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Deficit issues

Posted by admin on October 10, 2017 in Debt, Economy with No Comments

Running a budget deficit is common for many governments. Spending more than they earn annually, governments function with the help of international loans. Companies and individuals may also find themselves in a deficit which means they will go bankrupt unless they find a quick way to generate more income and pay back the creditors. The country’s budget deficit over the time creates the national debt. The largest international debtors are Greece, Portugal, Italy, Bhutan, Japan, Singapore, and the US.
Companies and governments use bonds to repay their creditors. Government bonds look attractive to creditors, which allows countries to run the budget deficit for years. Trying to cope with the deficit, governments that can print their currency may increase the money supply. This trend is dangerous because it lowers the value of that currency. Instead, there are safer ways to cope with the national debt such as cutting spending, raising taxes, and pushing forward the economic growth.
For governments, it is easy to create a budget deficit and extremely difficult to get rid of them. Countries like the US can easily exist in debt because they can print out dollars. Besides, paying off the debt makes no sense. If the interests on the debt are paid each year, the country just gives its income away. Certainly, governments are interested in boosting economic growth and borrowing more money, not giving it back. That is why governments do not benefit from repaying the debt right away. But as the interests of creditors rise, the US and other countries with the large debt will approach the default in leaps and bounds.

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