If a country can just print money, is global debt between countries real?
The debt is absolutely real. China loans money to US via buying the US treasury bonds. The bond is essentially a promise to pay back the money with interest, just like a loan. As you point out, the US can print money. If this were to happen, then the USD that the owner of a treasury bond receives when the bond matures are worth less that than the USD used to purchase the bonds. There are lots of reasons why the US doesn't want to print lots of money, so the purchaser of the bond is probably confident it won't happen. If for some reason they think it is possible, then they will want to cover that risk by only purchasing bonds that have a higher interest rate. The higher interest offsets the risk of the USD being worth less. Of course, there are lots more details, e.g., the bonds themselves are bought and sold before maturity, but this is the basic idea. "I think the important fact here is that all of our currencies are Fiat Currencies. So currency technically means nothing, because (as you mentioned) the country could print more any time it wants. Now what makes it useful is the combination of two big things: So I would say, we know they owe us 100 ""dollars"", and the dollar is just a word we use to represent value. It is not technically worth anything, beyond the fact that the government controls the amount of that currency in circulation and you trust that people still want more of that currency." To understand this fully one would need to understand quite a few things. Not in scope here. In short, whenever China sells goods to US, it gets USD as most of the trades are in USD. China uses this money to buy other things it needs like Oil etc. After this they still have quite a bit of USD left with them. The money is left with them because US is buying more things from China and selling less things to China. This creates a surplus USD with China. So if US were to borrow money from China or any other country, it would be this excess money. Ofcourse how money gets created in first place is a different topic altogether. This is a extremely complicated subject, but I assume you want a very simple answer (otherwise I'm not qualified to answer). The value of most currencies is closely tied to the economy of the county, so if China were to print a huge amount of yuan, then since the value of their economy has not really changed, the international currency markets would devalue the yuan to compensate. (This is rather like, if have shares in, say Apple, and they were to issue an extra billion shares, then the value of your shares would fall (by half), rather than for Apple to be suddenly be worth twice as much) Print too many notes and your currency basically becomes almost worthless, which is what happened to the Zimbabwean dollar. I like the idea of China skipping crate loads of actual yuan or dollars notes to America, but in practice, the borrowing is just a paper exercise, rather like an IOU. As to whether America owes Yuan or dollars, the answer is whatever has been agreed. Assuming the currencies are fairly stable, then since each country has more control over their own currency, it is natural for them to prefer their own currency. However, if America believes the value of the dollar will increase, they may prefer to pay back in Yuan (costing them less dollars), and if China believes the value of the dollar will decrease they may agree to that. The main driver behind countries not printing themselves out of debt is the fact that it will cripple the economy, destroy citizens savings, asset valuations and piss all the countries trade partners off so much that they may stop doing business with them.  You will have a few different extremes, look at Zimbabwe as an example of a country that just prints money like no ones business.  America is essentially devaluing its currency to compete with China. That annoys the Chinese because their holdings are devalued and as such you then see people moving away from US treasuries into more stable commodities and currencies. "Debt can be denominated either in a currency the country controls or a currency the country doesn't control. If the debt is denominated in a currency the country controls then they have the option of ""printing their way out of it"". That option doesn't come for free, it will devalue their currency on the global market and hurt savers in their country but it is an option. If the debt is denominated in a currency the country does not control then they don't have that option. As I understand it the US debt is in the first category. It's denominated in US dollars so the US government could if they so wished print their way out of it. On the other hand greece's debt is denominated in euros putting them at the mercy of european bankers."
