Why does the Unites States borrow money if they make so much more than any other country?

Question

Most European countries don't make but around 1.5 trillion, compared to the United States 12.7 trillion. Why must we borrow so much money, and why are we in such debt? I also don't understand if this is true, why we don't have that much better health care for our citizens, or higher quality of standards? Where does it all go?

Answer 1

Every country borrows money. It is convenient for cash flows to finance such things as large investments in infrastructure, wars, etc.

This is similar to the fact that if you pulled up a random public company's financial statements on Edgarscan, they would likely be carrying a great deal of debt ---- debt is how investment is financed. It is a pretty simple fact in Finance that if you think an investment will have a rate of return higher than the current interest rate, you borrow the money.

Also, if you look at most of the European countries you're talking about (UK, France, Germany), they will be carrying debt burdens of about ~60% of GDP, which is the same as the United States.

We are able to borrow more money on a numerical level because our income is higher, but on a level relative to the size of our economy, we borrow just as much at the average western nation.

Answer 2

Take two brothers, for example - Joe and Moe. Joe makes 10 times more than Moe. Joe makes $500,000 per year, whereas his brother makes $40,000 less than one-twelfth the amount of his brother.

Now, suppose Moe has a very modest standard of living and lives within his means and therefore he saves money a little bit every year. And that is why the US borrows every year.

On the other hand, Joe spends wildly - way beyond his yearly income - he spends money on palatial houses, luxury goods etc etc. His lifestyle calls for $200,000 more per year than what he makes. So, he goes to the bank and borrows money. The bank is happy to lend him money without realizing how bankrupt Joe is.

Now, it can be clearly seen that even Joe makes a lot more money than his brother, yet he goes into debt.

So, let's translate the above example into the question you asked. Just think of the United States as Joe, the big spender who lost his head and doesn't know how to live within his means.

As for the better helath care, it is simply politics. If the governemtn pays for it, then it has ot charge a higher taxes to its citizens. Some politicians don't like it and so far what they are winning.

Where does the money go? Simple. The US is primarily not charging its wealthy citizens a little bit more to carry the tax burden. Consequently, to satisfy the thirst for more and more consumption, the US is borrowing more and more which has to be paid off by our children and grandchildren. And that opens up another volumes of discussion!

Answer 3

United States need to be seen as two different entities. One is its government and the other is its people. Since it is a capitalistic society, peoples wealth is not considered Governments wealth. However, Government's debt is considered people's debt. That said, our elected leaders spend a lot more than they collect from us in taxes. They are too ineffective in collecting the right amount, or they are over spending and can not justify this spending to their constituents, so they end up borrowing it.

To address the question of where does it all go ? The useful portion, for which we all are willing to pay in taxes is coming back to us in terms of services and protection. Most of the amount that is being borrowed is going into wasted spending. Had it been useful investment, we the people would have been willing to pay as taxes and the elected leaders would have been able to justify that to us directly.

Here is the only silver lining to this borrowed money. A good amount of this money is borrowed from foreign nations at a relatively low cost. By the time we pay that back, we (the people , not government) would have used equivalent amount of that money in investments to create a lot more of it. Real growth rate of the investments in private investments is much higher than the interest rate government pays.

Answer 4

The US borrows so much money because politicians love spending money and giving it away to other countries for favors. Some countries provide free health care and education. But when individuals who do go to college graduate they start paying a hugh percent (much greater than in the US) in taxes to the government to care for the unhealthy and others who are going to college. It makes it tougher to save and build wealth. Thats what makes America great - you get to keep more of what you work for while the lazy do without. I have no problem with helping the truely helpless; but alot of individuals make very poor choices including living off the government.

