21

Who would pay depends on the terms of the default. Sometimes holders of similar debts are not treated equally, and this can play out in different ways. Greeks could default on external debts but continue to pay internal creditors. Or because the ESM and other entities are providing ongoing financing, perhaps they will continue to be repaid when others are ...


11

I'd add a historical perspective to the great answers already given. The data from a very illustrative article "The Greek Debt Restructuring: An Autopsy" by Jeromin Zettelmeyer, Christoph Trebesch, and Mitu Gulati. The private creditors would bear the losses if Greece defaulted before March 2012 These organizations held the Greek debt by 2011: The debt ...


11

You have to understand how international debt works. These are not loans, but bonds. China buys a US bond for e.g. 98 USD. This bond is a promise by the US treasury to pay 100 USD one year from now. China owns a lot of this type of bonds. Once the bond hits maturity, China is paid 100 USD and the thing it typically does with these 100 USD is it buys the same ...


8

Yes, I imagine there's reason to contest that claim. Consider the GDP to debt ratio. While it has risen over time and with the recent recession, it was not too far away from Germany which is considered, I think, the absolute picture of fiscal health. Consider also the critical point that the US government does not have a chance of death like a normal ...


7

Whether a country's debt is sustainable is a difficult question to answer. Bohn developped a framework for answering this question and the cited paper is a summary of much of its findings. Henning Bohn, 2005. "The Sustainability of Fiscal Policy in the United States," CESifo Working Paper Series 1446, CESifo Group Munich. Bohn proposes to estimate a ...


6

It's a holdover from the old Gold Standards. Gold standard regulation required all banks, including the central bank to hold gold as a regulatory asset. In the last gold standard, the Bretton Woods regime, the US in particular had to hold gold to back the dollar. The requirement went away with the collapse of the Bretton Woods agreement in 1973, but the gold ...


6

1.- The government imposed an austerity program and, in exchange, received assistance from the IMF and the EU. 2.- The ECB made it clear that it would do whatever as necessary to save the Euro, even buying sovereign bonds of Euro countries. 3.- A general improvement in financial conditions around 2013 throughout the world let to a decline in default premia....


5

Would you be satisfied with a graph of the last 20 years? Is yes, you can use Google Data Explorer. It seems to rely on Eurostat as well, so the data is probably available from them somewhere.


5

Every of the United States except Vermont is required by law to balance their budgets. 45 states have some sort of constitutional balanced budget provision and another 4 have it by statute. (Source) According to Inman (2003), such balanced budget provisions were mostly adopted after the state defaults of the 1840s: Following the defaults of state debts ...


5

Two reasons: The United States has a capable federal government that takes care of social insurance transfers and countercyclical economic policies. The American states spend less. The American states have stronger anti-tax sentiments, and increasing public spendings face opposition from business and rich people. Take the 2008 crisis for example. As for ...


5

For any country that issues its own currency, having a sovereign debt in its own currency is a choice. It can always be monetised. This will cause a one-off inflation episode, but it does lessen, or entirely remove, the national debt. So for all countries with sovereign debt in currencies they themselves issue, then no amount of national debt is ...


5

The Russian default was an extraordinarily insignificant event compared with a current-day US default on all treasury securities. There are no remotely similar events to compare it to. This makes it hard to make guesses about all the ramifications. Still, speculating is fun. My guesses, based on a complete default (no money recovered) on all treasury ...


4

There is a lot of controversy in economics about the advisability or otherwise of government taxation and deficits, but let's skip that and just look at the figures. The U.S. National debt held by the public, is approximately \$13.3 trillion. Federal tax revenue for 2014 was slightly over \$3 trillion - which still left a \$500 billion deficit. Interest ...


4

The difference is that in buying the bond, the central bank now owns a bond, and a fiscal deficit has not been directly monetised. That means that: the government will have to keep paying interest on the bond, to the central bank, and will have to redeem it if it's not a perpetual. Remember, some governments are completely distinct entities from central ...


4

there are a few reasons: Directly selling bonds isn't a common method to get money from your people. Raising taxes works more effectively. A promise of future spending would be roughly equivalent to selling bonds. why not sell bonds to everybody? not just the Greeks? To a large extent, this has already been done. You don't get to 158% Dept to GDP without a ...


