Quote Originally Posted by phonicsmonkey View Post
This is the problem - no-one lends money except to earn interest and no lender is willing to cancel a loan early and forsake the interest which would come later and the potential profit which is to be made in the future if the rate at which you are lending is higher than the rate at which you borrow. There is an actual loss and an opportunity cost in a loan being repayed early. Where bonds are issued with such an option embedded in the structure (ie. when the lender can repay early) they are typically more expensive for the borrower to compensate the lender for the risk that they will receive the principal back early. It's called 'repayment risk'.

Also, it is not as neat as simply saying "Europe is owed money by America" because it is privately owned institutions like banks, funds management and insurance companies which are the actual lenders. The American government has not borrowed directly from European governments or vice versa.
I am of the economical mind that you should pretty much never borrow money (other than longterm investment with easy repayment well within your budget), and only lend money if you can afford to lose it. Whilst I do have my fabulous student loan, I have absolutely no credit card bills or any other loans or negative amounts of money and I only buy what I can afford.

As such Government should be running a surplus of money from taxes and what not, which it can then use to provide loans for investment into the nation or even lend to another nation if needed, or simply for "rainy day" emergencies.