Government debt

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Government debt (also known as public interest, public debt, national debt and sovereign debt) [1] [2] contrasts to the annual government budget deficit, which is a flow variable that equals the difference between government receipts and spending in a single year. The debt is a stock variable, measured at a specific point in time, and it is the accumulation of all prior deficits.

Debt deferred payment, or series of payments, that is owed in the future

Debt is when something, usually money, is owed by one party, the borrower or debtor, to a second party, the lender or creditor. Debt is a deferred payment, or series of payments, that is owed in the future, which is what differentiates it from an immediate purchase. The debt may be owed by sovereign state or country, local government, company, or an individual. Commercial debt is generally subject to contractual terms regarding the amount and timing of repayments of principal and interest. Loans, bonds, notes, and mortgages are all types of debt. The term can also be used metaphorically to cover moral obligations and other interactions not based on economic value. For example, in Western cultures, a person who has been helped by a second person is sometimes said to owe a "debt of gratitude" to the second person.

Contents

Government debt can be categorized as internal debt (owed to lenders within the country) and external debt (owed to foreign lenders). Another common division of government debt is by duration until repayment is due. Short term debt is generally considered to be for one year or less, and long term debt is for more than ten years. Medium term debt falls between these two boundaries. A broader definition of government debt may consider all government liabilities, including future pension payments and payments for goods and services which the government has contracted but not yet paid.

Internal debt part of the total government debt in a country that is owed to lenders within the country

Internal debt or domestic debt is the part of the total government debt in a country that is owed to lenders within the country. Internal debt's complement is external debt. Commercial banks, other financial institutions etc. constitute the sources of funds for the internal debts

External debt total debt a country owes to foreign creditors

External loan is the total debt a country owes to foreign creditors; its complement is internal debt which is owed to domestic lenders. The debtors can be the government, corporations or citizens of that country. The debt includes money owed to private commercial banks, other governments, or international financial institutions such as the International Monetary Fund (IMF) and World Bank. Note that the use of gross liability figures greatly distorts the ratio for countries which contain major money centers such as the United Kingdom due to London's role as a financial capital. Contrast with net international investment position.

Governments create debt by issuing government bonds and bills. Less creditworthy countries sometimes borrow directly from a supranational organization (e.g. the World Bank) or international financial institutions.

Government bond bond issued by a national government

A government bond or sovereign bond is a bond issued by a national government, generally with a promise to pay periodic interest payments called coupon payments and to repay the face value on the maturity date. The aim of a government bond is to support government spending. Government bonds are usually denominated in the country's own currency, in which case the government cannot be forced to default, although it may choose to do so. If a government is close to default on its debt the media often refer to this as a sovereign debt crisis.

The World Bank is an international financial institution that provides loans to countries of the world for capital projects. It comprises two institutions: the International Bank for Reconstruction and Development (IBRD), and the International Development Association (IDA). The World Bank is a component of the World Bank Group.

Financial institution institution that provides financial services for its clients or members

Financial institutions, otherwise known as banking institutions, are corporations that provide services as intermediaries of financial markets. Broadly speaking, there are three major types of financial institutions:

  1. Depository institutions – deposit-taking institutions that accept and manage deposits and make loans, including banks, building societies, credit unions, trust companies, and mortgage loan companies;
  2. Contractual institutions – insurance companies and pension funds
  3. Investment institutions – investment banks, underwriters, brokerage firms.

Monetarily sovereign countries (such as the United States of America, the United Kingdom, Australia and most other countries, in contrast with eurozone countries) that issue debt denominated in their home currency can make payments on the interest or principal of government debt by creating money, although at the risk of higher inflation. In this way their debt is different from that of households, which are restricted by their income. Thus such government bonds are at least as safe as any other bonds denominated in the same currency.

United Kingdom Country in Europe

The United Kingdom (UK), officially the United Kingdom of Great Britain and Northern Ireland, is a sovereign country located off the north-western coast of the European mainland. The United Kingdom includes the island of Great Britain, the north-eastern part of the island of Ireland, and many smaller islands. Northern Ireland is the only part of the United Kingdom that shares a land border with another sovereign state, the Republic of Ireland. Apart from this land border, the United Kingdom is surrounded by the Atlantic Ocean, with the North Sea to the east, the English Channel to the south and the Celtic Sea to the south-west, giving it the 12th-longest coastline in the world. The Irish Sea lies between Great Britain and Ireland. With an area of 242,500 square kilometres (93,600 sq mi), the United Kingdom is the 78th-largest sovereign state in the world. It is also the 22nd-most populous country, with an estimated 66.0 million inhabitants in 2017.

