Sadankata

In the days of yore, there was a platform known as twitter. On a particular day, a tweet made the rounds, and I don’t remember its exact words. I remember its gist though, and it was “Every country in the world has debt. If all countries owe money, who do they owe?”

In a folksy, relatable way, that was a galaxy-brained question. If Ian borrows money from Jenna, Ian is in the negative and Jenna is in the positive. There are at least two parties to any debt – debtors and creditors.

One simple way of explaining this is simply that the nations don’t owe each other money. Nations are entities, much as people and companies and states and cities, and they can all owe each other money. So, one may say that nations as a class of debtors owe other creditor classes (companies, people etc.)

I’ve come to start thinking about debt differently, as a consensus about the future. When a debtor borrows money from a lender, what is really happening is that the debtor believes they will have money in the future, and want to spend some of it now. The lender agrees with them, giving them today’s money with a promise to get it back in the future. The degree of agreement between lender and borrower shows up in the terms of the loan. The less the lender agrees with the borrower about the future, the more onerous the loan terms (collateral, interest rates etc.), and at the extreme end of the disagreement spectrum, the (prospective) borrower doesn’t get any money.

When one starts to think about debt in this way, as a consensus about what the future holds for the debtor, it starts to show up everywhere. It is what makes France pay much lower interest costs when compared to Nigeria despite having similar debt to revenue numbers.

Now you know what will happen when the consensus about France’s future shifts.