Questions tagged [debt]

An obligation to pay another party at some point in the future. Examples include national debt, corporate bonds, and household credit.

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30
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6answers
2k views

What benefits do governments receive from not eliminating debt?

Most major economies have substantial government debt; for example among the OECD countries the lowest debt rate is Estonia with around 6% of GDP. Now we may be in a global recession at the moment, ...
24
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10answers
7k views

Why do banks take deposits if they do not need them to make loans?

I have taken some economics courses in university, where I was introduced to fractional-reserve banking. From my understanding, in fractional-reserve banking, the bank has motivation to encourage ...
19
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3answers
633 views

If I don't pay a debt, then the creditor takes my goods. Why, then, do Greek creditors not take Greece?

Normally, when you don't pay a debt, your creditors take your goods (house, car, etc). If Greece cannot pay its debt, can its creditors take Greek goods (structures, cities, industries, lands, etc)? ...
16
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1answer
488 views

When a country adopts the Euro, what happens to its debt?

When a country, say Greece, adopted the Euro as its currency, what happened to the debt that was based on the Drachma? Was it converted into Euros?
13
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9answers
5k views

What Level of Government Debt to GDP Ratio is Sustainable?

I was reading that Japan has a debt to gdp ratio of 240pc and I cannot understand why this has not left the country "bankrupt"? From looking at this like an ordinary person this level would be ...
12
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4answers
6k views

Why do lenders dislike early loan repayments?

I've frequently seen references in blogs and articles about how banks and other lending agencies like to refer to people who repay loans on an accelerated schedule as "deadbeats", because they get ...
11
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2answers
397 views

Are there any states that don't have debt?

I've not been able to find any states that don't have debt to other states. This, to me at least, seems really strange. Are there any nation states that are not in debt to other states, if so which ...
9
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3answers
11k views

What happens to a country with lot of debt?

As far as I know, debt is a way to get hands on extra money which will burden the future governments. What if every successive government keeps adding to the national debt? Isn't it like free money? ...
9
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4answers
398 views

In the eyes of a normal citizen, what difference does it make if my country has debt or no debt?

I got curious about this because I happened to pass by a list of countries with zero debt. Country debt seems like a major thing, but for a non-economics major like me, I don't exactly understand the ...
8
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4answers
2k views

Has the world become poorer?

This question is not backed by serious economic research but mainly by a very simple attempt to look at how the world economy has changed. I am asking whether and why the world has, over the past 50 ...
8
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4answers
473 views

Is it possible to eliminate the U.S. national debt?

A political science teacher of mine has said that the U.S. national debt has grown way beyond reach and is now just a political talking point with no real value. He says that there is no point in ...
8
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2answers
505 views

Consequences to lending and value of national currency from a negative interest rate and 140-year mortgages in Sweden

According to an article at Yahoo Finance, the Swedish central bank dropped its zero interest rate to -0.1 percent a couple of days ago (the article is dated to Thursday, February 12th, 2015). Now, ...
8
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3answers
659 views

Why do indebted governments fear deflation?

It's widely accepted among people who follow finance that various governments around the world, including the US government, are doing (or their central banks are doing) everything possible to keep ...
7
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2answers
869 views

Why would China and Russia selling the US' debt ruin the economy?

I was listening to an interview with David Harvey and he mentioned that if Russia and China were to sell the debt owed to them by the US, the US economy would take a serious dive. How would they sell ...
7
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1answer
82 views

How come the CBO reported the Federal Deficit for FY2014 was \$483 Billion when debt went up by \$1.1 trillion?

The Monthly Budget Review: Summary for Fiscal Year 2014 states that the deficit was \$483 billion. Treasury Direct shows Total Public Debt Outstanding increasing over the same period from \$16.7 ...
6
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2answers
421 views

Why aren't perpetual bonds more common?

Most government bonds and corporate bonds have a maturity date when the principal must be repaid. While the few percents of interest every year is generally not a big problem to pay out, when a bond ...
5
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2answers
2k views

Is investment in real estate a real investment?