Australia Country in Oceania

Australia, officially the Commonwealth of Australia, is a sovereign country comprising the mainland of the Australian continent, the island of Tasmania and numerous smaller islands. It is the largest country in Oceania and the world's sixth-largest country by total area. The neighbouring countries are Papua New Guinea, Indonesia and East Timor to the north; the Solomon Islands and Vanuatu to the north-east; and New Zealand to the south-east. The population of 25 million is highly urbanised and heavily concentrated on the eastern seaboard. Australia's capital is Canberra, and its largest city is Sydney. The country's other major metropolitan areas are Melbourne, Brisbane, Perth and Adelaide.

Eurozone Area in which the euro is the official currency

The eurozone, officially called the euro area, is a monetary union of 19 of the 28 European Union (EU) member states which have adopted the euro (€) as their common currency and sole legal tender. The monetary authority of the eurozone is the Eurosystem. The other nine members of the European Union continue to use their own national currencies, although most of them are obliged to adopt the euro in the future.

A central government with its own currency can pay for its nominal spending by creating money ex novo, [3] although typical arrangements leave money creation to central banks. In this instance, a government issues securities to the public not to raise funds, but instead to remove excess bank reserves (caused by government spending that is higher than tax receipts) and '...create a shortage of reserves in the market so that the system as a whole must come to the [central] Bank for liquidity.' [4]

Fiat money currency established as money by government regulation or law.

Fiat money is a currency without intrinsic value that has been established as money, often by government regulation. Fiat money does not have use value, and has value only because a government maintains its value, or because parties engaging in exchange agree on its value. It was introduced as an alternative to commodity money and representative money. Commodity money is created from a good, often a precious metal such as gold or silver, which has uses other than as a medium of exchange. Representative money is similar to fiat money, but it represents a claim on a commodity.

Bank reserves commercial banks holdings deposited in central banks

Bank reserves are a commercial bank's holdings of deposits in accounts with a central bank, plus currency that is physically held in the bank's vault. Some central banks set minimum reserve requirements, which require banks to hold deposits at the central bank equivalent to at least a specified percentage of their liabilities such as customer deposits. Even when there are no reserve requirements, banks often opt to hold some reserves—called desired reserves—against unexpected events such as unusually large net withdrawals by customers or bank runs.

History

The sealing of the Bank of England Charter (1694) Bank of England Charter sealing 1694.jpg
The sealing of the Bank of England Charter (1694)

During the Early Modern era, European monarchs would often default on their loans or arbitrarily refuse to pay them back. This generally made financiers wary of lending to the king and the finances of countries that were often at war remained extremely volatile.

The creation of the first central bank in England—an institution designed to lend to the government—was initially an expedient by William III of England for the financing of his war against France. He engaged a syndicate of city traders and merchants to offer for sale an issue of government debt. This syndicate soon evolved into the Bank of England, eventually financing the wars of the Duke of Marlborough and later Imperial conquests.

A new way to pay the National Debt, James Gillray, 1786. King George III, with William Pitt handing him another moneybag. National-Debt-Gillray.jpeg
A new way to pay the National Debt, James Gillray, 1786. King George III, with William Pitt handing him another moneybag.

The establishment of the bank was devised by Charles Montagu, 1st Earl of Halifax, in 1694, to the plan which had been proposed by William Paterson three years before, but had not been acted upon. [5] He proposed a loan of £1.2m to the government; in return the subscribers would be incorporated as The Governor and Company of the Bank of England with long-term banking privileges including the issue of notes. The Royal Charter was granted on 27 July through the passage of the Tonnage Act 1694. [6]

The founding of the Bank of England revolutionised public finance and put an end to defaults such as the Great Stop of the Exchequer of 1672, when Charles II had suspended payments on his bills. From then on, the British Government would never fail to repay its creditors. [7] In the following centuries, other countries in Europe and later around the world adopted similar financial institutions to manage their government debt.

