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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34 views

How is MicroStrategy raising money to buy more bitcoin? [closed]

Per this article: In a first for the fixed-income world, MicroStrategy said in a filing on Monday that it plans to offer $400 million of senior secured debt and will explicitly “use the net proceeds ...
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How could DTI(debt-to-income ratio) go well above 1?

IMF Working Paper No. 19/258: Assessing Macro-Financial Risks of Household Debt in China (PDF version) The riskiness of household debt increased as well: between 2010 and 2016, the share of debt held ...
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Are there any Sovereign Debt Guarantees, apart from those issued by the US?

The US has been undertaking an irregular form of foreign aid, Sovereign Bond Guarantees, which entails guaranteeing some of the public debt of their allies, source here: https://www.cgdev.org/blog/...
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Financial manipulation and Inflation as tools for sovereign debt default

In the book This Time Is Different, by Reinhart and Rogoff, in chapter 8, the authors state that Higher minimum level of reserves (?) And/or upper bound/ceiling to interest rates ( will help increase ...
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267 views

Why does the Loanable Funds Market model use the real interest rate instead of the nominal interest rate?

As far as I understand, the majority of loan contracts specify a nominal interest rate, NOT a real interest rate. So a hypothetical loanable funds markets would have people suggesting potential ...
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37 views

How come debts is higher than assets?

Investopedia has a definition about Debt ratio, I do not understand how come Debt ratio can be higher than 1. Because it means that equity is negative (because Total Assets=Debt+Equity).
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47 views

Why debt/equity ratio is limited to between 0 and 9

Is there any economic reason that debt/equity is limited to between 0 and 9 as in the picture below? This research examines the impact of the law on firms' financial flexibilities.
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Small Open Economy Without Government

Suppose we have an economy with a representative consumer with the following utility function: $$U=\sum_{t=0}^\infty\beta^t\frac{c_t^{1-\sigma}}{1-\sigma} $$ There is no uncertainty and the household ...
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67 views

How can increasing debt boost potential returns?

May 26 2020. Why Even Carl Icahn Couldn't Save Hertz From Chapter 11 - Bloomberg Hertz’s debt binge began when it was acquired by private equity firms from Ford Motor Co. in 2005; the new owners ...
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321 views

Printing Money vs. Issuing International Bonds

I'm reading Niall Ferguson's The Ascent of Money and I had a question about the economic difference between printing money vs. selling bonds to foreign entities. At one point in the book, the author ...
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External/Internal debt

https://www.bis.org/publ/work550.pdf page 7 extract "Third, the distinction between external and internal debt is important. External debt, long seen as a key driver of financial crises in EMEs (...
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What are the 'Public Account Liabilities' of the Government of India?

In the Quarterly Report on Public Debt Management for the Quarter Jul - Sep 2020 of the Government of India, an increase in 'Public Debt Liabilities' is declared. What are they?
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What happens to an MBS if all the underlying mortgages are fully paid back by the borrowers much before the maturity date?

What would happen to an MBS (mortgage-backed security) if hypothetically speaking all the underlying mortgages were fully paid back by the mortgagees (borrowers), much before the maturity date? I ...
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Difference between 'Internal Debt' and 'Market Loans' in RBI public debt statistics

While perusing RBI public debt statistics, I am at my wits end in trying to figure out the table headers. I am unable to sum up any combination of them to get any other. Specifically, what is the ...
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Is the debt owed to resourceful producers by resourceless consumers practically irrepayable?

Here is my argument for the debt owned by resourceless consumers to resourceful producers (as currency, bonds, loans, or other means). Is it correct? If not, where am I going wrong? Economic value is ...
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Currency Devaluation - As a Means of Paying Off Debt

From https://www.sapling.com/8117368/debt-handled-currency-devaluation: Currency devaluation will not only affect consumer debts, but it will affect how a country pays back its national debt. If a ...
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Does the US Federal Government keep public records of annual service payments on external (foreign-owned) public debt?

I'm doing some research on international debt policy, and I'd like to be able to compare some statistics I've compiled of external public debt in HIPC (heavily indebted and poor countries) with the ...
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How does QE effect the collaterals?

