World Economic Question.

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Some things do not make sense. USA is supposed to be the richest country in the world. They also have the most debts. How is it possible? It means the whole world is in debt if the USA is the richest, but, it is not numerically possible for every country in the world to be in debt as who would they all be in debt to?

A rich person can live beyond their means. You don't have to be poor to go into debt. And poor folks can be creditors, as well as being debtors.

The US has huge debt. But it owes most of its debt to...the USA.
About Seventy percent of US debt is owed to US instituions like US banks, and the Federal Reserve.
Only thirty percent is actually owed to foreign entities.


Much is made about how "China owns America". And China does hold five percent of the US debt because Chinese buy so many treasury bonds. But China does that to peg the value of its currency to the US dollar, and to purposely keep down its own currency's value. That keeps its exports cheap so...they can keep selling the US cheap stuff, and keep their economy growing. In return we get cheap goods. And credit to keep on buying the cheap stuff.

I agree with naturalplastic on this one. Many people in the States live well above their means by borrowing money such as with credit cards, loans and mortgages. Some people buy a house with a loan but rather than pay the mortgage off, they refinance the loan with a second or third mortgage. Essentially they never pay off the mortgage. When the value of the property rises, they cash in the difference. So the main asset, their home, is really not theirs but the bank that gave them the loan.

....and under 'Quantitative Easing' (QE), which has been carried out on a large scale in both Europe, Japan and the USA since 2009, Central Banks (eg Bank of England, US Federal Reserve) 'buy back' their governments' bonds (ie debt) with 'money' created on computer screens (popularly referred to as 'printing money'). The government then owes the debt to its central bank, or effectively to itself, and the debt is essentially cancelled (though it still exists on the bank's books). Close to £500,000,000,000 of British government debt (out of total debt of almost £2000,000,000,000) is owned by the BoE as a result of QE.

This is not a million miles away from what happened in Weimar Germany in 1923 or Zimbabwe a decade or so ago, according to some critics, but it hasn't produced anything like the disastrous outcomes that occurred in those countries.