Questions tagged [government-debt]

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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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45 views

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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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
31 views

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
42 views

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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2answers
60 views

What is the purpose of the Treasury issuing bonds?

I have always thought that the US Treasury issues bonds to raise money to allow the US to pay off debts in the short- and long-term. However, recently, I have read in a book on Modern Monetary Theory ...
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1answer
31 views

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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1answer
35 views

Real yields and growth [closed]

Found the following very interesting statement on bond prices, "The yield on a risk-free government bond should equal the growth in nominal GDP since that represents the opportunity cost of holding a ...
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Increase in Debt / GDP positive or negative for currency?

When a nation-state and/or monetary union increase it's debt to GDP ratio. Is this a net positive or negative for its currency?
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1answer
56 views

How do debt-free governments control the money supply?

From what I read in my introductory macroeconomics textbook, central banks can control the money supply by selling government bonds in the market (decreases money supply), or by buying government ...
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Why do people buy negative interest rate bonds?

I get that people buy long term government bonds, because of how safe it is, and if there would be a recession the government would just print more money and could pay it back. But why would anyone ...
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1answer
22 views

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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Governmental debt after COVID

Is there any well-researched studies published about the effect of increased governmental spending and later deepening debt burden due to COVID? Appreciate that the event is quite recent, but being ...
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1answer
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What are the possibilities to solve the European debt crisis?

The question aims to discover the possibilites that how the European debt crisis can be solved. Is it possible to solve without withdrawing from the Euro-area? Are there any option to bear with this ...
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Do states compete with each other when they emit debt?

Let's say that, for some reason (a crisis or similar), many first-world countries' states need to emit public debt to be able to pay the services the normally provide (pensions, health etc.). As I ...
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2answers
15 views

The process of printed money reaching the government?

I saw a link that suggested that when the fed prints money, this money is actually lent to the government in the form of bonds, not given. This, despite the fact that the Fed is (loosely) associated ...
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1answer
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What would happen if the U.S. “refinanced” its national debt?

Interest rates are at historical lows. I believe they went negative in parts of Europe recently. Since interest on the national debt is one of the biggest, if not the biggest, expense item of the U.S. ...
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Why is such a high US national debt not resulting in another great depression?

The chart below shows that US national debt as a percentage of its GDP is at an all time high excluding the one during WW-II. While I'm not as well informed in economics as most of the people on this ...
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1answer
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What is core government debt?

In fixed income, the yield on the 10-year US Treasury fell 0.07 percentage points to 0.56 per cent as investors retreated to the safety of core government debt From : https://www.ft.com/content/...
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Inflation vs GDP growth as factors driving down the US debt-to-GDP ration post-WW2

I'm trying to figure out how much inflation (vs GDP growth) shrank the debt-to-GDP ratio (in the decade or so) post-WW2 in the US. I found one paper that says: In 1946, the debt ratio was 108.6 ...
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How to calculate fiscal space for a country?

I would greatly appreciate if you could explain me how to calculate fiscal space for an specific country. Or, could you please introduce me some references which explain it's calculation step by step ...
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1answer
30 views

What happened to the national debts after Bretton Woods

When Bretton Woods was created and the world went on to the US Dollar standard, what happened to all the national debt's of all the countries like Japan, Britain, etc?
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Why the treasury is buying back its treasury securities during the coronavirus economic crisis?

I have read today that the treasury of my home country (not the US) started to buy back a significant amount of its Treasury securities (bonds, notes ...) from their owners. My question is what ...
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1answer
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What are the effects of a 12 month sudden stop/shutdown of a capitalistic economy like the US? [closed]

Consider a scenario where consumer confidence remains low until a virus such as COVID-19 is contained. In this scenario, containment is defined as being achieved once a vaccine is manufactured and ...
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1answer
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Shouldn't the total global debt amount to zero and not $253 trillion?

In Jan 2020, the Institute of International Finance (IIF) came out with a report (read summary here) that the total global debt is expected to climb to a new all-time high of more than $257 trillion ...
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Dynamic of 10 year UST given supply shock of the bonds that the Fed will buy into

It looks like the US government are gonna issue a lot of bonds in the near future. Basic demand/supply implies that this will lower the price of those bonds i.e higher yields. At the same time it ...
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1answer
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Won't countries be in trouble if all sovereign debtors demand payment?

I'm trying to understand this r/explainlikeimfive analogy. I rectified typos, and simplified some names and numbers. Won't Cal demand his principal back at some time in the future? Similarly, won'...
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1answer
25 views

How did the massive flight to long-term bonds create a liquidity crisis?

