Government Bonds: General Public Is Less Likely To Face Violent Revolution

The largest debt holders (entities to which the federal government owes money) of the public debt are foreign governments and investors (about $6 trillion), the US Federal Reserve ($2.5 trillion), various mutual funds (about $1 trillion), and state or local governments ($800 billion) [7]. The remaining one-third of the debt is classified as intragovernmental holdings, which are accumulated when the Treasury borrows from trust funds financing specific government programs for use in the general budget [6]. For example, the Social Security ran a surplus while the baby boomers were in their working prime and tax revenue was high, so the government has historically been able to borrow from the Social Security and Disability Trust Funds to pay for other expenditures [8]. As a result, Social Security is the single largest stakeholder in the national debt holding securities worth $2.8 trillion. Other government accounts that are owed money include the Office of Personnel Management and the Military Retirement Fund

The federal budget is known as the notorious economic tank from which money is distributed to various programs. The money used every fiscal year, which begins October 1st and ends September 30th the next year, belongs to the people. The government raises this money through taxes and they spend it on national defense, Medicare, and social security. The federal budget is an exercise in making choices, and those options will certainly affect individuals living in the U.S. These choices cause debt to pile up on the government, who is struggling to make it disappear. The deficit and debt of a government gauges how well it is being run and how well it has been run in the past. According to The Economist the national debt is the total

The U.S. government borrows large sums of money in times of national emergency, such as times of war. The U.S. entered many wars that greatly contributed to the national debt. The government also engaged in multiple social programs that increased the debt, such as the bailouts during the housing crisis in 2008-2009. To keep the economy from collapsing, the government borrowed enormous amounts of money. Half way through this housing crisis the deficit exceeded one trillion dollars. The deficit decreased to under $500 billion after the massive spending cuts deal in 2011.

Each year United States, China, Mexico, Germany and other countries come out with an annual budget that would include taxes and social security programs. Some countries will have failed keeping up with their money that they have to make up by getting treasury bills. This will allow the government to collect cash from institutional investors and the government will be able to continue to spend money on other programs. The top reasons behind national debt include health care programs, social security programs, unemployment, and immigrants.

A municipal bond is like an IOU that Puerto Rico promised to pay back later with interest. These bonds were very attractive to businesses because of the “Jones-Shafroth act of 1917”. This act was famous for granting Puerto Ricans U.S. citizenship, but it also made Puerto Rican bonds triple tax exempt which meant that federal, state, and local taxes, did not apply. The island seemed to be hooked on bonds and continued to sell them, even beginning to balance their budget with them in the 1970’s. Just as Puerto Rico was starting to look like a financial time bomb, in 1984 Congress mysteriously excluded Puerto Rico from the “Chapter 9 Municipal Bankruptcy Protections” with no explanation why. Also because of the language written into Puerto Rico’s constitution suggesting that debts be paid over all other government services, the island’s medicaid gap and low funding has closed down 10% of hospitals and prompted an estimated one Puerto Rican doctor to leave for the U.S. each day. The island’s hospitals aren't the only public service closing down at fast rates, nearly 150 schools island wide have been closed due to budget cuts and low

Their declining economy was caused by the government and other agencies issuing municipal bonds. These bonds are used to build schools, highways, roads, sewer projects and among other things. Then the state (Puerto Rico) pays back a specified amount of interest and the return principal on a maturity date (“The Basics of Municioal Bonds”). Because Puerto Rico was spending more then what the island was taking in caused the island to default on an almost four-hundred million dollar payment in May, 2016

The government has borrowed against this surplus, to pay for other government expenditures in the national budget, each year; and writing itself IOUs. By 2012 the government will have borrowed 3 trillion dollars from the trust funds (www.socialsecurityreform.org). The unexpected surplus is attributed to the entrance of baby boomers into the workforce.

The economic value of the instruments/“tools in which the United States Federal Reserve System uses to manipulate and command the money supply can be seen in the way the Fed uses open-market operations. According to “Chapter 34’s: Monetary policy” notes hand out, “Open-market operations refers to the Fed’s buying and selling of government bonds…These bonds can be traded to commercial banks and to the public.” According to Economics 20e textbook “Open-market operations are the most important day to day instrument the Fed uses to influence the money supply (Brue pg.752).” When the Fed sells bonds on the open market it decreases the money supply in circulation, as it reduces the reserves of banks the Fed has the potential to limit how much money the commercial banks can lend. If the Fed buys bonds back from the open market it increases the reserves of commercial banks which sequentially will increase the country’s overall money supply (CrashCourse). The Feds use of open market operations is an influential instrument for the Fed to

It allows the government to borrow under the guarantee of the United States Dollar. Believe it or not the US dollar is the most stable tender in the world. The government has been running a deficit budget since the great depression, this adds to the debt. But through running these deficit budgets the government has been able to keep the economy generally stable. Yes, there have been recessions and inflation but nothing like the great depression. So in my opinion the national debt is a good thing, allowing the United States Government to keep things stable. Also it’s not like we can just get rid of it. The government has to borrow money every year just to pay the interest on the

The Federal Reserve operates as a gatekeeper to the United States economy. It is the central bank of the United States and the head bank in the United States government. Its job is to regulate financial institutions, manages the nation’s money, and influences the economy. Since its creation in 1913, the Federal Reserve has helped stimulate and slow down our economy, with its original job being to organize, standardize, and stabilize the United State’s monetary system. In times of recessions, the Federal Reserve (Fed) can lower interest rates to encourage people to borrow money and make purchases.

In its role as the federal government's banker, the Fed also has certain fiscal responsibilities that is has to carry out. In doing this the Fed helps the government to with its taxation and spending activities. The Federal Government also helps with paying government bills. “When the Internal Revenue Service (IRS) collects tax revenues, the funds are deposited with the Fed”(Meek 2011). The Fed issues checks or makes electronic payments from the U.S. Treasury for programs such as Social Security, Medicare, and IRS tax refunds. Basically all money is funneled through the Fed, even things such as food stamps and postal money

It is the country's responsibility to repay the other countries through taxation and interest of its citizens. Deficit spending is a major component of the debt because more money was being spent instead of being repaid. Ever since the process was created, the United States continued to increase its debt immensely. The debt not only effects the government and economy, but it directly effects the citizens because the debt causes a reduction in the value of currency. National debt is one of the major domestic issues that the United States experiences now and even in the past. The concern of what causes the national debt, how it all began, and how it effects the citizens and economy will help further the economic knowledge into solving the

As stated above, in order to pay those who need money from the borrowed trusts as well as to provide cash for other expenditures, the government must look to the public for funds. This form of borrowing has many different types. The main form of government borrowing is in U.S. Treasury Securities. These are formal "IOU's" that the government issues with the

For instance, the Presidential Cabinet is a perfect example of the country being divided into subtopics, such as agriculture or labor. The Federal Reserve System, on the other hand, functions to benefit the overall finances of the country. As mentioned before, banks across the United States can borrow money from the Fed in order to keep their businesses thriving. The Fed oversees all of these transactions and commercial banks. Since it acts of the entire government’s bank, it has other functions. The primary role is to hold money for the nation’s banks; however, it also can sell bonds and treasury bills. As a result, the chairman meets periodically with the Secretary of the Treasury to ensure proper payments. The Fed, in addition, issues and controls the circulation of currency, which is another reason why they meet with the U.S. Treasury. In summary, the Fed has many functions that help keep the United State’s fiscal situations under

Most of the government’s spending ends up financed by the taxes, which is not inflationary at all. When government finances its spending through bond sales, either to its citizens or companies, it can create either expansionary or inflationary situations depending on how they balance their budget.