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Where does the money come from?

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aestus57:
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Just thinking about the economic troubles we're in at the moment, I was wondering where all the money comes from that the government needs to borrow over the coming years. Who do they borrow it from and who is rich enough to lend it out. Are we all being conned into future tax rises etc just to keep us down????? After all it just seems to be electronic numbers being moved around between bank accounts.  Is there a finite amount of money in the world or is there some grand magician out there who pulls a few billion out of a hat when its needed??

I get more confused the longer I think about it, can anyone enlighten me in the simplest of terms?

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Shipmate60:
Most of it is raised as Government Bonds.
These are a good investment as the interest is guaranteed.

Bob

RickF:
So the Government sell "Bonds" to raise money they need but haven't got, promising to pay back more than they borrow? Where do they get the money to pay the interest? Borrow it, of course.

I believe the Icelandic Government Bonds are particularly sort after!

Rick

Shipmate60:
The interest is funded through Taxes. That is the only way the Govt can raise its own money.
The problem arises when many Govts offer Bonds.
This pushes up the interest rate which makes it more expensive.

All Government Borrowing has to be paid for in Taxes, that is how the Banks were bailed out.

Bob

malcolmfrary:
The more important question is where did it go to?  I would be all in favour of getting it back in cash or kind.

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