So in the UK the tories and media keep saying the national debt is the highest its been since the ww2 (which is true of pretty much any year since the 80s). And that we need to raise taxes, tighten our belts etc to pay back what we borrowed to get us thru the pandemic.
Now I know this kind of treating a countries finances like household finances and talking about national debt like its credit card debt is disingenuous and just used as a way to justify squeezing people more than they are already.
But what I don't know with enough authority to be able to talk to people about it is why this is the case? How is national debt different and wtf is it? Who do we owe it to and do we even need to pay it back etc?
Ofc I know the whole thing is bullshit anyway any only exists to preserve the current power structure but let's leave that for now.
Be good to hear thoughts from someone who knows things.
It depends who you ask. Economics isn't a hard science.
example: https://en.wikipedia.org/wiki/Modern_Monetary_Theory#Comparison_of_MMT_with_mainstream_Keynesian_economics
it's all just complete garbage. it's why america just invests in bombs. say you lent somebody some money right? and then they got an endless amount of guns. are you going to go collect on that debt?
edit: bombs.
Yeah that's not how debt or imperialism works at all. Most of debt is owned to private actors and branches of government, not other states. Who are they gonna bomb, JP Morgan? The US has to and does pay up debt constantly. But also it accrues new debt via issuing bonds. It's not like owing to a loan shark where the loan shark bangs your door and tries to force you to pay, but if you've become like a mobster or something you can tell him to fuck off. The US constantly pays debt while also getting more in debt, it's what pretty much every country does, and if they default it is not at all good.
Oh my god your link literally proves my point, it is literally the subtitle to your article.
you claimed corporations are owed the debt. in reality it's the citizens and foreign governments.
I said private actors, not corporations. Citizens are private actors. Foreign governments only own a small part of the debt.
right, foreign governments, a third, that's the largest portion, while the rest can just be credited. it's why the US invests in bombs.
A difference between a "national debt" and something like your household debt, is that a Nation can't exactly go bankrupt and a Nation can last forever.
A person, only has a limited amount of time (a lifetime) to pay back their debts. A person, can only pay back debt if they have a source of revenue.
A nation, can exist forever and has an infinite amount of time to pay back debt. A nation, can levy taxes and enforce their collection.
A nation has a loan that comes due in, say, 100 years. Year 99 hits and the nation finds that it wont have enough cash on hand by the end of year 100 to finish paying off the loan. The nation can just take out another loan to finish paying off the initial 100 year loan and reset the clock on that portion of debt.
For a person, a loan officer would see that you were 99 years old with a low chance of paying off another 100 year loan (cause you'll very likely be dead soon) and deny you a loan to pay off the last few years of your initial 100 year loan.
This was a general example, don't nitpick the tiny details, the idea is to try to explain the differences between personal/national debt and why they are treated differently.
I haven't read it yet but I've head Kelton's the deficit myth is a good primer for this very issue
Governments sell bonds, which are debt obligations with either fixed or floating percentage government pays tied to its central bank rate. Usually these bonds have some end date, when the government is required to pay the underlying price. I.e. government wants to finance some shit, they say will sell 5 million 1000 pound 2040 bonds, with 1 % yearly. So for 20 years they will pay 10 pounds for each bond, and then in 2040 they have to pay full 1000 pound to these bonds holders. If they don’t, it’s called default. If government needs good will from capitalists, they should not default.
As bonds are being traded their price could lower, which simultaneously raises the effective percentage (yield) rate, but also signals some concern from capitalists. I.e. bond worth 1000 pounds in 2040 could be trading at 900 pounds, thus 10 pounds of interest/year is suddenly 1.12 percent instead of 1.
To tack onto this, people talk about "stocks and bonds" in financial portfolios. A bond is vaguely like getting dividends from a country.
Anyone can buy bonds, but it typically ends up being people who have lots of money and trust/alignment with the government. Some of the national debt is foreign-owned, but a lot of it is owned by the nation's own bourgeoisie. With national debt around 100-150% of GDP, it's common for over 10% of the government's budget to just go to paying interest on the debt- using public coffers to exclusively pay rich people. Unless the rich are disproportionately taxed, it's a wealth transfer from poor to rich. And you can't easily tax foreign nationals, so taxing the rich to pay the debt looks like a handout to other countries. This is why "just not paying the debt" is not an acceptable policy to the mainstream.
When you borrow in dollars instead of your domestic currency, as with IMF loans, the Anglos can fuck you over in whatever way they want.
When the US state borrows in dollars, since it's the domestic currency, it's functionally the same as inflation/taxes.
You can't change any of this without overthrowing the capitalist class. MMT'ers BTFO
beyond all the deficit shit, I think it's a feature of the global economy that a nation which exists at a trade deficit will naturally incur debt to their trading partner.
I think this has to do with currency valuation. like china sells us shit, chinese firms are sitting on mountains of accumulated capital in dollars. because they cant invest in china with dollars, or convert their stockpiles of capital all at once, they invest in bonds and other securities.
Folks like yanis varoufakis have written extensively about how america and western europe have maintained their dominance over the world despite no longer producing the world's goods. we essentially work as a vacuum cleaner. sucking up the world's capital and creating an empire of finance.
this system is like anti-mercantilism, nations dont compete to accumulate their own capital, they compete to accumulate each others capital as well. and how? BY MUNCHING
