Questions tagged [government-debt]

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28
votes
4answers
5k views

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 ...
22
votes
6answers
2k views

Who exactly foots the bill if Greece defaults

Apologies if the topic is not appropriate (economics newbie here) but I am curious as to who exactly would foot the bill if Greece defaults on the ~300 billion dollars it owes. It looks like most of ...
19
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3answers
710 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)? ...
14
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1answer
2k views

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 ...
14
votes
4answers
2k views

Why does China buy so much U.S. Treasury debt?

What is the reason that China buys so much US debt in form of Treasuries? How does this help the Chinese economy? It seems they are willing to give money to USA so USA economy can function better (...
12
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2answers
442 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 ...
12
votes
4answers
7k views

Why does any treasury / central bank hold gold?

I know the US treasury is slowly selling its gold reserves, but what is the actual mission and purpose when it comes to the holdings? What is the reasoning behind the slow rate of liquidation? I have ...
8
votes
4answers
563 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 ...
7
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4answers
5k views

Why can't a government print money to pay its debt?

I have written an explanation to one of the famous questions "why can't government print money to pay its debt". Is my explanation correct? Is this the similar situation which happens in ...
7
votes
3answers
736 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
901 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
votes
2answers
121 views

How did Portugal draw down their interest rates on pubic debt?

I notice that Portugal had a very high interest rate on its national bond issues back in 2012 but since then it has drawn down significantly: How were they able to decrease the interest rate?
7
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3answers
108 views

Why are nations engaging in austerity when bond yields are historically low?

In the UK and EU austerity programmes are rife. However, bond yields are also historically low, and have even been negative! At a time when debt is cheaper than ever, and below the accepted long term ...
6
votes
4answers
9k views

Government bonds and printing money

Wikipedia: If a central bank purchases a government security, such as a bond or treasury bill, it increases the money supply, in effect creating money. My question is: what is the difference between ...
5
votes
3answers
689 views

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 ...
5
votes
2answers
2k views

What would happen if the US defaults on its debt?

As has been widely discussed already, the situation in Greece is considered more serious than in the US, as they have dollar-denominated debt and can only print Greek currency. The US, has the benefit ...
5
votes
2answers
2k views

Why could China, much poorer than US, lend so much money to US?

The GDP per capita of China is only a fifth of that of US. But China has lent more than a trillion dollars to US. How could the much poorer China lend so much money? Where did those money come from?
5
votes
1answer
28 views

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 ...
5
votes
3answers
167 views

Do governments issue debt at low r to pay debt with high r?

I have a question. I know governments do debt rollover from time to time. But, to me it seems logical that governments do this when the interest rate of bonds they have issued in the past is higher ...
5
votes
2answers
87 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
votes
1answer
192 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 ...
5
votes
1answer
3k views

What's the difference between Quantitative Easing and regular central bank operations?

Most articles describe QE as purchasing government securities on the market. I thought that was what ordinary day to day operations of the central bank were in their efforts to maintain a target ...
4
votes
3answers
569 views

Why doesn't the government create money, spend it for free without interest, and recollect it with taxes?

I was thinking of a better monetary system, and here is what I came up with it. I'd like to know if this would work, as I see if offers many advantages over our debt-based monetary system today. A ...
4
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3answers
287 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
4answers
343 views

Greece default and why are US States not seen defaulting?

Reading various articles, it is clear that Greece is in the situation simply due to the fact that they have indulged in overspending on their national budget for over a decade, and with the 2008 ...
4
votes
2answers
139 views

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 ...
4
votes
1answer
161 views

Why did the Greek bailouts "fail" whereas the Portuguese bailouts succeeded?

While Greece has required several bail-outs and is on the brink of falling back into recession, the Portuguese economy has seemingly recovered. Why has recovery gone so well in Portugal but failed ...
4
votes
2answers
15k 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
votes
2answers
165 views

Why is government debt level presented as ratio to GDP, not against government budget or revenue size?

A country's public debt is often presented as ratio to GDP. For example, in Wikipedia, List of countries by public debt or National debt of the United States both use ratio or percentages of GDP. ...
4
votes
1answer
88 views

What happens to undated government stocks when interest rates dip below the coupon rate?

What happens to undated government stocks (debt— known as "bonds" in the US) which pay a coupon and have an embedded call option, when interest rates dip below the coupon rate? Will the market value ...
4
votes
2answers
130 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 ...
4
votes
1answer
102 views

Argentine default: "Rights upon future offers"

Argentina defaulted on its sovereign debt in 2002. It has reached an agreement with most but not all of its creditors. Wikipedia has a pretty good summary. The agreements included a 70% hair cut but ...
4
votes
1answer
107 views

Sources of historical cross-country government debt to GDP data

I am looking for a source containing debt (government debt) to GDP data of different governments. Do you know of any reliable sources with data going back as far as possible (at least 1960s)?
4
votes
1answer
48 views

Question regarding to Government Debt in Williamson Textbook

I am using the Williamson Macroeconomics textbook to look over a chapter on Monetary Policy and Banking (Chapter 12, 5th Edition). For a bit of context, the author specifices the government budget ...
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
votes
5answers
862 views

Why is national debt bad if the central bank can keep buying bonds?

When I read about national debt, it's usually about how debt is bad because with too much debt, debtors would demand higher interest rates. Eventually the government can't pay the interest, defaults, ...
3
votes
1answer
66 views

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 ...
3
votes
1answer
143 views

Why did Greece not solve its debt problem by selling treasury bond to its own people?

Since the Greek vehemently opposed the conditions imposed by the EU for the 3rd bailout, I don't understand why the Greek government did not raise the money needed to repay the previous loans by ...
3
votes
2answers
83 views

Greek default versus Euro exit

Talk about Greece leaving the Euro has been reignited by the recent election of Syrzia, with some again talking about how it is practically inevitable. Why are these people viewing a Greek default as ...
3
votes
2answers
159 views

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 ...
3
votes
1answer
50 views

Can debt to GDP ratio be reduced transfering debt to local autorities?

It is my understanding that not only government but also local authorities issue bonds. This answer on Money and Finance Stack Exchange suggests that such debts are not accounted in the computation of ...
3
votes
2answers
46 views

Why is the ten year interest rate lower for Spain/UK bonds than for US?

Take a look at the government bonds interest rates, https://www.marketwatch.com/. For the US is 2.9, and for Spain and UK are 1.5 and 1.1 respectively. Spain is an economy with high unemployment, a ...
3
votes
1answer
46 views

Where can I get national debt data?

I'm trying to find out about the history of South Africa's government debt. However, I couldn't manage to find suitable literature or websites showing the history. It is also very difficult to find ...
3
votes
1answer
71 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
2answers
74 views

What determines the rate of interest on national debt for a country?

From what I understand of Canada's rate of interest on the debt, after Pierre Trudeau, it was around 17.4%, after Mulroney, it was around 7%, and after Harper it was around 5.2%. Finding these ...
3
votes
1answer
53 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
100 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
70 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
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0answers
30 views

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 ...
3
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0answers
40 views

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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