1815, at the end of the Napoleonic Wars, British government debt reached a peak of more than 200% of GDP. [8]

Government and sovereign bonds

Public debt as a percent of GDP, evolution for USA, Japan and the main EU economies. Dept.svg
Public debt as a percent of GDP, evolution for USA, Japan and the main EU economies.
Public debt as a percent of GDP by CIA (2012) Public debt percent gdp world map.PNG
Public debt as a percent of GDP by CIA (2012)
Government debt as a percent of GDP by IMF (2018) Government debt gdp.png
Government debt as a percent of GDP by IMF (2018)

A government bond is a bond issued by a national government. Such bonds are most often denominated in the country's domestic currency. Sovereigns can also issue debt in foreign currencies: almost 70% of all debt in 2000 was denominated in US dollars. [9] Government bonds are sometimes regarded as risk-free bonds, because national governments can if necessary create money de novo to redeem the bond in their own currency at maturity. Although many governments are prohibited by law from creating money directly (that function having been delegated to their central banks), central banks may provide finance by buying government bonds, sometimes referred to as monetizing the debt.

Government debt, synonymous to sovereign debt, [10] can be issued either in domestic or foreign currencies. Investors in sovereign bonds denominated in foreign currency have exchange rate risk: the foreign currency might depreciate against the investor's local currency. Sovereigns issuing debt denominated in a foreign currency may furthermore be unable to obtain that foreign currency to service debt. In the 2010 Greek debt crisis, for example, the debt is held by Greece in Euros, and one proposed solution (advanced notably by World Pensions Council (WPC) financial economists) is for Greece to go back to issuing its own drachma. [11] [12] This proposal would only address future debt issuance, leaving substantial existing debts denominated in what would then be a foreign currency, potentially doubling their cost [13]

By country

General government debt as percent of GDP, United States, Japan, Germany. PublicDebtTriade.PNG
General government debt as percent of GDP, United States, Japan, Germany.
Interest burden of public debt with respect to GDP. ZinslastquoteEngl.PNG
Interest burden of public debt with respect to GDP.
National Debt Clock outside the IRS office in NYC, April 20, 2012 Usa national debt 20 April 2012.JPG
National Debt Clock outside the IRS office in NYC, April 20, 2012

Public debt is the total of all borrowing of a government, minus repayments denominated in a country's home currency. CIA's World Factbook lists only the percentages of GDP; the total debt and per capita amounts have been calculated in the table below using the GDP (PPP) and population figures of the same report.

A debt to GDP ratio is one of the most accepted ways of assessing the significance of a nation's debt. For example, one of the criteria of admission to the European Union's euro currency is that an applicant country's debt should not exceed 60% of that country's GDP.

National public debts greater than 0.5% of world public debt, 2012 estimates (CIA World Factbook 2013) [14]
countrypublic debt
(billion USD)
% of GDPper capita (USD)% of world public debt
World56,30864%7,936100.0%
Flag of the United States.svg  United States*17,60774%55,63031.3%
Flag of Japan.svg  Japan 9,872214%77,57717.5%
Flag of the People's Republic of China.svg  China 3,89432%2,8856.9%
Flag of Germany.svg  Germany 2,59282%31,9454.6%
Flag of Italy.svg  Italy 2,334126%37,9564.1%
Flag of France.svg  France 2,10590%31,9153.7%
Flag of the United Kingdom.svg  United Kingdom 2,06489%32,5533.7%
Flag of Brazil.svg  Brazil 1,32455%6,5882.4%
Flag of Spain.svg  Spain 1,22885%25,9312.2%
Flag of Canada (Pantone).svg  Canada 1,20684%34,9022.1%
Flag of India.svg  India 99552%8301.8%
Flag of Mexico.svg  Mexico 62935%5,4161.1%
Flag of South Korea.svg  South Korea 53534%10,9191.0%
Flag of Turkey.svg  Turkey 48940%6,0600.9%
Flag of the Netherlands.svg  Netherlands 48869%29,0600.9%
Flag of Egypt.svg  Egypt 47985%5,6100.9%
Flag of Greece.svg  Greece 436161%40,4860.8%
Flag of Poland.svg  Poland 43454%11,2980.8%
Flag of Belgium (civil).svg  Belgium 396100%37,9480.7%
Flag of Singapore.svg  Singapore 370111%67,8430.7%
Flag of the Republic of China.svg  Taiwan 32336%13,8600.6%
Flag of Argentina.svg  Argentina 32342%7,5710.6%
Flag of Indonesia.svg  Indonesia 31125%1,2400.6%
Flag of Russia.svg  Russia 30812%2,1590.6%
Flag of Portugal.svg  Portugal 297120%27,5310.5%
Flag of Thailand.svg  Thailand 29243%4,3300.5%
Flag of Pakistan.svg  Pakistan 28350%1,4620.5%