In the book The Financial Crisis and the Free Market Cure in chapter 3 author said that investment in real estate is not really investment. It is jobs that create ...
5
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3answers
228 views

What does trade deficit really mean?

I watched a video about how if America imports USD 1m worth of goods but only exports USD 600k worth of goods, there is a USD 400k debt to other countries if the other country allows this deficit. US ...
5
votes
2answers
185 views

Recovering from large government debt without currency devaluation

Current, Greece has a debt of roughly 175% of GDP. The new government has announced it wishes to negotiate a write-off, something Eurozone leaders have so far refused. From prior knowledge and this ...
5
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2answers
181 views

Learning about Debt and Credit

I am very interested in learning about debt and credit - not personal debt and credit - but debt and credit of countries and the like. I have searched everywhere but it's difficult to find books that ...
5
votes
1answer
92 views

Why, in such a debt-heavy era, is inflation still such a Bad Thing(TM)?

Going through the Wikipedia article on inflation, a number of pros and cons to inflation are covered. Most of the "cons" of inflation (cost-push inflation, hoarding, hyperinflation, diminished ...
5
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2answers
84 views

Have the Greek bailouts been included in state budgets Eurozone members?

A lot of people (mainly journalists and politicians) say that Eurozone taxpayers pay for the Greek bailouts. On the other hand, a lot of economists say that those money have not been added in the ...
5
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1answer
1k views

Why not just print money to combat deflation?

If interest rates are zero and inflation is under 2% per year then why not have the fed print money without borrowing until inflation is back at 2% per year? The money could be used to pay off the ...
4
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3answers
277 views

Will major economies be able to repay their debt?

According to The Economist, lots of major economies are in debt to the extent of it consuming most of the countries' GDP. And the whole system almost seems to resemble a Ponzi scheme at a macro level. ...
4
votes
1answer
560 views

Could debt cause inflation instead of deflation?

It is well known that debt can cause deflation, especially during crisis: to repay their debts agents sell their goods which causes a fall in prices. But if there is no crisis and agents "have the ...
4
votes
2answers
14k views

What's the difference between public debt, government debt and national debt?

When it comes to non-private debt, I hear these three terms the most, but I am not sure if they're interchangeable or discernible. Also, are they recorded in the balance of payments? I'm guessing if ...
4
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1answer
70 views

Australia and Saudi Arabia - Structural Similarities

I refer specifically to this article in which Andrew Critchlow paints a pretty dire view of the Australian economy. The line which challenged my priors was: ...
4
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1answer
151 views

How much of the Greece's public debt is created by its trade deficit?

How much of the Greece trade deficit reflects into it's public debt? Each year, Greece is importing about two times as much as it's exporting. In some years, even three times more. How much of that is ...
3
votes
2answers
4k views

What would happen if China called in its debt?

I was talking with a friend of mine the other day about Trump putting the 35% tax on all overseas manufacturing. Couldn't this hurt those countries that have plants where US manufacturing comes from? ...
3
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4answers
330 views

What is the justification for it being a problem if loans are not paid back?

As far as I could understand, the loan system applied by banks which is based on a fractional reserve system works as follows: Assumptions: The bank has initially 1000$. The fractional reserve is ...
3
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3answers
110 views

Economic theory / papers on sovereign debt?

I am an undergraduate student who does some research on sovereign debt and its sustainability. Which papers are essential to understand how sovereign debt works and which implication it has for the ...
3
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3answers
5k views

How to interpret Whited Wu index (WW-index)

I want to study financial constraints on companies of different groups and for that I try to use Whited-Wu index: ...
3
votes
1answer
35 views

Statistics of links between public debt and recessions

When the debt of a country gets above a certain level, is there a bigger chance for an economic crisis, recession or even civil unrest? I know things are different today. But did anyone bother to ...
3
votes
1answer
78 views

When Does a Country's External Debt Become a Problem?

Here in the UK, the external debt is currently over 300% of GDP. To me this looks very worrying, using my basic financial logic, it seems like this debt will only go up (because of interest combined ...
3
votes
2answers
179 views

Why don't governments exploit negative interest rates more than they currently do?