I do have an agenda. Or at least a question: Is the apparrel industry in the US dying? Is it being sent overseas thanks to 'free trade'/globalization laws?  &gt;A recent study released by IBISWorld identifies ten dying US industries. Among these top industries is apparel manufacturing. http://blog.zintro.com/2011/04/12/is-the-apparel-manufacturing-industry-in-the-us-dying/  I am against globalization. It puts all the eggs in one basket. We are seeing again and again when one country has a crisis it threatens to engulf, first, all of Europe, then the US, then the world. This is the price of globalization, which mainly profits the very wealthy. Aside from my objection to who profits, I think it's stupid to...put all our eggs in one basket. Let different countries do things differently, then evaluate which works best for the greatest number of people. Don't just make every country to everything the same, the neoliberal/neoconservative policy. "Normally I avoid any links pointing to guardian or telegraph or such sites but just was curios to what exactly the content of such a ""paper"" would be.   As expected, it has the seeds of a world war and is a lab factory for future terrorism. How does one expect value without work. US atleast produces some value here and there, but the other countries are just decline stage. Seriously UK? It seems some people can just not let go off their easy life ride or ""way of life"" as it is often referred to - basically create a system highly stacked in one's own favor and then blatantly call out others as conspiracy theorists or some such noun to get them on the defensive. Elimination of public debt should not be allowed for these countries.   There is so much cunningness, guile, cheating, lying in sneaky fashion and so much negativity hiding behind that theory - it is sometimes depressing how world operates and then people complain about it when there is real chance to put checks and balances to stop such disgusting things from taking form." "Who sets the prices? Effectively the market does, like basically all openly traded things. The Greek government could well have said ""5% is as high as we will go"".  As a result, investors may not have chosen to buy the securities.  The global bond market is highly liquid, and investors who have a choice could well then choose to go elsewhere. The reasons could well be varied, but primary among them would be that investors view Greek investments as more than 5% risky.  If I can get 5% from a country that I deem less risky than from Greece, my choice is clear.  Therefore to be compensated for loaning them my money, I am expecting a return of 7% because there is the possibility that they will default. As for not selling them at all, if they could avoid issuing bonds, most governments would.  They may not have had much of a choice.  If they just print more money, that does other potentially bad things to the economy.  The government needs funds to operate, if they are not collecting enough in taxes, for example, and do not want to print money as I mentioned, then bonds are one other common way to raise cash. Notwithstanding that in your example you are referring to the interest rate, not the price, the principal is the same." "The difference is in the interrelation between the varied investments you make. Hedging is about specifically offsetting a possible loss in an investment by making another related investment that will increase in value for the same reasons that the original investment would lose value. Gold, for instance, is often regarded as the ultimate hedge. Its value is typically inversely correlated to the rest of the market as a whole, because its status as a material, durable store of value makes it a preferred ""safe haven"" to move money into in times of economic downturn, when stock prices, bond yields and similar investments are losing value. That specific behavior makes investing in gold alongside stocks and bonds a ""hedge""; the increase in value of gold as stock prices and bond yields fall limits losses in those other areas. Investment of cash in gold is also specifically a hedge against currency inflation; paper money, account balances, and even debt instruments like bonds and CDs can lose real value over time in a ""hot"" economy where there's more money than things to buy with it. By keeping a store of value in something other than currency, the price of that good will rise as the currencies used to buy it decrease in real value, maintaining your level of real wealth. Other hedges are more localized. One might, for example, trade oil futures as a hedge on a position in transportation stocks; when oil prices rise, trucking and airline companies suffer in the short term as their margins get squeezed due to fuel costs. Currency futures are another popular hedge; a company in international business will often trade options on the currencies of the companies it does business in, to limit the ""jitters"" seen in the FOREX spot market caused by speculation and other transient changes in market demand. Diversification, by contrast, is about choosing multiple unrelated investments, the idea being to limit losses due to a localized change in the market. Companies' stocks gain and lose value every day, and those companies can also go out of business without bringing the entire economy to its knees. By spreading your wealth among investments in multiple industries and companies of various sizes and global locations, you insulate yourself against the risk that any one of them will fail.  If, tomorrow, Kroger grocery stores went bankrupt and shuttered all its stores, people in the regions it serves might be inconvenienced, but the market as a whole will move on. You, however, would have lost everything if you'd bet your retirement on that one stock. Nobody does that in the real world; instead, you put some of your money in Kroger, some in Microsoft, some in Home Depot, some in ALCOA, some in PG&E, etc etc. By investing in stocks that would be more or less unaffected by a downturn in another, if Kroger went bankrupt tomorrow you would still have, say, 95% of your investment next egg still alive, well and continuing to pay you dividends. The flip side is that if tomorrow, Kroger announced an exclusive deal with the Girl Scouts to sell their cookies, making them the only place in the country you can get them, you would miss out on the full possible amount of gains you'd get from the price spike if you had bet everything on Kroger.  