When I look at this long list of countries with debt, I get the feeling we've all been sold a load of manure. How can so many countries owe so much money? Generally speaking, why did they borrow it, and from where?

The way this looks to me is like a great cup game, where exactly is the pea...?

What am I missing?

** Is is possible that all the players have run the printing presses just a little each time they needed a pick me up to the point where we have now manufactured a net worth that is no longer believable? **

  • 3
    I think you need to ask a more carefully-defined question. As phrased, the answer is "because people loaned it to them", but that probably isn't the answer you are looking for.
    – jprete
    Aug 16, 2011 at 17:19
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    because people loaned it to them
    – BlackJack
    Aug 16, 2011 at 17:35
  • I'm not sure how you ask a more carefully defined question in this case. Govts are the largest entities in the world today. They appear to collectively owe (to who) more money than I can fathom even existing. The only thing I can add to the question is in the body. Doesn't it all look like sham? How can they owe more than the world is worth?
    – boatcoder
    Aug 16, 2011 at 17:55
  • 1
    Related: money.stackexchange.com/questions/7368/… Aug 16, 2011 at 18:06
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    Good question @Mark. Another way of asking the same question might be "In order for a government to borrow, someone else must first have saved, and be willing to loan it to the government. Where did all this savings come from?"
    – azcoastal
    Aug 17, 2011 at 18:06

4 Answers 4


They borrowed it from the people, and typically to finance wars and military spending. For example, Wikipedia suggests that the Bank of England "was set up to supply money to the King. £1.2m was raised in 12 days; half of this was used to rebuild the Navy." It's a game that everyone has to play once started; if Napoleon buys an army on credit, you'll have to raise an equal amount or face quite a problem.

As for why they've grown so large, it's because governments are quite skilled at owing large sums of money. Only a small portion of the debt comes due in full at a given moment, and they constantly reissue new debt via auction to keep it rolling. So as long as they can make coupon (interest) and the lump sum at maturity, it's not difficult to keep up. Imagine how much credit card debt you could rack up if you only ever had to pay interest.

This game will continue for as long as people lend. And there are plenty of lenders. There's pensions, mutual funds and endowments, which find public debt typically safer than stocks. And money market funds, which target 1 dollar NAV and only invest in the "safest" AAA-rated bonds to protect it. There's central banks, which can buy and sell public debt to manipulate inflation and exchange rates.

Absent some kind of UN resolution to ban lending, or perhaps a EU mandated balanced budget, these debts will likely continue to grow. You think they "collectively owe more money than can exist", but there's a lot of wealth in the world. Most nations owe less than a year's GDP. For example, the US's total wealth is in the neighborhood of 50 trillion.

  • +1 The fact that people continue to loan governments money at spectacular rates is an indicator that people believe that the current structure of government financing is reasonable and sustainable. Strictly speaking, if they turn out to be wrong it will be said lenders who take the fall, although of course the secondary effects will be fairly bad.
    – jprete
    Aug 16, 2011 at 19:19
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    "This game will continue for as long as people lend" or central banks continue to print money to purchase government debt. Over the last year the FED purchased nearly all the new debt issued by the US government with newly printed money. It's not always the people lending the government money.
    – Muro
    Aug 16, 2011 at 20:37
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    +1 for the historic reference. We tend to live in the crises of our own times while forgetting that nothing is new.
    – gef05
    Aug 17, 2011 at 14:32
  • "They borrowed it from people." Specifically, they sell most of it at auction in the form of Treasury bonds.
    – user296
    Aug 17, 2011 at 23:57
  • "+1 for the historic reference." It's actually pretty interesting. Amsterdam's economic rise led to a large merchant fleet, which can be easily converted into military power. So England felt it necessary to raise their own fleet to protect their ports and colonies. Less dramatic than Napoleonic wars, but I'm told the East India Companies weren't exactly peaceful.
    – jldugger
    Aug 18, 2011 at 17:02

By the phrasing of your question it seems that you are under the mistaken impression that countries are borrowing money from other countries, in which case it would make sense to question how everyone can be a borrower with no one on the other side of the equation.

The short answer is that the debt is owed mostly to individuals and institutions that buy debt instruments. For example, you know those US savings bonds that parents are buying to save for their children's education? Well a bond is just a way to loan money to the Government in exchange for the original money plus some interest back later. It is as simple as that.

I think because the debt and the deficit are usually discussed in the context of more complex macroeconomic concerns people often mistakenly assume that national debts are denominated in some shadow banking system that is hidden from the common person behind some red-tape covered bureaucracy. This is not the case here.

Why did they get themselves into this much debt? The same reason the average person does, they are spending more than they bring in and are enabled by access to easy credit. Like many people they are also paying off one credit card using another one.

  • Of course the difference is that your typically individual is borrowing at 15-20% on a credit card, whereas governments can commonly borrow at very low or sometimes negative-real rates. If someone will pay you to take the money, in some ways you would be foolish to refuse, if you can think of anything worthwhile to invest it in.
    – poolie
    Aug 18, 2011 at 6:41

Others have pointed out that the entities loaning money to the government are typically people and institutions. Recently, however, the US federal government borrowings were largely funded by money printed by the Federal Reserve. The government had to borrow $1.1 trillion from October, 2010 through June, 2011. During this period the FED printed around $0.8 trillion new dollars to purchase US debt. Thus, the US government was not borrowing money from people, it was being funded by money printing. The central bankers call this "quantitative easing".

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  • 1
    Why did we hear about this in the news? I feel relatively well informed, but I didn't hear about this until now.
    – boatcoder
    Aug 17, 2011 at 3:16
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    @Mark0978 - I'd heard about it in the news :)
    – warren
    Aug 17, 2011 at 10:11
  • I can't read this chart. Do you have a citation (link) to it? Aug 4, 2014 at 15:22
  • I wonder how does this chart looks today after the Covid19 pandemic... Apr 21, 2021 at 10:16
  • I found these interesting charts and data for March 2021: fiscal.treasury.gov/files/reports-statements/mts/mts0321.pdf Apr 21, 2021 at 10:38

Here is an overview of who owns US Debt from Wikipedia, it indicates that approximately 1/3rd of US debt is held by foreigners (mainly the central banks of other countries), approximately 1/2 of US Debt is held by the federal reserve, and the rest is owned by various America organizations (mutual funds, pension funds, etc). The money is loaned via bonds, treasury bills, etc. When you put money in your pension fund, you very likely buying US debt.

The US Treasury department all has a comprehensive page about how public debt works in the United States here: an overview of public debt from the treasury.

I wasn't able to find a similar breakdown for other countries, but Wikipedia has a comprehensive list of how much debt is owed by other countries: a list of countries by public debt.


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