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 ...
- 16.2k
20
votes
Accepted
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 ...
- 6,335
18
votes
Accepted
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 ...
- 50.1k
13
votes
Accepted
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. ...
- 970
13
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 ...
- 8,103
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, ...
- 1,587
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 ...
- 3,422
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 ...
- 475
8
votes
Accepted
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 ...
- 836
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 ...
- 50.1k
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 ...
- 419
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 ...
- 2,749
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 ...
- 2,628
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 ...
- 3,868
6
votes
Accepted
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 ...
- 1,616
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 ...
- 1,587
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.
- 28k
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 ...
- 8,103
5
votes
Accepted
Why is government debt level presented as ratio to GDP, not against government budget or revenue size?
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 ...
- 7,754
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 ...
- 9,844
5
votes
Accepted
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 ...
- 50.1k
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 ...
- 50.1k
4
votes
Accepted
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 ...
- 156
4
votes
Why does China buy so much U.S. Treasury debt?
As was said above, buying debt to affect the exchange rate and make Chinese exports more attractive may be one reason to buy these Treasuries. Surely all of these are not reinvested into buying more ...
- 6,496
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 ...
- 2,749
4
votes
Accepted
Government bonds - the most simple example
Using an example from the US treasury's website you can buy a \$100 dollar face value bond that pays 3% annual interest semiannually for thirty years. That means you would get $100 \cdot 3\% / 2 = 1.5$...
- 28k
4
votes
Accepted
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 ...
- 8,103
4
votes
Accepted
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 ...
- 3,761
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