What is the public debt from?

Public debt consists of debts owed by local, state and national governments. These debts can take many forms such as direct loans that must be repaid and promises of services or goods that must be met. The high level of public debt is often considered to be an economic warning brand, but largely depends on the type of debt and current economic trends in the country.

The public debt created by the national government is most often known as external debt. This includes money, services or goods owed to another government, international organizations such as the World Bank or financial institutions in other countries. Most countries in the world have a significant amount of external debt that can cause global economic problems if the country is released on its loans. In cases where the default external debt is immediate, governments and international organizations often cooperate on creating a sustainable solution to prevent damage to the whole economic spectrum.

Internal debt is another main component that makes up public debt. This applies to any money or services owed by individuals, businesses or financial institutions in the country. The internal debt is more often created by state or general governments, because in general they do not have the power to deal with other nations. The internal debt may include bonds and securities that are issued to investors with a guaranteed due rate to increase government income in the short term. Other forms of internal debt may include government contracts, such as building or defense, and paying pension programs such as veteran or social security benefits.

internal and external debt can be created short -term or long -term. Short -term public debt must be repaid in months or several years, while a long -term debt may be expected to be repaid. The division between short and long -term debt is important in mEmployment of the country's sustainability: The nation can be able to repay its currently due loans, but it seems that it has serious financial problems if all long -term debts are also considered.

Public debt is usually created by deficient expenditure. This practice allows governments to spend more than they have been doing for some time, often for the purpose of stimulating the economy. While some deficiency spending may be necessary and manageable, many economists warn against increasing the level of public debt too often. If there is a serious disaster, a country with an extremely high level of debt may be in danger of being incident in the default settings, which can cause serious economic consequences for the coming years.