* US data exclude debt issued by individual US states, as well as intra-governmental debt; intra-governmental debt consists of Treasury borrowings from surpluses in the trusts for Federal Social Security, Federal Employees, Hospital Insurance (Medicare and Medicaid), Disability and Unemployment, and several other smaller trusts; if data for intra-government debt were added, "Gross Debt" would increase by about one-third of GDP. The debt of the United States over time is documented online at the Department of the Treasury's website TreasuryDirect.Gov [15] as well as current totals. [16]

Outdated Tables
Public Debt Top 20, 2010 estimate (CIA World Factbook 2011) [17]
CountryPublic Debt
(billion USD)
% of GDPper capita (USD)Note (2008 estimate)
(billion USD)
Flag of the United States.svg  USA $9,133  62%$29,158($5,415,   38%)
Flag of Japan.svg  Japan $8,512198%$67,303($7,469, 172%)
Flag of Germany.svg  Germany $2,446  83%$30,024($1,931,   66%)
Flag of Italy.svg  Italy $2,113119%$34,627($1,933, 106%)
Flag of India.svg  India $2,107  52%$   1,489($1,863,   56%)
Flag of the People's Republic of China.svg  China $1,907  19%$   1,419($1,247,   16%)
Flag of France.svg  France $1,767  82%$27,062($1,453,   68%)
Flag of the United Kingdom.svg  UK $1,654  76%$26,375($1,158,   52%)
Flag of Brazil.svg  Brazil $1,281  59%$   6,299($    775,   39%)
Flag of Canada (Pantone).svg  Canada $1,117  84%$32,829($    831,   64%)
Flag of Spain.svg  Spain $    823  60%$17,598($    571,   41%)
Flag of Mexico.svg  Mexico $    577  37%$   5,071($    561,   36%)
Flag of Greece.svg  Greece $    454143%$42,216($    335,   97%)
Flag of the Netherlands.svg  Netherlands $    424  63%$25,152($    392,   58%)
Flag of Turkey.svg  Turkey $    411  43%$   5,218($    362,   40%)
Flag of Belgium (civil).svg  Belgium $    398101%$38,139($    350,   90%)
Flag of Egypt.svg  Egypt $    398  80%$   4,846($    385,   87%)
Flag of Poland.svg  Poland $    381  53%$   9,907($    303,   45%)
Flag of South Korea.svg  South Korea $    331  23%$   6,793($    326,   24%)
Flag of Singapore.svg  Singapore $    309106%$65,144
Flag of the Republic of China.svg  Taiwan $    279  34%$12,075

Debt of sub-national governments

Municipal, provincial, or state governments may also borrow. Municipal bonds, "munis" in the United States, are debt securities issued by local governments (municipalities).

Denominated in reserve currencies

Governments often borrow money in a currency in which the demand for debt securities is strong. An advantage of issuing bonds in a currency such as the US dollar, the pound sterling, or the euro is that many investors wish to invest in such bonds. Countries such as the United States, Germany, Italy and France have only issued in their domestic currency (or in the Euro in the case of Euro members).

Relatively few investors are willing to invest in currencies that do not have a long track record of stability. A disadvantage for a government issuing bonds in a foreign currency is that there is a risk that it will not be able to obtain the foreign currency to pay the interest or redeem the bonds. In 1997 and 1998, during the Asian financial crisis, this became a serious problem when many countries were unable to keep their exchange rate fixed due to speculative attacks.

Risk

Although a national government may choose to default for political reasons, lending to a national government in the country's own sovereign currency is generally considered "risk free" and is done at a so-called "risk-free interest rate." This is because the debt and interest can be repaid by raising tax receipts (either by economic growth or raising tax revenue), a reduction in spending, or by creating more money. However, it is widely considered that this would increase inflation and thus reduce the value of the invested capital (at least for debt not linked to inflation). This has happened many times throughout history, and a typical example of this is provided by Weimar Germany of the 1920s, which suffered from hyperinflation when the government massively printed money, because of its inability to pay the national debt deriving from the costs of World War I.

