Serious Question:What is Public Debt?
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WeÂ’ve read that Singapore had made such and such achievement: successful economic growth, low external debts, number one in this, thatÂ…
Then I came across a report on public debt in which Singapore is behind 8 countries at number 9. IÂ’m surprised that Singapore has debts!
I said to myself: “ Public debt? Who is debtor and creditor? How’s the money spent to incur such a debt? How does it affect the citizens? What are the ways to repay the debt? You may have even more questions.
Anybody who had studied economics would have known what public debt is.
If you havenÂ’t , try DIY research, google like I did. If you can obtain information from other sources, better.
IÂ’m sure that after your research, you will be able figure out somehow so many policies that affect us has to do with money. You wonÂ’t regret it.
Hope you will contribute your findings here. Let everyone has a free lesson on this topic Public Debts. WeÂ’ll learn something important that affects our lives. -
A budget deficit occurs when a government spends more money than it takes in.
An accumulated deficit over several years (or centuries) is referred to as the government debt(or public debt). Public debt is the part of a country's debts that is owed to creditors who are citizens of that country.
Public debt from excess borrowing from other creditors becomes the taxpayersÂ’ debts.
To repay public debt, expenditures have to be cut. Taxes have to be raised.
Imaginary country SunkenporeÂ’s government is particularly prone to raising taxes: VAT increase, fare hikes, higher road tolls etc
Imagine SunkenporeÂ’s GDP is 141B, public debt is 100.6%GDP. How long would it take to repay the public debt without dipping into the reserves?
Representatives are usually elected to make the voters better off. But imaginary country Sunkenpore does not work like this. -
Wait...there's more to the story. Unless substantial reforms are made soon, when the baby boom generation begins to retire and collect old age savings, the debt will explode. A huge amount of SunkenporeÂ’s taxes will go to nothing but interest.
How about annuity to partially solve the problem?
How does a country amass such a huge public debt?
Japan also amassed a huge public debt because the country has to face many natural calamities.
Sweden and Finland with extensive welfare systems can manage their public debts better(CIA World Factbook). -
Interesting.. where did you get this statistic from?
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You might want to find the breakdown of the debts and find out how much is used to develop the debt securities market.Originally posted by googoomuck:Wait...there's more to the story. Unless substantial reforms are made soon, when the baby boom generation begins to retire and collect old age savings, the debt will explode. A huge amount of SunkenporeÂ’s taxes will go to nothing but interest.
How about annuity to partially solve the problem?
How does a country amass such a huge public debt?
Japan also amassed a huge public debt because the country has to face many natural calamities.
Sweden and Finland with extensive welfare systems can manage their public debts better(CIA World Factbook).
To add on, CPF funds are not derived from general tax revenue. -
guess nt many ppl study econmics huh, only 2 unique ppl have replied.....
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Wrong conclusion to draw leh..... just because dun post = no study economics....Originally posted by venny:guess nt many ppl study econmics huh, only 2 unique ppl have replied.....
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FromWIKI, CIA world factbook......mostly googled for information.Originally posted by Fingolfin_Noldor:Interesting.. where did you get this statistic from?
I would like to know more about public debts. That's why I ask that anyone who know economics to provide some information.
Questions like how a country budget the expenditure.
I've surfed the websites but found only some information from mostly USA and a few European countries like Sweden.
These countries are quite frank with the problems they face and very open about the ways they deal with the problems. -
Can see the breakdown here
http://www.singstat.gov.sg/stats/latestdata.html#8 -
"Singapores bond market is the best-developed in ASEAN and one of the most highly developed in Asia. The government has been issuing government bonds in recent years (despite posting budget surpluses) in an effort to build a yield curve in long-term debt. The aim is to increase further the depth and liquidity of the market, and to encourage listing by both domestic and foreign companies operating within Asia as a whole. The prospects for growth in this market are bright, given Singapores reputation as a transparent and politically stable financial market."
-Economist Intelligence Unit -
Extract from an article - Growing in debt: Are we heading to a debt trap? By the Economist.com
Excessive accumulation of public debt can adversely affect the financial markets and the GovernmentÂ’s development efforts. In particular, interest payments on a large stock of public debt could constrain fiscal expenditure and prevent the Government from focusing on investments in physical and social infrastructure.
Moreover, a rising interest burden can easily allow public debt to spiral out of control. These concerns will, in turn, impair the autonomous management of the monetary policy by driving the monetary authority to increase inflation and lower interest rates.
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Back to the non-existent country Sunkenpore. Where else can she tap on to reduce government debt? LetÂ’s assume itÂ’s a non-welfare state (If itÂ’s a welfare state, the problem would be more complicated).
How about cutback on civil servantÂ’s pay to a level comparable to the countryÂ’s low income earners?
Or adjust the healthcare cost?
Or monkey with the immigration policy? -
There's good and bad. Govt got more money to spend on important things.
Just whether the things are important to us. -
I'm reconsidering having more children. What if the debts are passed on for them to pay?
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I think the debts are more of bonds issued to develop the market rather than we need the money.Originally posted by googoomuck:I'm reconsidering having more children. What if the debts are passed on for them to pay? -
They have to be honored though. That is the danger behind them.Originally posted by kramnave:I think the debts are more of bonds issued to develop the market rather than we need the money. -
Just hope that they are working the money to do that.Originally posted by Fingolfin_Noldor:They have to be honored though. That is the danger behind them. -
U die earlier and ur CPF get passed to them, subjected to taxes of courseOriginally posted by googoomuck:I'm reconsidering having more children. What if the debts are passed on for them to pay? -
Another thing that shouldn't be overlooked is the incentive behind clearing public debts. This doesn't apply to dictatorships like this regime though.
Take the US for instance. Considering the fact numerous creditors (through the securities issued by the federal government) which the federal government (and its agencies) is indebted to are actually American firms, the need to service the national debt may not actually be as pressing. In truth, it might actually prove beneficial to the securities' holders that the government holds a sizable debt - through issuing securities - with such firms to stimulate economic growth and employment (through the prosperity of the creditors). A couple of Democrat presidential administrations (Franklin Roosevelt's public spending policies have its root in this) have actually utilised this principle in some form, shape or way.
Ironically, the 'demise' of a debt issuer often benefits the holder (tangibly and intangibly) and this pretty much holds at both governmental and corporate levels. This is clearly born out by the fact that a couple of prominent financial institutions' vast improvement in performances (most notably Goldman Sachs) in the aftermath of the burst of the dotcom bubble in the late 1990's.