I’m trying to work this around in my head, but no luck so far. How exactly does this work? When you take a loan out and repay it back, the economy gains more money, but what happens when a lot of people default on their loans? Like…for student loans or a touch? Would it cause a touch like the subprime mortgage crisis to happen?
If interest rates were to drop significantly more, say 30 YR fixed to sub 3%, and a huge percentage of homeowner mortgages are refinanced, what implications does this have on the broader economy, e.g. money supply, inflation, etc?
A. Because debt service is the difference between the passive and structural deficits. The larger the difference between the two, the greater the burden of the debt on the economy.
B. Because interest payments are the result of past expenditures and do not result in additional productive expenditures. They are the burden of the debt: if the debt service is large and is hurting the government’s ability to fund today’s expenditures, that debt could be considered a problem.
C. Because debt service determines the real deficit. The higher the real deficit, the greater the burden of the debt on the economy.
D. Debt service is not an vital measure of whether debt is a problem. Only debt/GDP ratios and future budget balance projections are relevant measures of the burden of the debt on the economy.
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It is for debt in infrastructure.
I don’t know much about the debt, but know that is refers both to intra and inter governmental debt. If the debt keeps rising, and our taxes and GDP do not pay off any debt (in fact, I guess entitlement spending obviously adds to the debt), and the debt limit keeps being pushed back further and further, how will our country be able to remain powerful, or even dodge [more] war? I just don’t know how we can even be functioning.
Can a large public debt cause the bankruptcy of the government,building it unable to meet its financial obligations? WHY?