Questions tagged [government-debt]

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Have there been more US CDS curve inversions since 2011, and do these correlate with (political) disputes around the debt ceiling?

Gori proposes a model of the 2011 US debt ceiling crisis in which the spread (and ultimately inversion) of the US government credit default swaps (1Y/2Y vs 5Y) is used as a proxy measure for the ...
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Economic indicators for government debt (sovereign debt)

I am looking at sovereign debt as a percentage of GDP. However, due to external factors like exchange rates, the percentage may change from one year to the next even if a government did not borrow any ...
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Relationship between taxation, national debt, and pool of private investment money

We've all heard the argument that an increase in taxation of the wealthy, or of investment earnings in particular (capital gains + dividends) will discourage investment and hurt the overall economy. ...
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Do governments have to pay interest on government debt held by the central bank?

Through open market operations, the central bank may buy government debt to increase the money supply. Does the government need to pay interest on the debt held by the central bank, or does the debt ...
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3answers
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Krugman article - Government debt helps avoid a destructive scramble for cash?

I was just reading this Krugman article which contains the words... I’ve already mentioned that having at least some government debt outstanding helps the economy function better. How so? The answer, ...
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1answer
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The link between economic growth, inflation, interest rates and fiscal deficit

I want to ask a question about how economic growth, inflation, interest rates is linked to fiscal deficit. I was reading a book on introductory economics and the following passage came up: If a ...
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2answers
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Relation between budget deficit and inflation?

In Iran we have had a high inflation rate for several decades (usually above 20 percent). Some of the top economists of the country say that it is mainly because the government spending is ...
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47 views

How to weakly predict T-bill rates?

I know, I know -- if I could predict Treasuries, I could leverage that information, various forms of the EMH, etc. But a lot of people have mortgages (ARMs) tied to US1Y, and so having some kind of ...
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1answer
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Is there a “runaway” threshold for Debt-to-GDP Ratio in the U.S.?

Last year, when Congress was debating the stimulus/relief packages, one Senator made a comment about the debt-to-GDP ratio and how we are approaching a point in that ratio that will have some major ...
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Do Fed OMOs directly and immediately increase M1 or M2 if they buy treasuries from a member bank? And what proportion of OMOs does that constitute?

I commonly hear that when the Fed conducts open market operations, it is directly increasing the money supply by exchanging newly created electronic money for US treasuries. But in the case where the ...
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25 views

detailed account of government borrowing and fed open market operations

I would like to read an extremely detailed (yet, if possible, accessible) account of exactly what happens when the US government borrows money -- how rates are negotiated, who exactly the ...
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1answer
48 views

How are sovereign bond interest rates determined?

They are a lot of questions about the price of a bond or its yield. Why do people buy negative interest rate bonds? How did Portugal draw down their interest rates on pubic debt? ... and so on Mine ...
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1answer
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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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First order approximation of consolidated budget constraint describing the evolution of government debt

I am trying to derive a first order approximation of the government's budget constraint around a zero inflation steady state. This is from Jordi Galís 2020 paper "The effects of a money-financed ...
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Is there a source which informs the public of who is buying up newly issued U.S. Government debt?

Is there a list somewhere of who is buying the newly issued debt that will finance the American Rescue Plan (the $1.8 trillion stimulus package signed recently)? Of course, I have an idea of who owns ...
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Why isn't high inflation along with robust welfare a 'good' system?

High inflation, by definition, means that the demand for goods and services is higher compared to the demand for currency. In other words, people are more willing to give up currency for goods and ...
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1answer
38 views

Risks asscoiated short term stimulus as interest rates approach zero

TL;DR Government interest rates are approaching zero. What are the risks to borrowing large sums in the current enviroment? Would inflation occur? Full Story I was recently reading an article about ...
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1answer
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How does the treasury determine the rates of the bonds they sell?

My understanding is that price and yields are determined via supply and demand. How are the interest rates determined when the bonds are auctioned off?
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What are the economics advantages for not rolling a debt (as a country)

Let's assume that a country has a GDP growth rate of approximately 1% per year (the number is not important). Then the government of such a country can theoretically roll its current debt and even ...
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How much of new debt in Italy is due covid?

The debt to GDP of Italy ballooned in 2021 to 158.5% (https://www.reuters.com/article/us-italy-budget-debt-idUSKBN29L0PP). That is almost 20% increase from 2019. I wonder how much of that is just ...
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What is the difference between "borrowing" money and "printing" money?

When a country's government has a budget shortfall, that country has to find some way to pay its contractors/emplooyees. Unlike a normal company, the government can't simply go to the bank and ask to ...
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Does IMF consider the international reputation of a country?

Hi I have three question below which I tried searching on internet and read a lot of literature as well. Besides all the literature sources I need to know some practical knowledge of people out there. ...
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1answer
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How did the US Government fund its deficit when the Federal Reserve was pruning its balance sheet in 2018-1019?