Answer 5

even with the certainty that different countries do have diverse currencies than our own, each and each distant places money quantity could be converted into an quantity of yet another distant places money. How a lot one distant places money is properly worth in comparison to the properly worth of yet another, is commonly based off of the wellbeing of each currencies economies. For an occasion, for one US dollar, you will possibly desire to purchase a 16oz Coke. yet for that comparable, you will possibly probable finally end up paying someplace around a hundred chinese language Yen. it form of sounds like its extra, yet quantities have the comparable properly worth (throughout this occasion, one Coke). As time is going on, we print extra money to rigidity inflation up. We even have becoming marketplace that promotes not purely revenue on a business enterprise scale, yet their total marketplace, which builds extra jobs and maintains the upward push technique. This technique maintains until all industries are in income right here, which provides our us of a as an entire money to grant lower back to the countries that we borrowed from.

Answer 6

Do you seriously think the United Stated Federal budget should be no higher than that of Italy or France or Germany? The US is a FAR larger country in all respects, and therefore is going to spend more money.

Why do you expect healthcare to be given to you by the government? Do you expect food and clothing to be given to you by the government?

Answer 7

Well, the answer is rather obvious. Unlike other industrialized nations, the U.S. does not have universal health care, but has an enormous military budget instead. In relative terms, the U.S. spends on defense about four times as much as Japan...

Answer 8

basically to fund everything even though the US makes quite a substancial amount of money it takes much more to sustain america, think of all the things the US needs to buy whether they are good or bad, we have to sustain public buildings such as librarys or municipal buildings, we must buy oil for our cars and pay all of the people who work on the public roads, building public roads, right now we also must pay for the armed forces, all the supplies and reasearch going into the weapons and technologies as well as a soldiers pay. social security is another big drain on america giving all the elderly in america big chunks of money is pretty costly as well. thats all i can think of right now though

Answer 9

It is not that we don't buy enough goods to create a good economy...but that we buy most of our goods from overseas.So to keep up here in the US we have become a credit based economy. In order to keep up with spending growth we have allowed credit growth to take up the slack. Never before in history have we had a 300% debt ratio. How it will pan out is anyones' guess. And it usually ends badly

Answer 10

Firstly, you need to realize that money is not the same as it
was when your forebears were creating their concepts of it.
Your own concept of what money is, will probably be
little changed from when you were a child, as that is when
we define these things in our life.

If money were still in a salt bag, in a herd of cattle, in a
coin made of silver or even in sea shells, it would be more
real than it is today. In today's world, money is only a
cyber entry in an account kept in some computer
somewhere. Oh, yes, we still put coins in coke machines,
and carry folding stuff to the movies, but the big money is
never seen in those forms. It is all just an electronic
charge, positive or negative, either yes or no, red or black
on a disc somewhere. Money is binary, these days.

So the dilemma comes about, when you are one of those
persons or organizations charged with the maintenance of
money, as to whether or not to create more of it, or less.

Today's money must be 'managed' so as to hopefully
balance the scales with production. When money is
limited, it limits production and commerce generally.
When money is too abundant it stimulates unwarranted
consumption which leads to shortages and global warming.
The Economy runs too hot, they say.

When money was a physical object, its supply was limited
to how many silver coins one could make, or how many
sea shells one could gather. Now that it is more or less
imaginary money, we are charged with the responsibility to
manage it, as a poor computer never runs out of Zeros, so
why would a Cray?.

So with all these countries, states, companies and
households creating new money as fast as they can caper,
the game is really about confidence, more than physical
reality. The big economies can inflate at the expense of the
little ones, and inflate they do. They create so much money
there is scarcely a safe place to invest it, as reality goes out
the window and the chain letter or pyramid game runs the
world.

Did you ever play Monopoly when everyone did well, the
game got balanced, and eventually everyone had so much
money the bank went broke? What did we do? We simply
made some new Monopoly money, and usually in thousand
dollar denominations, aye? So that game can only be
terminated by some other outside influence, like a big fight,
bed time, meal time, or someone giving the board a big ole
yank!

In the real world, the game can only be terminated when
we run out of resources, like oil, food, water, clean air, or
whatever. However a good yank on the board can
sometime help shake up the stagflation somewhat.