At the moment many governments, such as Finland's, are able to borrow money at negative interest rates. My question is: why don't they borrow as much money as possible while interest rates are ...
3
votes
1answer
62 views

Could a hike in interest rates cause a country to be unable to pay back it's debt burden?

Sometimes I read in news articles, that a central bank can't hike the interest rates much higher, because then the government would be unable to pay the interest rate burden of it's government debt. ...
3
votes
1answer
50 views

The appeal of low-dividend stocks when trading with government debt

Background: In the 1710s, the British government borrowed heavily to finance wars. To reduce the interest on this debt, the government converted this debt into stock from a private company. The ...
3
votes
1answer
94 views

What happens to the billions in Euros that Greece owes if it leaves the Euro

Greeces owes billions of Euros to the IMF and European Union. What happens to those debts if it leaves the Euro? Do the debts get translated into Drachma or can the government just print Drachma to ...
3
votes
1answer
439 views

Why does nation's total debt matter and not NIIP?

Most people in the media talk about how the total debt level of a nation relative to its GDP is a measure of how "screwed" the country is. For example, see this: http://www.zerohedge.com/news/goldmans-...
3
votes
1answer
67 views

Do German Goverment bonds usually include (or included) a condition that the debt will not be serviced in case of trade imbalance?

Today the Spiegel ran an article on a proposal to end the Euro Debt Crisis. That article made the claim given in the title Syriza will eine sogenannte Wachstumsklausel für jene Schulden einführen, ...
3
votes
1answer
139 views

Credit market debt is $200 trillion?

In a recent article by David Stockman he wrote: Credit market debt outstanding has soared from \$85 trillion to \$200 trillion. What is he talking about? What is the itemization of this debt. ...
3
votes
0answers
37 views

Do countries with high taxes end up with low government debt but high private debt?

I'm curious if my observation that some Scandinavian countries (Denmark, Sweden) have high taxes, low government debt, but high private (in particular high household) debt is applicable more generally ...
3
votes
0answers
48 views

Economic effects of very large (>200%) household-debt-to-GDP-ratio in advanced economies

According to OECD figures, five OECD countries have houshold-debt-to-GDP ratios in excess of 200%: Denmark 292.0% Netherlands 277.1% Norway 221.8% Australia 211.8% Switzerland 211.2% Most of ...
2
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2answers
522 views

What is the need for a special purpose entity/vehicle in mortgage backed securities

What is the need to create a special purpose entity/vehicle (SPV) for mortgage backed securities? What potential risks are avoided due to the creation of SPV? It is my naive idea that the holder of ...
2
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4answers
231 views

How can people save in a equilibrium economy?

Two people on a desert island: John produces 100kg potatoes and sells them to Paul for \$100. Paul catches 100kg fish and sells it to John for \$100. GDP is \$200\$, right? Next year, they improve ...
2
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2answers
344 views

Is the loan principal ever delivered in pieces over time?

Not sure if this is the right place for this question but it's more of a theoretical finance question than a personal finance question. So a loan has a principal amount that is given to the borrower ...
2
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2answers
888 views

Who owns German debt?

I know that Germany has huge external debt. I don't know how to find out which entities own this and especially which country they belong to.
2
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2answers
2k views

Are debt/GDP ratios calculated with real or nominal GDP as the denominator?

As the title suggests, I would like to know whether the numbers are generally calculated with real or nominal GDP. Besides that I would also like to know whether it matters and how significant of a ...
2
votes
2answers
231 views

Why do bonds pay back the entire principal at maturity instead of paying it off gradually?

Bonds usually pay interest only and the entire principal is paid back at maturity. On the other hand fixed rate retail loans pay back both interest and principal such that at the end no debt is ...
2
votes
1answer
394 views

If banks create money by lending it out, how are they taking any risk?

When I lend money to someone and they don't pay it back, I lose my money. I can only lend out money that I own (or borrow). I understand that when a bank lends money, that money is created the ...