The primary way for Governments to fund their deficits is by issuing new currency from the central bank against new treasury bonds. The Federal Reserve reduced its [balance sheet]1 from 4.4 trillion ...
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1answer
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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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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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1answer
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Can the US government selectively cancel debt held by the Federal Reserve?

Sort of a follow-up to this question on the Politics SE, which asked about the US government cancelling debt held by China. From the answers to that question, this kind of selective default is not ...
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1answer
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Why is market absorption of issued US Treasury Bonds (with the Fed purchase plan) a problem?

Financial market reports suggest that there are uncertainties about the Federal Reserve's ability to absorb new US Treasury Bonds issued in larger quantities to support the US government's growing ...
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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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1answer
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Why don't Governments do away with the optics of taking on debt against new currency, and instead issue a limited currency every year (say 5% of GDP)?

Governments engage in the optical illusion of taking on debt against issued currency. The debt is effectively owed by the Government to itself. The value of the debt is completely controlled and ...
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What would happen to Eurozone and EU if Italy defaults on its debt?

Question What would happen to Eurozone and EU if Italy defaults on its debt? Background & disclaimer This direct question is an attempt to amend the more expanded question. Given that this ...
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1answer
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Oliver Hart said that financing deficits by printing money can lead to hyperinflation "once the economy is close to full capacity". What does he mean?

In response to a poll on Modern Monetary Theory, Nobel Laureate Oliver Hart said that Governments financing deficits by printing more money "can quickly lead to inflation or even hyperinflation ...
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What exactly is the risk Italy's high debt to GDP ratio poses to Eurozone and EU? [closed]

Background Us laymen read all around that Italy's weak economy and its high government debt/high debt to GDP ratio is threatening the financial stability and health of Eurozone and EU. However, little ...
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For stability, is there a limit to the sovereign debt that a Government owes to itself against issued fiat currency?

Looking beyond the optical illusion of Governments owing debt to Central Banks, Governments effectively owe themselves the sovereign debt created against issued fiat currency. By definition, there ...
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1answer
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Why it is important to observe if the 10Y treasury yield moves nowadays?

in the context of low yields, where fed continues with fiscal stimulus, I've heard from many economists that this week the 10Y treasury rate has been finally increasing. In which situation is this ...
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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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1answer
31 views

National debt vs having national assets

What hypothetical benefits and problems would a country have if it decided to have positive balance? That is, to have its debt much smaller than its assets. Similar to what Norway does. And reverse, ...
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What happens when government bonds purchased as part of central bank quantitative easing (QE) reach maturity?

Does the central bank ask the government to pay or are they rolled over?
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How does high U.S. federal debt affect its citizens?

My apologies if this is a silly question. My background isn't in economics, though wish I had some. During the 2008-9 financial crisis, federal debt increased significantly and there was a small talk ...
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1answer
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Why would governments sell bonds when the economy is in recovery? [closed]

China confident of meeting 2020 fiscal targets, CGTN, 7 August 2020. The article states that China is selling "special government bonds". Why do this? Especially when economy is just ...
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1answer
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Does national debt and its repayment assume population increase?

I assume that the repayment of an increasing national debt depends on an increasing GDP. And increasing GDP, in turn, depends mutatis mutandis on increasing population. So an increase in national ...
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1answer
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How to calculate Debt to GDP ratio quarterly?

I know the formula Debt to GDP ratio = Debt : GDP I have debt quarterly data and GDP (yearly and quarterly). The one that make me confuse is, when i use Debt Q1 2014, for example it wont match with ...
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51 views

Why are the YTMs of TIPS of longer maturities more sensitive to current interest rates and inflation rates?

According to this website, the yields of TIPS of longer maturities are greater than that of TIPS of shorter maturities. It seems counterintuitive since yields of longer-maturity bonds, which are based ...
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1answer
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Even at the break-even inflation rate, isn't the YTM of a TIPS greater than that of a normal treasury bond?

At a the break-even rate of inflation, the semi-annual interest payments from a TIPS and a normal government bond would be roughly equivalent. However, the principal amount originally invested in the ...
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What is the opposite of public debt?

The opposite of a budget deficit is a budget surplus But what is the opposite of public debt? Instead of govt/state being in debt, having the government have extra money to keep or to lend it to banks ...
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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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1answer
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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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1answer
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How can a government save, if it has deficit?

I am reading an IMF paper about China's debt (link) which says: ❝ Despite a large augmented fiscal deficit of 10 percent, fiscal savings remain higher than other countries, resulting from the biased ...
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Modelling the effect of crisis on unemployment

We want to estimate the effect of crises on a country's unemployment rate and distinguish the strength of this effect according to the debt level in a country (i.e. via the interaction effect crisis x ...
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1answer
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Are the primary dealers obliged to buy treasuries no matter what?

It is said that treasuries are the highest quality debt because the government can always "print money" to pay the debt. But, isn't so that the ones printing the money to loan to the ...
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1answer
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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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