Public debt: debt that’s yours, but not just yours. It’s all of ours.
Public debt isn’t the same thing as “the deficit.” It’s much bigger. Public debt is the accumulation of a nation’s debt over the years. Each year, the government can run a surplus or a deficit. Those who run deficits are trickling IOUs into the public debt. Those who run surpluses are pulling some of those IOUs out and paying them off.
A year where the public debt didn’t change means the government spent the same amount it raised in tax revenues. Public debt is also called sovereign debt, or national debt (it never includes state and local municipality debts, nor what the private sector owes abroad). All the debts.
You want some? You can buy them. Maybe you already have, if you own a federal government bond. They’re really boring, but boring means "safe" in finance. And they’re great since they allow the government to inject value into the economy and toward the people now, rather than later. Like all loans.
That’s why politicians often spend more than they have. People love them for it. They enjoy the benefits...until they don’t, when the public debt gets too big. Cue: sovereign debt crisis.
For instance, Greece. They took on too much public debt, and asked the EU to pay the loans, like an unemployed child asking parents to help with their rent. The EU then said "have some austerity measures," cutting spending to pay for its loans. However, this slowed the economy and tax revenues...not good. Not good for Greece, but also not good for the EU.
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Finance: What is the Difference Between ...6 Views
finance a la shmoop - what's the difference between a private company and
a public company? one word- regulation. well private companies have virtually
none. that is they are only quote regulated unquote by the contracts that [chains fall off building]
are passed among the key parties. I agree to invest such and such amount of money
to buy this many shares- and outlining the contract here in runs what happens
to that money given various outcomes. well private companies are usually
funded and covered by the wealthy. and the government feels that the wealthy
can afford their own damn lawyers that they have enough education to know that
they need lawyers ,and while they're on their own. but in the case of public
companies things are different the government feels like it owes protection
to Jo Plummer sixpack who invests his hard-earned 3 grand a year in savings in
coca-cola stock. coke arguably the most public of public companies lives under [Coca Cola shares and price pictured on a website]
all kinds of rules. disclosures of operations disclosures of finances and
disclosures of governance and CEO compensation or bottling plant problems
in South Paulo or even that lawsuit over the carbonated swimming pool boondoggle
in Nairobi. why so much paperwork and disclosure bureaucracy? well the
government feels that if they require all these notices from coke then Joe
plumber 6-pack is somehow protected as if Joe ever read those coca-cola
document disclosure statements. yeah pretty much never. would Joe understand
them even if he did read them? well probably not so why bother with them? in [man sits behind tall stacks of paperwork]
theory it's just meant to be an added layer of protection for stockholders
just in case Joe decides to take a shmoop financial literacy course someday and
becomes a Rain Man level genius with you know the digits. of course on the other
hand there are a lot of government people who need employees and coke pays
lots and lots of fees for all of that disclosing, so as usual you know follow
the money. [man walks down yellow brick road littered with money] oh yeah.
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