I just don't understand economics.

[H.E. Pennypacker]

Here's something I've never understood: how a country can be in debt, but at the same time, have a lot of money, or at least enough to keep things going.

Take the United States, for example. How is it that the US can have a growing debt, and not have a crisis?

The word "debt," when used to refer to countries, must be a lot different from personal debts that you and I have. When you and I are debt, we have to stop borrowing money, and find a way to make up for the debt, or else there will be serious problems (e.g. living on the streets).

So, what's the answer?

People talk about growing debt, but I don't see any American citizens starving because the debt is as large as it is (there are starving citizens, but they're starving for different reasons). In that case, is debt a "bad" thing at all, since it doesn't seem to have negative consequences?

Some person on Yahoo Answers said the US has more assets than debt. Okay, great. How about paying off the debt before moving things along, and letting the debt stack up like a pile of trash? Personal debt can't pile up, but national debt can....weird.

There's gotta be something I am missing...maybe it's some basic economic principle us laymen, or maybe just I, are missing. Don't hit me on the head for not understanding all this, please!

PS: Let's not turn this into politics. I just want to understand the economics of this.

[23meg]

The following may be a good start:

http://en.wikipedia.org/wiki/National_Debt
http://en.wikipedia.org/wiki/U.S._public_debt

[Nikron]

Government debt is not necessarily a bad thing... In fact, it'd be pretty horrid if we weren't allowed to have any..

[dpsleep]

well the national debt is the ammount of money borrowed to get rid of the yearly deficit. the deficit is the the ammount of money that the u.s. spends over the budget every year. we have the federal reserve that is reponcible for all our money's, and the irs for taxes. both are private organizations. and in a nutshell, the us doesnt give a crap about the debt, they can keep printing money and circulateing it into the economy. where does the money come from? nowhere. we have no gold standard so they can just keep inflateing the crap out of our money. i think a dollar bill is worth somthing like 4 "cents" of gold.

[konungursvia]

To my understanding, only a relatively simple financial house, like a young person, would stick to a no-debt situation. Doing business without borrowing capital is like doing a PhD without borrowing books. It makes things so much easier without actually necessarily posing any risk. Unless you're irresponsible, and those fines start to pile up and pile up. The US has a fairly big debt, but it also has a huge budget each year. It's the current account deficit that is more troubling. This means that all businesses, government offices and individuals in the US, put together, spend a lot more outside the country than they earn outside the country. They also owe a lot to each other. The danger is that outsiders will stop viewing the US dollar as a stable currency for reserves, and begin dumping. Then it drops in value and the debt is impossible to pay, a huge depression follows. Yuck, I'm going to have a bath.

[Ek0nomik]

well the national debt is the ammount of money borrowed to get rid of the yearly deficit. the deficit is the the ammount of money that the u.s. spends over the budget every year. we have the federal reserve that is reponcible for all our money's, and the irs for taxes. both are private organizations. and in a nutshell, the us doesnt give a crap about the debt, they can keep printing money and circulateing it into the economy. where does the money come from? nowhere. we have no gold standard so they can just keep inflateing the crap out of our money. i think a dollar bill is worth somthing like 4 "cents" of gold.

The United States can't simply print off money and call it even. Printing off money at will results in rapid inflation.

[bobbybobington]

The U.S. can afford to have so much debt right now because of foreign investment, but eventually I think somethings gonna give.

US debt clock

[C-A]

The United States can't simply print off money and call it even. Printing off money at will results in rapid inflation.

I am not disagreeing with you because honestly I don't understand enough to but how do we know that would happen? Isn't the whole system based upon the arbitrary value of gold and how much each nation claims to have? Does it really matter how much they have? Or does it just matter if they are ever called to exchange out gold for their debts?

[KyleJRM]

I am not disagreeing with you because honestly I don't understand enough to but how do we know that would happen? Isn't the whole system based upon the arbitrary value of gold and how much each nation claims to have? Does it really matter how much they have? Or does it just matter if they are ever called to exchange out gold for their debts?

Well, why is gold valuable?
Money is only a representation of stuff, the things people want to buy with the money (be it labor, raw materials, finished products, etc.)

If you add more money, but don't add more stuff, then people will just pay more money for the same stuff. Thus, prices go up.

[Ek0nomik]

I am not disagreeing with you because honestly I don't understand enough to but how do we know that would happen? Isn't the whole system based upon the arbitrary value of gold and how much each nation claims to have? Does it really matter how much they have? Or does it just matter if they are ever called to exchange out gold for their debts?

What KyleRJM said is pretty much it.

I am not an economics major (an information systems major to be exact ), but I have taken some courses in it. If the government simply prints off money to get rid of "debt", than does debt really ever exist? Why does anyone have debt if money can be simply printed out of machines? The printing of money would cause inflation, and also harm investors/savers.

Imagine tons of money being printed by your government. Does the "dollar" carry the same value? Absolutely not. It dramatically increases prices for goods. The actual term of this is hyperinflation. You can look it up if you feel studious.