21 votes

Who exactly foots the bill if Greece defaults

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 ...
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20 votes
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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?

In general, there are three kinds of debt: Secured debt, like a mortgage or a repurchase agreement. With a mortgage, for example, the debt is secured by a lien on the home, and if the debtor does not ...
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18 votes
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Is there a “runaway” threshold for Debt-to-GDP Ratio in the U.S.?

Is there a threshold we can pass in terms of debt-to-GDP that will cause a runaway sort of effect? No there is no threshold or magic number (at least not one we know of). Few years ago there was an ...
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  • 41.6k
13 votes
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What would happen if China called in its debt?

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. ...
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  • 961
12 votes

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

Why doesn't the government create money, spend it for free without interest, and recollect it with taxes, you ask. Well, it does. That's exactly what public investment & spending, and the taxation ...
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  • 7,992
11 votes

Who exactly foots the bill if Greece defaults

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, ...
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11 votes
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Are there any states that don't have debt?

The classic answer here would be Libya and Brunei, but I think Libya now has debt. Brunei is a strange case in that it uses a joint currency with Singapore dollar, controlled by the monetary ...
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  • 1,428
10 votes

Is it possible to eliminate the U.S. national debt?

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 ...
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8 votes

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

Your get the basic intuition, but real-life situation is a bit different. First, I didn't really understand what you meant by "try to catch some 'fool'", but what you are calling foreign exchange ...
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  • 475
8 votes

Why do people buy negative interest rate bonds?

There are several reasons why it makes still sense. Nominal negative return does not mean that real return is negative. There is a difference between nominal interest rates and real interest rates ...
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  • 41.6k
7 votes

Will major economies be able to repay their debt?

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 ...
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  • 419
7 votes
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What would happen if the US defaults on its debt?

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 ...
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  • 806
6 votes

Why does any treasury / central bank hold gold?

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 ...
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  • 2,690
6 votes

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

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 ...
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  • 2,590
6 votes

Why is the USA not capable to pay its debt?

The US is in a privileged position of producing a currency that people in other countries want to use (as reserve). There's even a French name for that. Anyway, a result of that is cheap credit for ...
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  • 3,730
6 votes
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Do governments have to pay interest on government debt held by the central bank?

Yes, the government has to pay interest on debt even if it is held by the central bank. That is true at least for major modern central banks. For example, from a press release from the US Federal ...
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  • 894
5 votes

Greece default and why are US States not seen defaulting?

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 ...
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5 votes

Public debt of European countries, by year

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.
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5 votes

Will major economies be able to repay their debt?

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 ...
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  • 7,992
5 votes

Why is such a high US national debt not resulting in another great depression?

You answered question (1) with your own chart. The United States had a “high” debt-to-GDP ratio in World War II - and there was no subsequent depression. (There was a sharp recession as a result of ...
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5 votes
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Relation between budget deficit and inflation?

Relation between budget deficit and inflation? There is no direct relationship between budget deficits and inflation, however, inflation is one of the ways government can choose to finance government ...
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  • 41.6k
5 votes

Do governments have to pay interest on government debt held by the central bank?

This may vary from country to country, but in most countries government pays interest de jure but not de facto as all major central banks send their profits (including profits made from interest ...
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  • 41.6k
4 votes
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Why does any treasury / central bank hold gold?

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 ...
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4 votes

Is it possible to eliminate the U.S. national debt?

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 ...
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  • 2,690
4 votes
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Government bonds and printing money

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 ...
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  • 7,992
4 votes
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Why did Greece not solve its debt problem by selling treasury bond to its own people?

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 ...
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  • 3,721
4 votes
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Public debt of European countries, by year

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 ...
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4 votes

Who owns German debt?

This Deutsche Bank figure from 2013 has some broad categories for German debt and compares it with other rich countries: A newer chart, using slightly with more granular categories. Note that Germany ...
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