New answers tagged government-debt
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As noted in a comment, the difference is between gross and net debt.
If the only debt instrument in the world is A owing B \$100, the gross debt is \$100, and the net debt is possibly 0 - if we are willing to count B’s financial asset as a “negative debt.” (It’s not entirely clear that is reasonable, but that will depend on how one wants to define things.)
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Who will buys bonds; not including the FED
When a government wants to issue bonds, it will usually do so via a bond auction, where the bond will be bought by large banks or financial institutions.
Those institutions will then sell the bonds on, often to pension funds, other banks, and individual investors. So other banks and individuals also buys bonds.
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The principal has to be repaid eventually but with majority of formal debt instruments such as government bonds the creditor can’t just demand repayment whenever he or she wants. Most debt instruments have pre-specified date and if not date then conditions when and how the principal is being paid back.
For example a standard 10year bond will pay its ...
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This is because in order for many business to stay liquid they often have to issue short term debt. Many financial firms need liquidity so much that they literally make loans that are for duration of only one day.
However, the more people invest their savings in bonds which are usually long term debt (most bonds have maturity over 5-10y), the less money is ...
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