Will all debts ever be paid back?
Corona debt Is the world running out of money?
Government bonds attractive to investors
Such institutions must securely invest the funds they manage. Depositing everything in a bank account would be too risky, because if a bank were to go bust, the money would be gone. Government bonds are much safer there. Because it is possible, but unlikely, that an entire country could go bankrupt.
That is why the creditworthiness and thus the attractiveness of government bonds for investors remains high, even if all countries are currently in debt. In this case, the creditworthiness is measured by how certain the investors are of getting their money back, according to Boysen-Hogrefe:
It is enough for investors to know that the state can borrow elsewhere.Prof. Jens Boysen-Hogrefe
It becomes critical at the moment when investors are no longer sure whether the states will generate the money again in the long term in order to be able to repay it. Corona suddenly makes such scenarios conceivable. Closed shops and theaters, standstill in factories, restricted air and rail traffic, the massive decline in economic output also have an impact on federal, state and local tax revenues.
A severe recession is predicted for the German economy, for example, due to the corona crisis. The gross domestic product already shrank in the first quarter of 2020, for the second quarter the economic experts expect a real crash due to the nationwide lockdown.
Is the world running out of money?
The whole world is affected by the economic slump. That could start a vicious circle: Investors lose confidence and stop buying government bonds. The governments therefore lack the money for rescue measures, which is urgently needed especially during the crisis. A permanent lockdown could lead to such situations - but also an uncontrolled spread of the pandemic.
Financial expert Boysen-Hogrefe - who is also part of the federal government's tax assessment group - does not yet expect a global shortage of money due to the current Corona slump. Unless a deeper economic crisis follows, in which many companies go bankrupt and permanently disappear from the market without being replaced by others. If this increases long-term unemployment, for example, investors become skeptical. Because then the state collects less taxes, but needs more money to cushion the crisis. And those who permanently spend more than they earn are not borrowed.
Many investors would then turn their backs on the state out of concern that it would not be able to service its liabilities. And that is exactly what makes that more likely.Jens Boysen-Hogrefe
Germany needs global economic cooperation
That is why the states should not overstrain the game with debts, said Jens Boysen-Hogrefe. Debt must always be linked to a sustainable economic policy. This also includes not questioning global economic cooperation because of the Corona crisis. This is particularly important for the economic recovery in Germany.
Germany is heavily dependent on exports. Worldwide reluctance to invest or disrupt supply chains would create permanent problems.Jens Boysen-Hogrefe
Mountain of debt not noticeable in everyday life
The good news from financial expert Boysen-Hogrefe: At the moment, the rapidly growing mountain of debt has hardly any impact on our daily lives. As long as interest rates remain low, the burdens on public budgets are low. In some cases, the federal government even earns money by issuing bonds - provided that investors trust the state over the long term. Boysen-Hogrefe brings up all the companies and private individuals who are indebted and are able to cope well with it:
Debt is not the problem, you just have to be able to afford it.
Federal Finance Minister Olaf Scholz is certain of this with a view to the corona debts: We can afford it. This is also because in recent years we have operated very solidly, worked with foresight and achieved a low level of debt. Additional debts hurt, but they are manageable as long as Germany continues to generate sufficient income, confirms financial expert Boysen-Hogrefe.
Germany is not running out of money
What if somebody asked for the entire debt to be repaid overnight? It is a completely unthinkable scenario, but it would theoretically be feasible for Germany:
Citizens have a lot of wealth. It is higher than the national debt, in principle that would be possible. In reality, Germany would simply borrow the money elsewhere.Jens Boysen-Hogrefe
Neither Germany nor the world is currently running out of money.
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