Money could just as easily be created as the opposite
polarity, if we so desired and our wives would let us. It
could be a positive charge, instead of a negative one, in
that cyber disc where it is housed. Then, instead of us all
getting deeper and deeper in debt, we would all accumulate
so much Monopoly money there wouldn't be much fun in
the game. So our masters have decided in their wisdom, to
issue new money as DEBT and not as a CREDIT.

This simple difference ensures that the psychological
control of that money remains in the hand of the
establishment. Were it to be created as CREDIT, the
establishment would have much less psychological control
over its constituents.

It may matter little what might be, the fact is, money is
(mostly) created as debt only, these days, so only the few
folk who remain forever in credit miss out. Those who
borrow and spend til they are famished get the most of the
planet’s spoils.

Where it starts to hurt, is that those who produce are
penalized, in favour of those who only consume, and
eventually we are chasing any population in the world who
are prepared to produce, while we 'lucky' folk all sit back
and consume.

As far as health is concerned, it is simple indeed. Our
minders don't want us all that healthy. Managing sickness
is second on the list of big money spinners on this planet
(making war machinery is still tops, I assume). If some
god could wave his magic healing virtue over us all and
make us 100 % well, it would decimate the world economy
and we would probably all starve to death in the after
shocks. Don't kill the goose that is laying the golden eggs.
Keep your neighbours kids sick, ........... just that little bit,
though, and your community will continue to build houses
and shopping malls.

Now as to where all the money goes, this is simple too. It
was only on a computer somewhere, so when the debt is
retired, as they call it, the money ceases to exist, and that
sector in the disc can then be used to create some more
money on someone else's credit card. Oh how wonderful
that cyber money is! It is like magic, it appears when
needed and can be vaporized when it is not needed.

When the world runs into currency dead ends, they simply
create another new bank, maybe called the 'Lender of last
Resort' or World Bank, or Intergalactic Bank, and start
creating some more money on their computers (this money
being the exception, is created as a credit). If they overdo
it a little, they can then simply retire a bit now and then to
'tighten up' the economy. When confidence in that bank
has been detrimentally eroded, blemished or prejudiced,
they can simply create a new one. We all fall for it, and it
works fine.

Where are the limits of this confidence game? Well,
historically, it always ends in disaster, but the US Dollar is
the only major instance we have that has never had to bite
the dust. Will it ever have to bit the dust? Will we survive
if it did? Well, answer those questions and I will tell you
what would happen next, " we would create another bank,
another currency, get some more computers, lay out
Boardwalk and Payton's Place and start the game all over
again."

Where is the tragedy? There is none really, only if you
decline to play.

Once you have discovered the illusion that is money, you
may well ask yourself, "What is Wealth?" One man feels
rich if he inherits a donkey. Another man feels poor when
he needs tires for his Ferrari. Once you have defined in
your own mind and to your own satisfaction just what it is
you are prepared to accept as wealth, you may find you are
already surrounded with it, and have more than some and
less than others. What a great place to be, aye?

Lord Maynard Keynes set us up with the modern
philosophy that cyber money could be controlled by a
planned gradual inflation of the supply: the idea of a
constantly expanding money supply. And in the theoretical
sense he was very accurate. However, events never are
what they were intended to be, so all economies, societies
and civilizations of the past who practiced using unlimited
money creation, or fiat money as it is called (coined after
the big inflation that ended in the French Revolution, late
1700s), ended badly when the game played out too long.
When the rich get too rich and the poor have too many
babies, it puts a lot of pressure on such a system. Now
when money was based on real objects, metals, etc., there
was not such lofty pinnacles reached before peaking out, so
they had less distances to fall. Today, we are witnessing
the worlds greatest tower of commerce built on fiat money,
and if it fell, it would possibly wipe us all out. The only
insurance I know of to salve that fear is living close to the
earth, in a sparsely populated desert somewhere, plus
attracting to oneself great strokes of good luck in the
survival game.

Happy Financing.

Do a Yahoo Search on the term:
Fractional Reserve Banking