For instance, the ECB accepts green bonds as collateral. And also they are more likely to include green bonds in a QE program. Does this face make a green bond more valuable? How would it work in a ...
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How to find US total debt?

Sorry i'm not really an economist but I don't know where else to ask. I'm reading Ray Dalio's Big Debt Crises and he has several graphs for total US debt burdens https://imgur.com/a/tPX3LuH where it's ...
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Contribution by each factor

Must admit it has been many years since I have done advanced calculations or anything remotely like it, so please bear with me. I have problem that I hope to get some help with. Say I have below ...
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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 ...
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How do the Government, Firms and the Foreign sector pay their debts in this circular flow of income?

Here is a circular flow of income that I took from Krugman's macroenomics textbook. Please notice, in this diagram households just give their savings to banks (which are part of the financial sector) ...
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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 ...
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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 ...
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187 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 ...
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Why might it make sense to buy bonds in a company facing restructuring?

In this video, Sal Khan states, "If you really thought that Lehman Brothers in the long term was going to come back, what you might want to do is somehow try to become one of its bondholders, and ...
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Biggest foreign owners of China debt?

It is already known that China and Japan are the biggest owners of US debt - about one trillion dollars each. But who are the biggest owners of China debt? I mean the foreign owners.
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Does China issue treasury bonds too?

The USA is issuing a lot of treasury bonds and investors are buying it. But does China issue such bonds too? If yes, then how many such bonds did they issued and who are the largest owners of those ...
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Why did Germany use hyperinflation to free itself from an external debt?

Im reading about how Germany used almost any solution To free itself from its WWI debt: hyperinflation, calculating payments on the basis of the economy's potential, rescheduling annuities and finally ...
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Why would non-investment grade debt be issued at the investment-grade debt market?

Newsweek quoted Bentley University Prof. David Gulley Ph.D., Univ of Kentucky-Lexington, 1990 M.A., University of Kentucky, 1989 B.A., Alma College, 1986 A \$10 Trillion Corporate Debt Bomb Is ...
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What are the uses of overnight loans?

As far as I understand an overnight loan is a loan that is settled the next day. Who are the entities that would find it useful to take a loan just for a day? and, what would they use an overnight ...
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Are government bonds internal or external debt?

I was watching this video and since it's a bit oversimplified I wanted more information. I was curious because internal debt is in the local currency from local lenders, while external debt is in a ...
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What does the Fed do with their profits?

As far as I understand the system the Fed prints money which it then uses to buy bonds. Bonds are basically statements of debt meaning that the Fed receives interest from the parties it has bought the ...
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Which is safer in the long-term, diffuse debt or concentrated debt?

I want to deepen my understanding of risks as posed by debt burdens among actors of an economy. After some literature review, it seems the matter is nuanced; points can be made for both sides. I'll ...
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Does the government ever pay back its debt from the OMO to the Fed? [closed]

I'm getting confused about how exactly does money being created by the Fed. From investopidia.com: ...
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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 ...
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How can we get negative **real** interest rate?

According to Fisher's equation, Real interest rate=Nominal interest rate - expected inflation rate So, how can we get negative real interest rate? I'm in doubts. On one hand, purely from algebraic ...
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How can a sovereign debt ratio be high, but debt-servicing ratio be low?

I'm quoting this May 22 2020 interview with NYU Stern Prof. Nouriel Roubini. In other words, you’re saying that because of structural weaknesses in the economy, even modest inflation would be crisis-...
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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 ...
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Is there unnecessary duplication for borrowing in this circular flow of income diagram?

Here is a circular flow of income that I took from Krugman's macroenomics textbook. We can see that when firms want to borrow they can go to the financial sector and borrow savings of national and ...
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Is it possible to repay the world debt? If not, why do we care?

Let me apologize if my questions sound stupid to experts. I have no training in economics. I am just curious and puzzled. I couldn't find any answer to the questions below. As far as I have ...
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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? ...
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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)? ...
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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 ...
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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 ...
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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 ...
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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?
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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? ...
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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, ...
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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.