Investing in debt can be a good thing or a bad thing. Let’s say you have a friend and they want to start a business. This friend is a diligent person, you like his business plan and you think he will succeed, so you loan him some money. He’ll pay you interest plus the principal at some point in the future. This is productive lending.

Before buying government debt, I think it’s worth asking, what is my loan being used for? Why am buying this government debt? The money that is being lent to the government is usually not being used to benefit the community. If it is, it does so at the expense of higher prices for everyone. The money being lent to the government at this point is mostly being used to pay off previous debts. This is not productive lending.

Money being invested in government debt is money that won’t be invested somewhere else.

#debt #governance