So most of the world is in debt

[Diddy]

As per title - Uk,USA,France,Spain+Greece+more, all of them/us are in debt with unimaginable figures seemingly arriving out of thin air. Can anyone shed some light on some genuine questions that puzzle me a bit.
Q1. Who do we all "owe" this money too ?
Q2. What happens if we decide to "Do an Iceland" and say middle finger to you ?
Q3. If the whole world is in debt (figure of speech really) then why do we still send financial aid to the poorest countries. In fact just this week the UK government has stated that overseas aid is to be protected from cuts this year.....while at the same time slashing £6Billion out of government spending (AKA some poor fucker is going to loose their job * 000's, that is what cuts mean no matter what way they dress it up)

I am aware Q3 makes me look like a nob but TBH I can live with that as I believe charity begins at home...and why financial aid and not food/crops/seeds ?

 

[oneman]

- Budget deficit is not the same as trade deficit are two different things. The UK can have a huge budget deficit but our trade balance is not that bad. Even China has a budget deficit but obviously trade balance is surplus.

- There is more money is private companies (banks, investment companies, pension funds, etc) rather then in the hands of the state. So when UK borrow money, it issues bonds (which basically say we promise to pay this amount back with this amount of interest) etc which are purchased by the banks but also by other governments. For example China has huge stocks of foreign currency. Theoretically it could destabilised the US financially if it was to flood the open market with the amount of dollars and bonds it holds.

- To do an Iceland basically says that it will not be able to pay all the bonds and commitments that it owes. Now a lot of debt is owed by private banks into which UK investors (people, UK banks, councils, etc) put money into based on crazy interest rates the Iceland were offering. So it is these investors who will lose out if Iceland banks default. Remember that like in the UK, Iceland goverment had nationalised the banks and underwritten loans which is why the goverment had to agree if they were going to pay people back.

- If a country does not pay back its debts then it going to have big problems borrowing in the future.

- Much of our foreign aid is pre-committed and relatively speaking it not a large amount compared to what UK deficit is. Food / crops / seeds is not a long term solution for these countries, helping them get back on their feet is. And that leaves these countries to be exploited in future.

 

[Munkey]

I'll have a go in layman terms..

Budget deficit is the difference between what our goverment spends and the money it raises (ie from taxation). Lets say our government spent 100m on a hospital and another 100m fixing the roads but only raised 150m through taxation, we would have a budget deficit of 50m.

If you give the finger horrible things happen like mickey mouse organisations downrating your credit score, so if you want to borrow money you'd have to pay marginally higher interest rates. In the real world it would be much less painful defaulting rather than entering a period of depression, which is where we seem to be heading.

In a recession or depression we have to live in semi or partial luxury, this means unfortunately living with a 42" plasma instead of a 50" 3DTV. The poor equivalent would be an African family going without essential medicine which could lead to death, although I guess if you don't have a 50" plasma you're not really living.