4

The IMF created its Historical Public Debt Database a few years back; that should do the trick for you. It's described in this paper, with annual data from 2012 back to as far as the late-1800s for some countries. You could pair that with the IMF/World Bank Quarterly Public Sector Debt statistics.


4

This does not work like that. If you want to add-up all the debt in the world you will not end-up with 0. Think about a situation in which I owe you \$100, you owe someone else \$100, and this someone else owe me \$100. Total debt would be \$300, even if another guy is debt-free. Moreover, country debt (called sovereign debt) is not only owned by other ...


4

Your get the basic intuition, but real-life situation is a little bit different. First, I didn't really understand what you meant by "try to catch some 'fool'", but what you are calling foreign exchange bank is actually called the Foreign Exchange (market), and consist of buyers and sellers that are basically ready to buy and sell any currencies (almost all ...


4

The ratio of government debt to GDP is a useful indicator because, broadly, the larger a country's GDP, the larger is the tax revenue the government could potentially raise to service the debt while maintaining other government expenditure at an acceptable level. Thus a very high debt / GDP ratio would raise doubts about the government's ability to service ...


4

Greece had more debt, less growth and higher budget deficits than Portugal throughout the crisis. As a result, the Greek bailout should have been even bigger, but this was politically untenable, while the Portuguese bailout proved sufficient in size. The lower budget deficits in Portugal, for example, also made it easier to comply with the austerity ...


4

Your understanding is wrong. Nations accrue debt by selling bonds. They pay interest on those bonds to the bond-holders.


4

A “full explanation” would be extremely long; depending on the situation, a great many things would happen. For developing countries, defaults are typically on debt in foreign currency, issued under foreign law. They will end up in legal fights with bondholders, and/or end up dealing with the IMF (or other body) to restructure their debt. Economic problems ...


3

If you owe euros you have to pay in euros. If for example the British government owes euros, then they get some funds (perhaps take another loan) and in case this is in a currency different from euros they convert it to euros on the market. If the sum is large enough it is wise not to convert it all at once but in smaller installments. This way the exchange ...


3

Here's a non-technical answer: Bonds are a form of debt. What the issuer is selling is essentially a promise to repay the principal (i.e. whatever price the buyer paid) and some interest to the buyer. (Note: since we're talking about debt, you could also think of the buyer as a lender.) In return, the issuer gets to use the money from the sale for ...


3

Debt being cheaper than ever doesn't mean that it is optimal to borrow. Unless you plan to invest the borrowed money into projects that yield higher returns with certainty (we would call this arbitrage), any debt implies a tradeoff between the welfare of current versus future generations. Perhaps the borrowing before to higher rates was non-optimal under ...


3

We have first to be clear about what meaning do we give to the word "default". The other answer gave it a temporary meaning ("missing a payment deadline"). In such a case, any direct economic effect is bound to be small (expecially if the delay is short). But there may be indirect economic consequences through the effect on economic expectations. Now let's ...


3

You are correct. The majority of Greek sovereign debt is held by other EU sovereigns. So EU taxpayers end up footing the bill in the event of a Greek default. Usually, rather than outright defaulting (i.e. missing a repayment deadline), there will be some agreement to restructure the debt so that Greece gets more time or some other form of concession. So ...


3

I guess it is for the same reason that other countries hold foreign reserves. The argument is that for some reason foreign markets become suddenly very adverse to take your currency, you should have some other medium of exchange that allow you to finance imports or serve short term external debt. This is very related to the Guidotti–Greenspan rule.


3

Until the euro remains the official currency, the public and private sector in Greece have to pay wages and invoices in euro. They're also paying external debt in euros. But euros are fleeing the country and the banking system. And Greece can't print more of them. It means that firms and people have less and less liquidity. To escape the barter economy, ...


3

This is a pretty standard bond pricing issue. The short answer is yes, the market value of the bond can and often will exceed its par value if interest rates are below the coupon rate, just so long as the call option is structured such that the government must pay any interest that has accrued between the last coupon date and the time that the call option is ...


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