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Government debt is also known as national debt and public debt. It is money or any other form of credit that is owed by a particular governmental body. This term is applicable for various governmental organizations functioning at different strata.

Government debt is also regarded, at times, as being equal to debts of taxpayers living within a state. This is because government is representative of people living within a particular state. Government debt is normally accumulated when government spends more than what it collects by way of taxes.

Government debt is mainly of two types – internal and external debt. Internal government debt is owed by a government to lenders within its geographical boundaries and external debt is debt which is owed by a government to lenders who reside outside it.

Types of debt

Government security

A government security is a debt financing instrument that is issued by a governmental organization at a national or local level. Government securities have very little possibility of default as they are supported by taxing and credit authority of the issuer.

Treasury note

Treasury notes are debt securities that are issued by the US government. Interest rates of treasury note are fixed and term periods range from one to ten years. Investors can purchase treasury notes from banks and the US governmental bodies.

Treasury bond

Treasury bonds are also debt financing instruments that are marketed by the US government. They have a fixed rate of interest and their term periods exceed ten years. Holders of treasury bonds are paid after six months. Income made from treasury bonds is taxed by the federal government.

Federal debt

Federal debt is debt owed by national government of the US. Among creditors of the US national government are individuals, other governments, businesses, and organizations. These entities hold debt financing securities issued by the US government.

Primary dealer

Primary dealers are those entities that make deals regarding issuing of governmental debt securities. They perform duties like underwriting new debt financing instruments by the US federal government. They are basically pre-approved banks.

Debt by country

For a table listing external debt by country, see the main entry on government debt.

European Central Bank

The European Central Bank (ECB) is a central bank which regulates the monetary system of the European Union. It is the regulatory authority for the Euro and its monetary policy affects all 13 member nations of Eurozone.

Contagion

Contagion is the cross-border spread of financial shocks. Such international spillover means that economic or financial troubles that originate in one nation can affect others.

Repo Rate

Repo rate Repo rate, is short for repurchase rate, and is also known as the official bank rate.

Liquidity Trap

A liquidity trap occurs when the demand for money is so huge people don't want to hold anything but money.

Henry Paulson

Henry "Hank" Paulson, Jr., is the United States Treasury Secretary.

The Fed

The Federal Reserve System is the central bank of the US.

Credit crunch

A credit crunch (or credit crisis) is an economic condition in which loans and credits for investment are suddenly unavailable.

Bailout

A bailout is a rescue from financial trouble. Bailouts are normally enacted by governments to provide financial aid to ailing firms, regional, city or local governments. US and European governments have enacted large bailouts as a response to the credit crunch.

Lehman Brothers

Lehman Brothers Holdings Inc. was an international financial services firm headquartered in New York City. It went into bankruptcy in September 2008 as a result of the credit crunch.

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