Hindsight's always 20/20; I could have spent some beer money to buy Bitcoins when they were changing hands for pennies apiece, and I'd be a multi-millionaire right now. You can't think that way when investing, because it's ""survivor bias""; you see the successes topping the index charts, not the failures. You could just as easily have invested in any of the hundreds of Internet startups that don't last a year." "The only party that can pay back a government bond is the government that issued it itself. In the case of Argentina, US vulture funds have won cases against it, but it has yet to pay.  The best one can do to collect is to sue in a jurisdiction that permits and hope to seize the defaulted government's assets held in such jurisdiction. One could encourage another state to go to war to collect, but this is highly unlikely since a state that doesn't repay is probably a poor state with nothing much to loot; besides, most modern governments do not loot the conquered anymore.  Such a specific eventuality hasn't happened in at least a lifetime, anyways.  It is highly unlikely that any nation would be foolish enough to challenge the United States considering its present military dominance. It is rare for nations with medium to large economies to spurn their government obligations for long with Argentina as the notable exception.  Even Russia became current when they spontaneously disavowed their government debt during the oil collapse of 1998. Countries with very small economies such as Zimbabwe are the only remaining nations that try to use their central banks to fund debt repayments if they even repay at all, but they quickly see that the destruction caused by hyperinflation neither helps with government debt nor excessive government expenditure. Nevertheless, it could be dangerous to assume that no nation would default on its debt for any period of time, and the effects upon countries with defaulted government debt show that it has far reaching negative consequences. If the US were to use its central bank to repay its government obligations, the law governing the Federal Reserve would have to be changed since it is currently mandated to ""maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates."" The United States Treasury has no power over the Federal Reserve thus cannot force the Federal Reserve to betray its mandate by purchasing government debt. It should be noted that while Japan has a government debt twice its GDP, it also has a persistent slight deflation which has produced incredibly low interest rates, allowing it to finance government debt more easily, a situation the US does not enjoy. For now, the United States seems to be able to pay expenditures and finance at low interest rates.  At what ratio of government debt to GDP that would cause interest rates to climb thus put pressure on the US's ability to repay does not seem to be well known." "And what exactly have the effects of that been? Hmm?   It seems to me that you just disproved your entire point. The fed created a ton of money, it quadrupled the monetary base. And inflation never hit 3%. In fact, most of the money never left the banks. It's sat around for almost a decade as excess reserves.   Basically, the fed ""printing"" money didn't do anything except the bare minimum. The vast majority of that money never even made it into circulation; they aren't even real paper dollars, there were not paper dollars printed. They've never been anything more that an electronic accounting trick on a fed computer to give the banks confidence in their balance sheets." **Economic and Monetary Union of the European Union: Monetary policy inflexibility**  Since membership of the eurozone establishes a single monetary policy for the respective states, they can no longer use an isolated monetary policy, e. g. to increase their competitiveness at the cost of other eurozone members by printing money and devalue, or to print money to finance excessive government deficits or pay interest on unsustainable high government debt levels. As a consequence, if member states do not manage their economy in a way that they can show a fiscal discipline (as they were obliged by the Maastricht treaty), they will sooner or later risk a sovereign debt crisis in their country without the possibility to print money as an easy way out.  ***  ^[ [^PM](https://www.reddit.com/message/compose?to=kittens_from_space) ^| [^Exclude ^me](https://reddit.com/message/compose?to=WikiTextBot&amp;message=Excludeme&amp;subject=Excludeme) ^| [^Exclude ^from ^subreddit](https://np.reddit.com/r/economy/about/banned) ^| [^FAQ ^/ ^Information](https://np.reddit.com/r/WikiTextBot/wiki/index)   ^] ^Downvote ^to ^remove ^| ^v0.23 Are you talking about printing up more of the same kind of bill, or printing up a different kind of bill?  You'll have different answers based on which one you mean. If it's a different kind of bill: Governments don't like competition in this matter. In US history there are examples of the government shutting alternative currencies down.  A recent run at an alternative currency is the Liberty Dollar.  The similarity is not lost on BitCoin or even Chuck E. Cheese (last one is a satire, but I did worry for a second as I still have a bunch of those tokens!). If it's the same kind of bill: The currency is a tool of the government (in the US) and it does the sourcing for its production.  There isn't a whole lot of reason for others to get involved, really.  It's special paper, special plates, special presses, special everything, and doing it in one place ensures some consistency of product.  There aren't any compelling reason to open up another manufacturing channel to produce exactly the same product. There's no real economic benefit for banks to print their own money.  The larger ones play a key role in shaping how much is printed, but actually printing the bills is an offshoot of this.