In practice, the market interest rate tends to be different for debts of different countries. An example is in borrowing by different European Union countries denominated in euros. Even though the currency is the same in each case, the yield required by the market is higher for some countries' debt than for others. This reflects the views of the market on the relative solvency of the various countries and the likelihood that the debt will be repaid. Further, there are historical examples where countries defaulted, i.e., refused to pay their debts, even when they had the ability of paying it with printed money. This is because printing money has other effects that the government may see as more problematic than defaulting.

A politically unstable state is anything but risk-free as it may—being sovereign—cease its payments. Examples of this phenomenon include Spain in the 16th and 17th centuries, which nullified its government debt seven times during a century, and revolutionary Russia of 1917 which refused to accept the responsibility for Imperial Russia's foreign debt. [18] Another political risk is caused by external threats. It is mostly uncommon for invaders to accept responsibility for the national debt of the annexed state or that of an organization it considered as rebels. For example, all borrowings by the Confederate States of America were left unpaid after the American Civil War. On the other hand, in the modern era, the transition from dictatorship and illegitimate governments to democracy does not automatically free the country of the debt contracted by the former government. Today's highly developed global credit markets would be less likely to lend to a country that negated its previous debt, or might require punishing levels of interest rates that would be unacceptable to the borrower.

U.S. Treasury bonds denominated in U.S. dollars are often considered "risk free" in the U.S. This disregards the risk to foreign purchasers of depreciation in the dollar relative to the lender's currency. In addition, a risk-free status implicitly assumes the stability of the US government and its ability to continue repayments during any financial crisis.

Lending to a national government in a currency other than its own does not give the same confidence in the ability to repay, but this may be offset by reducing the exchange rate risk to foreign lenders. On the other hand, national debt in foreign currency cannot be disposed of by starting a hyperinflation;[ citation needed ] and this increases the credibility of the debtor. Usually small states with volatile economies have most of their national debt in foreign currency. For countries in the Eurozone, the euro is the local currency, although no single state can trigger inflation by creating more currency.

Lending to a local or municipal government can be just as risky as a loan to a private company, unless the local or municipal government has sufficient power to tax. In this case, the local government could to a certain extent pay its debts by increasing the taxes, or reduce spending, just as a national one could. Further, local government loans are sometimes guaranteed by the national government, and this reduces the risk. In some jurisdictions, interest earned on local or municipal bonds is tax-exempt income, which can be an important consideration for the wealthy.

Clearing and defaults

Public debt clearing standards are set by the Bank for International Settlements, but defaults are governed by extremely complex laws which vary from jurisdiction to jurisdiction. Globally, the International Monetary Fund can take certain steps to intervene to prevent anticipated defaults. It is sometimes criticized for the measures it advises nations to take, which often involve cutting back on government spending as part of an economic austerity regime. In triple bottom line analysis, this can be seen as degrading capital on which the nation's economy ultimately depends.

Those considerations do not apply to private debts, by contrast: credit risk (or the consumer credit rating) determines the interest rate, more or less, and entities go bankrupt if they fail to repay. Governments need a far more complex way of managing defaults because they cannot really go bankrupt (and suddenly stop providing services to citizens), albeit in some cases a government may disappear as it happened in Somalia or as it may happen in cases of occupied countries where the occupier doesn't recognize the occupied country's debts.

Smaller jurisdictions, such as cities, are usually guaranteed by their regional or national levels of government. When New York City declined into what would have been a bankrupt status during the 1970s (had it been a private entity), by the mid-1970s a "bailout" was required from New York State and the United States. In general, such measures amount to merging the smaller entity's debt into that of the larger entity and thereby giving it access to the lower interest rates the larger entity enjoys. The larger entity may then assume some agreed-upon oversight in order to prevent recurrence of the problem.

