What is Public Debt

[Tobi]

A large amount of public debt means that the government of a country will have to make huge interest payments. Investors will analyze whether these payments can be collected from the tax i.e. from existing money supply. If not, then this signals that the country will monetize its debt i.e. print more currency and pay off the debt. Since a huge public debt today is a signal of problems coming up in the future, the Forex market prices this too in the value that is quoted.

However, it needs to be understood that once again there is a relative comparison between the public debts of the two countries in question. Absolute amounts may not matter as much!

 

[gwolf666]

A high level of public debt indicates that a government will have to make large interest payments, which raises concerns among investors. If these payments cannot be covered by taxes, the government could choose to "monetize the debt" by printing more money. This creates uncertainty in the Forex market, as the currency is expected to devalue in the future. Furthermore, comparing public debt between two countries is more relevant than absolute figures.

 

[Augusta]

is the total amount of money a government owes to creditors, including individuals, corporations, and other governments. It is a liability on the government's

 

[King Belieal]

Public debts are always owed by countries and states. They are always passed from one government to the other. It affects the economy negatively if it is too high.