A few weeks ago I noticed that several blogs and such were adamantly proposing that the Fed lower rates immediately by 50 bps. They said that the flight to safety -- to long-term government bonds -- ...
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1answer
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Is there a reference that plots different countries' debt-to-GDP ratios over (long) times?

This old blog post has an interesting plot that demonstrates that the U.K.'s current debt-to-GDP ratio is significantly below its very-long-term (180-year) average. Is there a plot anywhere that ...
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1answer
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Why do Eurozone members have a commonly higher Debt-to-GDP ratio?

As you could find out from the map, among 22 countries whose debt-to-gdp ratio is above 50%, only 7 are not Eurozone members, and from which only UK is comparably large economical entity. ...
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1answer
153 views

Most significant factors in the price of a goverments bonds

As a follow up on Long-,short-term interest rates and inflation. Inflation is clearly a factor(tho not possible to model mathematically) when it comes to the market price of a bond. I can think of ...
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Why does the United States' national debt matter?

This might sound like a naive question, but I mean it quite honestly (please be aware that I am merely a high school student): Why does the United States' government debt matter? To be sure, based on ...
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107 views

What would happen to US economy before US government lose control over its national debt?

From this wiki page we can clearly see that US national debt is growing steadily after 2010 and now it's larger than US GDP already (at the end of 2019). Still it's commonly believed the debt is ...
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How would M2 and Velocity of M2 be affected if balance sheet expansion continues long-term?

Let’s assume that the Federal Reserve does NOT discontinue injecting liquidity into the Repo market but, instead, continues a long-term policy of continuous and regular liquidity injections. Let’s ...
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1answer
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What is the logic behind that one can “grow out of debt” via increase in GDP?

As we all know the US has a big debt and increasing deficits. The head of FED J. Powell commented that the US was on an unsustainable path w.r.t some debt to GDP ratio. A few commentators I listen to ...
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Greece national-accounts : deficit and debt doesn't seem coherent

I wanted to have a look at Greek's data to have an idea of the debt crisis' impact on various indicators. Two of those indicators are national debt levels (in GDP% or in absolute value) and ...
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Spending despite fiscal deficit

This is going to be a rather simple question. Surprisingly, I did not find quite a lot of answers satisfactorily explaining my point. The question goes like this- The USA, under the Trump regime, ...
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1answer
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What prevents a government from issuing debt to finance riskier investments?

Germany has a 10Y bond yield of -0.336%. Meanwhile, Brazil has a 10Y bond yield of 6.415%. Why doesn't the German government issue bonds in order to buy Brazilian bonds? It seems a no-brainer win. ...
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Does Medicaid or Medicare represent a higher risk to the Federal Government Solvency and Debt going forward?

I'm trying to understand not only which program is expected to be larger in terms of costs, but which one has the least capacity to adjust (reduce benefits if revenues for the program fall).
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Would deflation further stress the Federal Government's Balance Sheet? Would this put in peril Debt payments and Social Security benefits?

I would like to know if deflation would represent a risk to Debt (bond) payments and Social Security benefits. To my understanding, Social Security is only indexed when there is positive inflation. ...
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53 views

Is there a country in the world not in debt?

This morning I read the following article: https://www.bbc.co.uk/news/business-49961301 It got me thinking, is there any country in the world not in debt? I am aware that debt is good for a country,...
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What impact does deficit spending have on economic inequality?

Taxation schemes can be classified as progressive (the tax rate is higher for higher income brackets), regressive (the tax rate is lower for higher income brackets), or neutral (the tax rate is the ...
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What is the privilege of a primary dealer?

Primary dealers have a privileged position, so there is value in being registered as a primary dealer. - https://economics.stackexchange.com/a/13450/8387 I was previously under the assumption that ...
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Local vs. foreign currency denomination for Emerging Market Bonds

For emerging market governments, why is it safer to issue bonds in local currencies than in foreign currencies to raise money? Given that both are invested in by foreign investors, couldn't both ...
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Debt Held By The Public

Following off the back of this question on debt-to-GDP vs. debt held by public-to-GDP - Difference between "Debt Held by the Public" and "Total Public Debt Outstanding"?: So in ...
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1answer
98 views

Why does the inverted yield curve occur with US Treasury securities?

I have always thought that US securities were considered nearly risk free as the government will almost always pay them back. So why is it the case that investors currently view short term securities ...
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When the Central Bank sells a bond, where does the money go ultimately?

As the accepted answer points out, the premise of my question was flawed. Thank you for the dispelling of my wrong assumptions. The original question follows. There are two related questions (and ...
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1answer
43 views

Why does the US have public debt if they make more than that annually?

Probably a dumb question: I know next to nothing about economics and I'm just trying to make sense of what I'm trying to learn. So, I've been looking into GDP lately, trying to understand what it ...
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153 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 ...