The Government and Borrowing.

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UptheDeise

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Ok, here's a few things I would like some answers to.

The government needs to borrow a few billion this year to keep the country a float.

So the Government borrows this money by issuing governments bonds (gilts)?

Who may buy this gilts?

These gilts will have a maturity date with interest paid out each year that they are held?

When the interest is due and the gilts mature where does the government get the money to pay out on these?
 
Doing a robin hood act im sure, robbing the rich to...

If these gilts are over 5 years then they must be fully confident that the economy will be very stable in 5 years time when the payout is to be made.
 
Re-issue bonds in 5 years time to pay off the current bonds - goverment financing at its best - on the Never Never
 
So if this recession last for a few years the government will have to sell more bonds to pay off the mature bonds and to keep the country afloat.

So in other words what we have going on here is a ponzi scheme.

Good grief.
 
UptheDeise said:
So if this recession last for a few years the government will have to sell more bonds to pay off the mature bonds and to keep the country afloat.

So in other words what we have going on here is a ponzi scheme.

Good grief.
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It's exactly what the US have been doing for decades. In a way many consumers have been doing it as well, i.e. getting loans to pay off credit cards, then using credit card for everyday expenses in order to service the loan, eventually getting a consolidation loan to pay off multiple credit cards, car loans..... you get the idea.

Government and consumer attitude towards debt has come to a stage where taking on debt is done with the clear intention of NEVER getting out of debt, or FULLY repaying it; but rather rollover from one loan to another. A very dangerous game to play!!!
 
Of course, in the meantime, the taxpayers have to pay the interest on the borrowings. Not only has the amount borrowed increased but the interest rate has also - watch out for the interest costs over the next few years.

And because we will need to borrow more to repay the loans coming to maturity, we won't be able to default without completely ruining the country's credit rating. Thus first call on tax income will be an ever growing interest bill.
 
Who actually loans us this money? What will happen if they stop lending us all this money? The country goes bankrupt... then what?
 
UptheDeise said:
Ok, here's a few things I would like some answers to.

The government needs to borrow a few billion this year to keep the country a float.

So the Government borrows this money by issuing governments bonds (gilts)?

Yes, mostly bonds. But also short-term borrowing. Also borrowing via personal savings (An Post)

Who may buy this gilts?

In theory, anybody. In practice, banks, pension funds, insurance companies, CUs, foreign banks, etc.


These gilts will have a maturity date with interest paid out each year that they are held?

Yes. Usually 5, 10, 15 or 20 years. The UK go to 40 yrs, also some of them are perpetual (never pay back).

When the interest is due and the gilts mature where does the government get the money to pay out on these?

It usually rolls over the debt, or if it has a surplus it may not need fresh loans.
Click to expand...
 
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