|
The money will only be lent if there are sufficient securities tied in with that debt, which in the case of sovereign debt will be gold or possibly state infrastructure.
In many cases, the money is also lent to said country purely in order to get regular payments with interest, rather than having the intent of getting the loan paid off per se. The debt (and corresponding bonds) are a form of asset, and are then sold and bought as any asset would.
Unfortunately one then gets systemically important financial institutions (sifi's), that then buy this debt, and modern economics would just not allow major defaults of this debt in large amounts and the debt then eventually just gets written off in certain circumstances. (such as a lot of African debt which just gets written off on a seemingly regular basis - but in these cases certain rights then get privileged to the bond owners, such as mining rights)
Oh, and I just have to add - that's not really a basic economics question, but rather a really, really complicated one which has many more factors that what I have briefly mentioned :-0
|