National Debt
The National Debt occurs when a government borrows money to fill the gap between its spending and the money it receives from taxes, etc.
This debt is NOT the same as when you borrow money from a bank (eg. mortgage). What you have to remember is that the Government is representing you and the rest of the population, so, when it borrows money it is in essence borrowing from itself. If it then immediately spends this money in the economy, it is returning it to itself. So, a National Debt is not in itself a problem.
Now for the 'but ifs': If the National debt becomes too big then the size of the repayments can become very large and affect a government's ability to spend on services such as education and health.
If foreigners lend money to the goivernment, the repayments go out of the country and therefore in future, there is relatively less money spent in the economy.
Next time I shall attempt to explain why Thatcher was wrong to presume that to 'break even' was the best option for a government.
This debt is NOT the same as when you borrow money from a bank (eg. mortgage). What you have to remember is that the Government is representing you and the rest of the population, so, when it borrows money it is in essence borrowing from itself. If it then immediately spends this money in the economy, it is returning it to itself. So, a National Debt is not in itself a problem.
Now for the 'but ifs': If the National debt becomes too big then the size of the repayments can become very large and affect a government's ability to spend on services such as education and health.
If foreigners lend money to the goivernment, the repayments go out of the country and therefore in future, there is relatively less money spent in the economy.
Next time I shall attempt to explain why Thatcher was wrong to presume that to 'break even' was the best option for a government.
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