Economic policy basis

According to Modern Monetary Theory, public debt is seen as private wealth and interest payments on the debt as private income. The outstanding public debt is an expression of the accumulated previous budget deficits which have added financial assets to the private sector, providing demand for goods and services. Adherents of this school of economic thought argue that the scale of the problem is much less severe than is popularly supposed. [19]

Wolfgang Stützel showed with his Saldenmechanik (Balances Mechanics) how a comprehensive debt redemption would compulsorily force a corresponding indebtedness of the private sector, due to a negative Keynes-multiplier leading to crisis and deflation. [20]

In the dominant economic policy generally ascribed to theories of John Maynard Keynes, sometimes called Keynesian economics, there is tolerance for fairly high levels of public debt to pay for public investment in lean times, which, if boom times follow, can then be paid back from rising tax revenues. Empirically, however, sovereign borrowing in developing countries is procyclical, since developing countries have more difficulty accessing capital markets in lean times. [21]

As this theory gained global popularity in the 1930s, many nations took on public debt to finance large infrastructural capital projects—such as highways or large hydroelectric dams. It was thought that this could start a virtuous cycle and a rising business confidence since there would be more workers with money to spend. Some[ who? ] have argued that the greatly increased military spending of World War II really ended the Great Depression. Of course, military expenditures are based upon the same tax (or debt) and spend fundamentals as the rest of the national budget, so this argument does little to undermine Keynesian theory. Indeed, some[ who? ] have suggested that significantly higher national spending necessitated by war essentially confirms the basic Keynesian analysis (see Military Keynesianism).

Nonetheless, the Keynesian scheme remained dominant, thanks in part to Keynes' own pamphlet How to Pay for the War , published in the United Kingdom in 1940. Since the war was being paid for, and being won, Keynes and Harry Dexter White, Assistant Secretary of the United States Department of the Treasury, were, according to John Kenneth Galbraith, the dominating influences on the Bretton Woods agreements. These agreements set the policies for the Bank for International Settlements (BIS), International Monetary Fund (IMF), and World Bank, the so-called Bretton Woods Institutions, launched in the late 1940s for the last two (the BIS was founded in 1930).

These are the dominant economic entities setting policies regarding public debt. Due to its role in setting policies for trade disputes, the World Trade Organization also has immense power to affect foreign exchange relations, as many nations are dependent on specific commodity markets for the balance of payments they require to repay debt.

Structure and risk of a public debt

Understanding the structure of public debt and analyzing its risk requires one to:

Problems

Sovereign debt problems have been a major public policy issue since World War II, including the treatment of debt related to that war, the developing country "debt crisis" in the 1980s, and the shocks of the 1998 Russian financial crisis and Argentina's default in 2001.

Implicit debt

Government "implicit" debt is the promise by a government of future payments from the state. Usually this refers to long-term promises of social payments such as pensions and health expenditure; not promises of other expenditure such as education or defense (which are largely paid on a "quid pro quo" basis to government employees and contractors).

A problem with these implicit government insurance liabilities is that it is hard to cost them accurately, since the amounts of future payments depend on so many factors. First of all, the social security claims are not "open" bonds or debt papers with a stated time frame, "time to maturity", "nominal value", or "net present value".

In the United States, as in most other countries, there is no money earmarked in the government's coffers for future social insurance payments. This insurance system is called PAYGO (pay-as-you-go). Alternative social insurance strategies might have included a system that involved save and invest.

Furthermore, population projections predict that when the "baby boomers" start to retire, the working population in the United States, and in many other countries, will be a smaller percentage of the population than it is now, for many years to come. This will increase the burden on the country of these promised pension and other payments—larger than the 65 percent [22] of GDP that it is now. The "burden" of the government is what it spends, since it can only pay its bills through taxes, debt, and increasing the money supply (government spending = tax revenues + change in government debt held by public + change in monetary base held by the public). "Government social benefits" paid by the United States government during 2003 totaled $1.3 trillion. [23]

In 2010 the European Commission required EU Member Countries to publish their debt information in standardized methodology, explicitly including debts that were previously hidden in a number of ways to satisfy minimum requirements on local (national) and European (Stability and Growth Pact) level. [24]

See also

Government finance:

Specific:

General:

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A sovereign default is the failure or refusal of the government of a sovereign state to pay back its debt in full. Cessation of due payments may either be accompanied by formal declaration (repudiation) of a government not to pay its debts, or it may be unannounced. A credit rating agency will take into account in its gradings capital, interest, extraneous and procedural defaults, failures to abide by the terms of bonds or other debt instruments. Countries have at times escaped the real burden of some of their debt through inflation. This is not "default" in the usual sense because the debt is honored, albeit with currency of lesser real value. Sometimes governments devalue their currency. This can be done by printing more money to apply toward their own debts, or by ending or altering the convertibility of their currencies into precious metals or foreign currency at fixed rates. Harder to quantify than an interest or capital default, this often is defined as an extraneous or procedural default (breach) of terms of the contracts or other instruments.

