From the course: Economic Tips for Everyone

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Government debt

Government debt

From the course: Economic Tips for Everyone

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Government debt

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- Countries spend money and when they don't have the money they want to spend, they raise money by issuing debt, usually in the form of bonds. In the United States, government bonds are called treasuries, in Germany, they're called bunds, but whatever you call them, these bonds represent an obligation for the government to pay you back your money plus some interest rate. But just like a massive credit card bill that's hard to pay off, sometimes governments only pay the minimum or just the interest on their debts. The more government debt increases, the higher the interest rate may need to be and the bigger the debt burden, the more it can limit future growth. Because while borrowing money and issuing debt can help an economy grow when the government spends more, taking money out of the economy to pay off debt can have long-term negative economic impacts.

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