Simple economic question: If government is heavily in debt, but has never had trade..

Discussion in 'Economy' started by Norman, Sep 24, 2010.

  1. Norman
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    Norman Gold Member

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    So I have been pondering this question a bit, and I mean the answer is probably very simple, but I just want clarification on this before I go sputing out nonsense, like you see everyday in mainstream media :eusa_drool:

    The question is: If government is heavily in debt, but has never had trade deficits, does that mean the citizens of the country own all the debt?

    It's really simple but DAMN, I can't think this through.

    And also if someone could tell me a bit about the currency exchange. So if a foreign investor invests to your country (they can use different or same money really), does that mean they actually give the money to some OTHER investor in the other country which then invests to the government bonds and so on. Again this is really simple but just can't get my head around.

    Yeah I need to read a bit more, but maybe this resulting conversion will help me. Either way thanks a lot to the guy with the answer =).
     
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  2. loosecannon
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    loosecannon Senior Member

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  3. Norman
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    Norman Gold Member

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    Thanks, so the answer would be:

    YES, that means the citizens of the country own all the debt. (unless the government has stacks of other governments paper sitting around). And that is not dependent if they use the same currency or not.

    Is this right?

    Anyway thanks =). I had to edit the quote, cause I can't post links (yet).
     
    Last edited: Sep 24, 2010
  4. loosecannon
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    loosecannon Senior Member

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    I think you nailed it.
     
  5. CrusaderFrank
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    CrusaderFrank Diamond Member

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    What does a trade deficit have to do with who buys the debt?
     
  6. loosecannon
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    loosecannon Senior Member

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    don't go there
     
  7. Norman
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    Norman Gold Member

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    This has been discussed before?
     
  8. 8537
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    8537 Senior Member

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    Ya need dollars to buy dollar-denominated assets.

    And if you have billions and billions of dollars in your accounts, you need somewhere to park them.
     
  9. Samson
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    Samson Póg Mo Thóin Supporting Member

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  10. CrusaderFrank
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    CrusaderFrank Diamond Member

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    What does a trade deficit have to do with who buys the debt?

    I can see if the question was "If the government ran a budget surplus and didn't need to issue debt..." but what does a trade deficit have to do with who buys the debt?
     

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