debt administration

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1、CHAPTER14DebtAdministrationFederal,state,orlocalgovernmentdebtresultswhenthatgovernmentborrowsfromanindividualorinstitution.Borrowingchangesthepatternofpurchasingpowerbetweenthelenderandtheborrower.Thelenderforgoespurchasingpowernowforthepromiseofrepaymentlater,andtheborrowerreceivesp

2、urchasingpowernowwithanobligationforrepaymentlater.Thebondrepresentingthatdebtisalong-termpromisebytheborrower(bondissuer)tothelender(bondholder)topaythebond’sfaceamount(orparvalueortheprincipaloftheloan)atadefinedmaturity1dateandtomakecontractualinterestpaymentsuntiltheloanisretired.

3、Thebor-roweriscommittedtodebtservice—interestpaymentsasrequiredplusperiodicrepaymentoftheprincipal—throughthelifeoftheloan.Governmentdebtresultsfrom(1)coveringdeficits(annualexpendituresgreaterthanannualrevenues),(2)financingcapital-projectconstruction,and(3)coveringshortperiodswithin

4、afiscalyearinwhichbillsexceedcashonhand.Notallgov-ernmentsborrowforthesamesetofreasons.Inparticular,thecausesofthedebtofthefederalgovernmentarenotthesameasthosebehindthedebtofstateandlocalgovernments.FederalDebtThefederalgovernment’sdebtistheproductofwarfinance,attemptstostabilizethen

5、ation’smacroeconomy(i.e.,todealwithproblemsofunemploymentandslow1Somegovernments,notablytheBritish,havesoldobligationswithnomaturity,butpayinginterestinperpetuity.Holdersofthesesecurities,calledconsols,mayretrieveprincipalbysaletoanotherinvestor.Anothervariation:Somedebtissoldonadisco

6、untbasis;thedifferencebetweenwhatispaidforthedebtinstrumentbythelenderandtheamountrepaidbytheborrowerconstitutestheinterest.Short-termobligations—typicallysoldonadiscountbasis—arecalledbillsandnotes.629630PartThree:AdministeringDebt,WorkingCapital,andPensionFunds2growth),andmiscellane

7、ouspoliticaldisputesthathavecausedexpenditurestoexceedreceipts.AstheGeneralAccountingOffice(GAO)explains:Thefederaldeficit...isthedifferencebetweentotalfederalspendingandrevenueinagivenyear.Tocoverthisgap,thegovernmentborrowsfromthepublic.Eachyearlydeficitaddstotheamountofdebtheldbyth

8、epubl