Originally posted by sh76If you could not handle the balloon payment than the issue started when
Perhaps, but what other choice is there? If you own a house and have to make a balloon payment of $50,000 to pay off a line of credit, so you refinance and take out a loan from a different bank of $50,000, using your house as collateral again, is there anything wrong with that?if i
you agreed to that loan. What is wrong is you didn't think through what
you were doing when you were signing your name to a loan. The A answer
is to pay your debts and going deeper into debt to pay your debt does not
clear up your debts it only makes you deeper in debt.
Kelly
Originally posted by Great King RatActually, it makes a lot of sense. When someone lends their money to a government, they are taking a risk, because the government could default on its debt obligations. Since debt usually mature within a fixed period of time, this allows investors to determine how much risk they want to take, and conversely, how much interest they are likely to get. An Italian 10-year bond will give much more interest than a German 1-year bond (which gives almost no interest), but the risk of an Italian default is obviously also much greater.
Oh man, I have to read what you just wrote a couple of more times before any of it sinks in, Sh76. Thanks so far.
"Well, government bonds are constantly being paid out as they mature or are cashed in after maturing, as the case may be. [b]The government then issues new bonds to pay for paying off the old ones."
Again, does this not sound terribly, terribly wrong??[/b]
Thanks for the clarification, Kazet.
However, with "very wrong" I specifically meant "The government then issues new bonds to pay for paying off the old ones". How is that not fixing a problem by creating a problem which you then fix by creating a problem only to fix it by creating it after which you fix that problem by creating it etc. etc. etc. ad infinitum...???
Originally posted by Great King RatEven when a nation is running a budget surplus, the rate at which bonds mature will generally be larger than the rate at which the debt is shrinking, so even then they will need to borrow new money to pay off old debts. Even the debt itself is not necessarily a problem - Norway issues government bonds not because it needs to, but because it has to pay such little interest on it it does not make sense for Norway to use its state investment fund (which holds more assets than the sovereign debt of Norway) to pay off its debts.
Thanks for the clarification, Kazet.
However, with "very wrong" I specifically meant "The government then issues new bonds to pay for paying off the old ones". How is that not fixing a problem by creating a problem which you then fix by creating a problem only to fix it by creating it after which you fix that problem by creating it etc. etc. etc. ad infinitum...???
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Originally posted by KazetNagorraDo you recall if Spain could pay off its debt today if it wanted to?
I don't know how well the chorizo investment fund is doing at the moment.
Looking at this link somehow I don't think so:
http://www.tradingeconomics.com/spain/government-debt-to-gdp
And I thought Spain's looked bad
http://www.tradingeconomics.com/united-states/government-debt-to-gdp
Originally posted by EladarI don't think so, no. My point was that many nation states have assets that they could, in principle, liquidate to pay off debts, but choose not to (either wisely or unwisely).
Do you recall if Spain could pay off its debt today if it wanted to?
Looking at this link somehow I don't think so:
http://www.tradingeconomics.com/spain/government-debt-to-gdp
Originally posted by Great King RatAs an individual, certainly. As a business, corporation or nation state, not always. Another example. The state pension fund of the Netherlands, the ABP, has assets totalling about 281 billion euros. The state debt of the country is about 436 billion euros. Would it be wise to liquidate the state pension fund in order to reduce the debt?
Should it not be considered wisely to have as little debt as possible? It's one of those things that my parents taught me when I was younger and I consider that pretty solid advice.
Originally posted by KellyJayProgressives have no other choice because their ideology demands that they live beyond their means because they have a "right" to do so.
If you could not handle the balloon payment than the issue started when
you agreed to that loan. What is wrong is you didn't think through what
you were doing when you were signing your name to a loan. The A answer
is to pay your debts and going deeper into debt to pay your debt does not
clear up your debts it only makes you deeper in debt.
Kelly
But I didn't say a nation should use whatever it can get its hands on to reduce the debt. I also don't think debt should be reduced at an enormous speed if that results for instance in massive unemployment numbers since that's counter productive.
But at least they should aim within reason to keep the debt as low as possible and in time have no debt at all*, right?
* America and The Netherlands will presumably never, ever be debtfree again. Are there even any countries that do no have debt?
Originally posted by Great King RatThat depends on what the government does with the money. If it invests the new money in high speed broadband, this should give their companies a competitive advantage, and make it easier for consumers to consume - and lead to greater profits and higher taxes.
Thanks for the clarification, Kazet.
However, with "very wrong" I specifically meant "The government then issues new bonds to pay for paying off the old ones". How is that not fixing a problem by creating a problem which you then fix by creating a problem only to fix it by creating it after which you fix that problem by creating it etc. etc. etc. ad infinitum...???
If the level of increased government revenue from the higher taxes is higher that the interest rate on the debt then the government makes a net gain.
In the UK the government spends more on debt interest than education. It cannot realistically cut its debt interest payments because if it even considered defaulting the price of borrowing would rise, so it cuts education, in the long term this will make the UK less competitive, therefore increasing the need to borrow more.