Government Debt Essay Example | Topics and Well Written Essays - 1500 words

organization Debt - show ExampleExternal political science debt refers to the inwardness funds collected from emergeside the country from foreign investors and governments. fit in to Gartner (2006, p. 68) the government will always sell its securities in the open market when it wants to raise funds from the investors. chance upon traded government securities in the open market overwhelm but not limited to treasury bills, notes and bonds (Snowdon & steel (1997, p.103). Sovereign debt refers to government debt owed to investors mostly foreign in foreign currencies. Shone (1989, p. 119) states that Sovereign debts are normally utilize by the government when they are in need of large amount of money to carry out an expensive public project. Sovereign debt is considered risky owing to the fact that it is affected by fluctuation in currency and any default by the issuing company may translate to low conviction rating and no further debt advancement as foreign investors will be sc ared away. Government bonds, which is the common form of raising revenue from local investors in local currency is highly like by most government because it is not affected by the credit rating of the country (Miles & Scott 2005, p.19). It is ill-starred that the United Kingdom government debt has been growing at an alarming rate over the recent past. The world(a) recession that began in 2008 has left several developed nation into huge debts. Carlin and Soskice (2006101), asserts that the UK higher budget shortage can be attributed to the large government spending and low government revenue owing to red ink of jobs and reduced spending. The UK society has been enjoying the deficit sending without a glimpse at its consequences. The United Kingdom debt which includes the aggregate amount of money owned by the central government in form of government bonds, monarch bonds, Social Security trust fund, and accrued capital expenditure. Fiscal consolidation refers to the policies taken by the government to manage its debt and reduce its budget deficit. Fiscal consolidation policies vary from country to country depending on the fiscal objective of the government. Most countries are always caught up in dilemma when it comes to fiscal consolidation oddly during recession. Most economies have been unstable since the beginning of recession as unemployment rate increases from time to time, key companies cladding financial constraints and individuals losing mortgages and thus it becomes difficult for the government to decide whether to come up with economic stimulus or fiscal consolidation policies. For instance the UK government has been facing bulging public debt and budget deficit objet dart the same time unemployment rate is escalating unprecedentedly. Tobin theory is a theory of investment behavior also noteworthy as Tonins Q Theory and denoted by letter q. This theory is used to determine the ratio of the companies issued shares (share capital) to the permuta tion cost associated with the assets of the company. Three significant situations are evident when relating the market value and the replacement cost and they include q being greater (q1), lower (q