If the goverment borrowed loads of money and it got to the point where it couldn't even pay the interest off every year, and so became bankrupt, what would happen. Would the country then be taken over by whoever the debts are owed to??
(And also when the goverment borrows money, who do they borrow it from, banks?? or other countries??)
No, nobody would own the country due to debt.
USA are in major debt, as is pretty much all of Africa. You just owe money, it's not like somebody repossessing your house. And yes it's borrowed from other countries.
It would come down to whether our military forces could fight off other countries, and even if we had a massive financial problem tomorrow, they still could.
I guess the major problems would be civil war and a blow to technological advances. We'd also lose a lot of products due to lack of trade.
It couldn't happen for a long time though, our superior financial power and international relations would get us by.
Yeh it can't be taken over, we only owe money to other countries and they owe money to us. The IMF could come in and be a problem though.
the USA are like trillions of dollars in debt so no worries about bankruptcy
The money we would owe is hypothetical anyway...
Most major economies run on a deficit.
They raise money through government bonds and the World Bank. You can Google this stuff.
The money owed isn't real anyway...
Countries don't have a bottom line. The UK has an insane budget deficit, but what allows that to happen is basically confidence. If the confidence goes, we would probably see a currency crisis, which would be pretty nasty.
Okay.... for the confused lot
the government spends money on all the things they spend money on e.g health care, social security etc, this is outlined in the april budget. They say how much they plan on spending.
to spend this they must raise money to spend through taxes and government bonds (i.e you give money to the governement and they pay you interest on that loan), and thorugh borrowing from other countries.
if the govt spends more then they gain then this is a budget deficit and national debt increases
if govt gains more then the spend (unlikely) this is a surplus and debt decreases, as we can pay off some of it.
basic jist, i think.