The Global Debt Crisis-its Impact on Singaporeans
The major economies of the world are getting ever-deeper in debt. They are spending more than what they are collecting from corporate and personal tax revenue, exports, and investments; by a huge margin. It's not just the USA that has been profligate in spending. All the G7 countries have high Debt to GDP ratio. Countries borrow by issuing sovereign bonds. In the USA these are called Treasuries, in the UK they are Gilts, in Japan they are called JGBs, and so on. Financial institutions, insurance companies, pension funds, investment funds and central banks of other countries buy these bonds by bidding for them at auctions. The interest rate that countries pay on their debt is called the yield. Bonds can be short term , medium term or long term e.g. 5, 10, or 30 year bonds. The longer-dated the bond, the higher the uncertainty (and thus the risk) so 30-year bonds pay a higher yield. The yield is also higher for countries that are deemed riskier-due perhaps investors' perception o...
