding what it is all about.  External loan (or foreign debt) is the total debt a country owes to foreign creditors. The debtors can be the government, corporations or citizens of that country. The debt includes money owed to private commercial banks, other governments, or international financial institutions such as the International Monetary Fund (IMF) and World Bank. In simple words, it means that the national debt, is money that a government (a public institution) owes to  private institution around the world attached the a certain interest rate. If you are interested to know the status of your county click here. As you can notice, if you’re living in a western country the national debt of your government is between 90% – 6000% of the GDP. In simple words it means that the country do not have the capacity to pay back the loan. In many cases, not even pay back the interest % on the loan.

What is a national debt

Why does it matter? First, it means this debt will never be paid and that no real solution exists to solve it. Secondly, It means that more the time will pass more problematic the situation will be. And the third point (maybe the most relevant to this post), is that real prosperity for those country is not possible. It is important to understand that these points and numbers are known to all and that it is not a new situation we put ourselves into. This debt problem exists for many decades. It is true that the last economical crash in the last 20 years made the balance inflate. But it is known a understood by all the world leaders and economist for many decades. Now, please take the time to think how many changes of government you had in you country in the last 20 years. All of them understood the problem, part of them not only ignored it but worsen the situation, letting it be the problem of the future generation and governing party.

The national debt of many western countries has increase dramatically in the last 15 years. The speed of loan taken by countries is a direct warning signal to us all. This loans that are taken are a clear sign of lack of responsibility of local government, as they are well aware that they do not have a real plan to solve the current debts they are in.  This lack of responsibility need to stop! simple solution exist and should be implicated. At the moment, just keep in mind that if you’re searching to understand why life has become so economically complicated for the average person in the western society, the national debt of your country is probably one if not the most important factor for that.

Share you thought with me in comment and express your opinion. Awareness and open conversation are the key for the creation of a better future.

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5 thoughts on “National debts, the real problem of the average person. Part 1 – What is a national debt?

    1. There is a few options. The classic one is government bonds. When countries are needed of funds, they issue government bonds. Those can be purchased by banks, investment company or private people with a certain interest rate attached to it.

      These bonds can be issue with an interest rate based on their need and the competition with the interest rate of other countries.(can arrive also to 40%).

      As it is considered ” a safe investment” (safer in many cases than the stock market) many investors find it attractive.

      In General, internal national debts is money that the government owe to local banks (by using the pensions, savings account and investment account of the local population, while external debts are largely consisting of the same saving, pension and investment accounts of people from other countries – which are the loan given to a certain country by another one).

      In this way debts of a country can be owed to to private people (trough direct purchase of bonds) cooperation’s, investment companies or banks (which is again private people just without their complete understanding and sometimes without their awareness)

      Hope I manage to explain it simply is a comment. If it is not fully clear or if you would like to understand it better, let me know, i will write about it a separate post.

      Thank you for asking this question. I find it relevant and important.

      1. This post is part of a series. Follow it up and I promise you will understand it fully. If not, please let me know and I will enlarge the series. The same is valid regarding any other series I wrote on this blog.

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