Original sin is a term in economics literature, proposed by Barry Eichengreen, Ricardo Hausmann, and Ugo Panizza in a series of papers to refer to a situation in which "most countries are not able to borrow abroad in their domestic currency."

Debt crisis Wikimedia disambiguation page

Debt crisis is a situation in which a country is without the ability of paying back its government debt. When the expenditures of its government are more than its tax revenues for a prolonged period, a country may enter into a debt crisis .In any country,the government finances its expenditures primarily by raising money through taxation. When tax revenues are insufficient, the government can make up the difference by issuing debt.

Causes of the European debt crisis

The European debt crisis is an ongoing financial crisis that has made it difficult or impossible for some countries in the euro area to repay or re-finance their government debt without the assistance of third parties.

The national debtof the People's Republic of China is the total amount of money owed by the government and all state organizations and government branches of China. As of October 2018, it stands at approximately CN¥ 36 trillion, equivalent to about 47.6% of GDP. Standard & Poor's Global Ratings has stated Chinese local governments may have an additional CN¥40 trillion in off-balance sheet debt. The high debt level is a current economic issue facing China.

The national debt of Turkey is the entire stock of direct, fixed-term, contractual, financial obligations of the state of the Republic of Turkey that are outstanding on a particular date.

References

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  3. The Economics of Money, Banking, and the Financial Markets 7ed, Frederic S. Mishkin
  4. Tootell, Geoffrey. "The Bank of England's Monetary Policy" (PDF). Federal Reserve Bank of Boston. Retrieved 22 March 2017.
  5. Committee of Finance and Industry 1931 (Macmillan Report) description of the founding of Bank of England. Books.google.ca. 1979. ISBN   9780405112126 . Retrieved 10 May 2010. "Its foundation in 1694 arose out the difficulties of the Government of the day in securing subscriptions to State loans. Its primary purpose was to raise and lend money to the State and in consideration of this service it received under its Charter and various Act of Parliament, certain privileges of issuing bank notes. The corporation commenced, with an assured life of twelve years after which the Government had the right to annul its Charter on giving one year's notice. Subsequent extensions of this period coincided generally with the grant of additional loans to the State"
  6. H. Roseveare, The Financial Revolution 1660–1760 (1991, Longman), p. 34
  7. Ferguson, Niall (2008). The Ascent of Money: A Financial History of the World. Penguin Books, London. p. 76. ISBN   9780718194000.
  8. UK public spending Retrieved September 2011
  9. "Empirical Research on Sovereign Debt and Default" (PDF). Federal Reserve Board of Chicago. Retrieved 2014-06-18.
  10. "FT Lexicon"  The Financial Times
  11. M. Nicolas J. Firzli, "Greece and the Roots the EU Debt Crisis" The Vienna Review, March 2010
  12. "EU accused of 'head in sand' attitude to Greek debt crisis". Telegraph.co.uk. Retrieved 2012-09-11.
  13. "Why leaving the euro would still be bad for both Greece and the currency area"   The Economist , 2015-01-17
  14. "Country Comparison :: Public debt". cia.gov. Retrieved May 16, 2013.
  15. "Government – Historical Debt Outstanding – Annual". Treasurydirect.gov. 2010-10-01. Retrieved 2011-11-08.
  16. "Debt to the Penny (Daily History Search Application)". Treasurydirect.gov. Retrieved 2014-02-03.
  17. "Country Comparison :: Public debt". cia.gov. Archived from the original on October 15, 2008. Retrieved November 8, 2011.
  18. Hedlund, Stefan (2004). "Foreign Debt". Encyclopedia of Russian History (reprinted in Encyclopedia.com). Retrieved 3 March 2010.
  19. http://hir.harvard.edu/debt-deficits-and-modern-monetary-theory Debts, Deficits and MMT
  20. Wolfgang Stützel: Volkswirtschaftliche Saldenmechanik Tübingen : Mohr Siebeck, 2011, Nachdr. der 2. Aufl., Tübingen, Mohr, 1978, S. 86
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  22. "Report for Selected Countries and Subjects". International Monetary Fund . Retrieved 2010-10-12.(General government gross debt 2008 estimates rounded to one decimal place)
  23. "Government Social Benefits Table". Archived from the original on November 1, 2004.
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