There is one thing I can never quite understand with all the talk of this debt.

We keep hearing how the UK is in debt by billions of pounds and Greece is in massive amounts of debt and Iceland and America and so on and so on...

So surely there must be one country who is massively wealthy and in credit by trillions of dollars.

Without them there is no where for the debt to go to?!

So who is it?

Or doesn't it work like that?

My understanding is that China owns vast quantities of other country's debt, so they may well account for a lot of it.

Its more a case of Robbing Peter to Pay Paul.

Most country debt is underwritten by private conglomerates and banks. Split and traded on the markets.

Don't think there will actually be any countries that operate in the black, its all about balancing the defecit against income.

And by the way, we only finished paying for the second world war a few years back...

I would have imagined the IMF has a lot to do with it.

Governments borrow money from everybody, not only from other governments.

Domestic and foreign banks, pension funds, investment banks, corporations, sovereign funds and even wealthy individuals buy gov. debt. Especially pension funds and money market funds who have very conservative (safe) invest. strategy.

Lending money to governments is usually very safe too. When Lehman Brothers collapsed there was panic in the market so market participants started buying US gov. debt just to park their money in a safe place. It was not uncommon to actually pay money* the government just so they can look after it for you, so you can sleep at night without the worry that the bank might go down with your money.

So it might even be you who is lending to the gov. through your investments.

*pay money as in you buy a bond for more than its fair value (value of discounted cashflows) so you essentially lose money on the deal intentionally just to make sure your money is safe

It's all imaginary, why don't we just stop using it and barter with brass buttons and fairy dust instead.

I have all the brass buttons, I shall rule the world!

Yes but what if fairy dust is worth a lot more than brass buttons, then you are no richer than you are now, especially if brass buttons are used for giving change.

I was going to invest in balloons but the inflation's a bitch.

It is the middle of June and raining.
The little British beach town is deserted as it’s tough times.
Everybody is in debt and everybody lives on credit.
Suddenly, a rich tourist comes to town.
He enters the only hotel, lays a £50 note on the reception counter, and goes to inspect the rooms upstairs in order to pick one.
The hotel proprietor takes the £50 note and runs to pay his debt to the butcher.
The butcher takes the £50 note, and runs to pay his debt to the pig farmer.
The pig farmer takes the £50 note, and runs to pay his debt to the supplier of his feed and fuel.
The supplier of feed and fuel takes the £50 note and runs to pay his debt to the town's prostitute who, in these hard times, gave her "services" on credit.
The prostitute runs to the hotel and pays off her debt with the £50 note to the hotel proprietor, to pay for the rooms that she rented when she brought her clients there.
The hotel proprietor then lays the £50 note back on the counter so that the rich tourist will not suspect anything.
After a short while, the rich tourist comes down after inspecting the rooms and takes his £50 note, saying that he did not like any of the rooms, and leaves town.
No one earned anything but the whole town is now without debt, and looks to the future with a lot of optimism.
And that, ladies and gentlemen, is how the British economy operates today.

Haha! I like that!

Nobody is in credit. More than 90% of the "money" in circulation in the world is fictional and created, as debt, by banks.

http://www.youtube.com/watch?v=rC720Cl3N-0&feature=related

Nobody come up with the answer that it's the mints making all the money yet?

I'll get my fur stole.

Sadly, though, it’s very true. Debt = money. When you take out a loan, that money isn’t really in the bank. It’s magicked into reality, based on your promise to pay it back. The bank can take that promise, sell it, lend it etc. to make even more money.

As we have seen, when a significant amount of people can’t pay the money back, the system collapses.

And why the system relies on confidence in the banking system.

Well it's not really anywhere. Our whole capitalist society is based on an illusion.

'It's just an illusion, shaba-daba-da, it's just an illusion....'

Think I need some caffeine.