As of January 2018, the US had a national debt of around $25 trillion, the UK was $2.5 trillion in debt, Japan was $12 trillion in debt, China was $5.5 trillion in debt, and India’s outstanding debt stood at roughly $2 trillion.
Globally, debt levels have never been higher, and the total global debt is over 250 trillion dollars.
Compare that to the global annual GDP, which is roughly 80 trillion US dollars! To understand this situation fully, it’s time for some Economics 101.
The game of money is the game of cash flow, in other words, the money coming to you and the money you give out.
For the government, their inflow of cash usually comes from taxes paid by citizens. The government then uses this taxed money for building infrastructure, national security, social programs, and other welfare activities.
However, when the spending of the government goes past the income it earns, it leads to a condition called a deficit.
To make up for this, the government needs to borrow money, or perhaps ‘create’ money!
There are three ways for the government to borrow money: From its citizens, from other countries, and from itself.
Yes, the citizens of a nation can lend money to their government, which adds to the national debt. To do this, the government issues bonds with a fixed interest rate to be paid to the lender. This could be paid quarterly, annually, or cumulatively at the end of its maturity.
Maturity refers to the period for which the bond is issued, from as little as a few weeks to multiple decades.
Government bonds are considered one of the safest financial instruments because it’s the government that guarantees to return the money after maturity.
Just as it can borrow from its citizens, the government can also borrow money from foreign countries.
The government can borrow money from foreign banks, international financial institutions, or other foreign investors, such as World Bank, by issuing treasury bonds. In the US, these are called T-bonds.
However, when a nation borrows money from overseas, the money is usually in a different currency than their own. Many economists are skeptical of this method because, besides the usual obligation of interest payment on issued bonds, there is the risk of exchange rate fluctuations.
Interestingly, the country can even borrow money from its own governmental institutions and subsidiaries. Some governmental agencies, such as the Social Security Trust fund, sometimes get more revenue from taxes than they need. Instead of stashing this surplus cash, these agencies buy US T-bonds, thus lending money to the government.
The shadiest way that the government can borrow money from itself is through the central banks. In many countries, central banks come directly under the control of the government, so whenever such governments run out of money and don’t want to borrow from domestic or foreign investors, it can simply borrow money from central banks. Central banks then print money and give it to the government as a loan.
On paper, it may look like the government borrowed money from central banks, but the government is just inventing new money and flushing it into the system. This method seldom works, as it generally leads to hyperinflation, when the prices of commodities and services rise very quickly—as much as 10% overnight or over 50% in a month!
In the practical world, a country’s debt is incredibly complicated, involving hundreds of contributors and subtractors, but wise governments know to borrow from its people and foreign investors before starting their own currency printing presses!
WORD BANK:
outstanding /ˌaʊtˈstæn.dɪŋ/ (adj): nổi bật
roughly /ˈrʌf.li/ [B2] (adv): khoảng
Economics 101 (n): Bài học kinh tế cơ bản
cash flow /ˈkæʃ ˌfloʊ/ (n): dòng tiền
inflow /ˈɪn.floʊ/ (n): dòng tiền vào, thu nhập
welfare /ˈwel.fer/ [C2] (n): phúc lợi
deficit /ˈdef.ə.sɪt/ [C2] (n): thâm hụt
make up for sth [B2] (v): bù đắp cho cái gì
issue /ˈɪʃ.uː/ [C2] (v): phát hành
bond /bɑːnd/ (n): trái phiếu
interest rate /ˈɪn.trɪst ˌreɪt/ (n): lãi suất
lender /ˈlen.dɚ/ (n): người cho vay, bên cho vay
quarterly /ˈkwɔːr.t̬ɚ.li/ (adj, adv): hàng quý
cumulatively /ˈkjuː.mjə.lə.t̬ɪv.li/ (adv): tích lũy
maturity /məˈtʊr.ə.t̬i/ (n): kỳ hạn
guarantee /ˌɡer.ənˈtiː/ (v): đảm bảo
treasury /ˈtreʒ.ɚ.i/ (n): kho bạc
currency /ˈkɝː.ən.si/ (n): loại tiền tệ
skeptical of sth /ˈskep.tɪ.kəl/ [C2] (adj): hoài nghi về điều gì
obligation /ˌɑː.bləˈɡeɪ.ʃən/ [B2] (n): nghĩa vụ
exchange rate /ɪksˈtʃeɪndʒ ˌreɪt/ (n): tỷ giá hối đoái
fluctuation /ˌflʌk·tʃuˈeɪ·ʃən/ (n): biến động
institution /ˌɪn.stəˈtuː.ʃən/ [B2] (n): tổ chức
subsidiary /səbˈsɪd.i.er.i/ (n): công ty con
trust /trʌst/ (n): quỹ ủy thác
revenue /ˈrev.ə.nuː/ [C1] (n): doanh thu
stash /stæʃ/ (v – inf): cất giữ
surplus /ˈsɝː.pləs/ [C2] (adj): dư thừa
shady /ˈʃeɪ.di/ (adj – inf): mờ ám
flush /flʌʃ/ (v): xả
hyperinflation /ˌhaɪ.pɚ.ɪnˈfleɪ.ʃən/ (n): siêu lạm phát
commodity /kəˈmɑː.də.t̬i/ [C1] (n): hàng hóa
incredibly /ɪnˈkred.ə.bli/ [C1] (adv): cực kỳ
complicated /ˈkɑːm.plə.keɪ.t̬ɪd/ [B1] (adj): phức tạp
subtractor /səbˈtræk.t̬ɚ/ (n): bên lấy ra
ỦNG HỘ READ TO LEAD!
Chào bạn! Có thể bạn chưa biết, Read to Lead là một trang giáo dục phi lợi nhuận với mục đích góp phần phát triển cộng đồng người học tiếng Anh tại Việt Nam. Chúng tôi không yêu cầu người đọc phải trả bất kỳ chi phí nào để sử dụng các sản phẩm của mình để mọi người đều có cơ hội học tập tốt hơn. Tuy nhiên, nếu bạn có thể, chúng tôi mong nhận được sự hỗ trợ tài chính từ bạn để duy trì hoạt động của trang và phát triển các sản phẩm mới.
Bạn có thể ủng hộ chúng tôi qua 1 trong 2 cách dưới đây.
– Cách 1: Chuyển tiền qua tài khoản Momo.
Số điện thoại 0947.886.865 (Chủ tài khoản: Nguyễn Tiến Trung)
Nội dung chuyển tiền: Ủng hộ Read to Lead
hoặc
– Cách 2: Chuyển tiền qua tài khoản ngân hàng.
Ngân hàng VIB chi nhánh Hải Phòng
Số tài khoản: 012704060048394 (Chủ tài khoản: Nguyễn Tiến Trung)
Nội dung chuyển tiền: Ủng hộ Read to Lead
