Showing papers on "Debt published in 1974"

Are Government Bonds Net Wealth

Abstract: The assumption that government bonds are perceived as net wealth by the private sector is crucial in demonstrating real effects of shifts in the stock of public debt. In particular, the standard effects of "expansionary" fiscal policy on aggregate demand hinge on this assumption. Government bonds will be perceived as net wealth only if their value exceeds the capitalized value of the implied stream of future tax liabilities. This paper considers the effects on bond values and tax capitalization of finite lives, imperfect private capital markets, a government monopoly in the production of bond "liquidity services," and uncertainty about future tax obligations. It is shown within the context of an overlapping-generations model that finite lives will not be relevant to the capitalization of future tax liabilities so long as current generations are connected to future generations by a chain of operative intergenerational transfers (either in the direction from old to young or in the direction from young to old). Applications of this result to social security and to other types of imposed intergenerational transfer schemes are also noted. In the presence of imperfect private capital markets, government debt issue will increase net wealth if the government is more efficient, at the margin, than the private market in carrying out the loan process. Similarly, if the government has monopoly power in the production of bond "liquidity services," then public debt issue will raise net wealth. Finally, the existence of uncertainty with respect to individual future tax liabilities implies that public debt issue may increase the overall risk contained in household balance sheets and thereby effectively reduce household wealth.(This abstract was borrowed from another version of this item.)

The debt Trap : the IMF and the third world

Abstract: Details the history of the first thirty years of the system of aid and credit in which the IMF is the keystone.

Economics of Social Issues

Abstract: 1.Alleviating Human Misery: The Role of Economic Reasoning 2.Economic Systems, Resource Allocation, and Social Well-Being: Lessons from China's Transition 3.Government Control of Prices in Mixed Systems: What Are the Actual Outcomes? 4.Pollution Problems: Must We Foul Our Own Nests? 5.Economics of Crime and Its Prevention: How Much Is Too Much? 6.The Economics of Education: Crisis and Reform 7.Poverty Problems and Discrimination: Why Are So Many Still So Poor? 8.The Economics of Monopoly Power: Who Does What to Whom? 9.The Economics of Professional Sports: What Is the Real Score? 10.Competition in the Global Marketplace: Should We Protect Ourselves From International Trade? 11.Economic Growth: Why Is the Economic Road So Bumpy? 12.Money, Banking, and the Financial System: Old Problems with New Twists 13.Unemployment and Inflation: Can We Find a Balance? 14.Government Spending, Taxation, and the National Debt: Who Wins and Who Loses? 15.Social Security and Medicare: How Secure Is Our Safety Net for the Elderly?

Some Principles of Inflationary Finance

Abstract: It is well known that a government can use inflation instead of taxation as a means of financing its expenditures.' The amount of inflationary finance possible has been shown to depend on the demand for money. Previous work, however, has ignored the fact that a government can shift the location and elasticity of that demand curve through the use of various controls and regulations, and thereby change the level of inflationary tax receipts that is associated with a given level of inflation. I will argue here that exchange controls, interest rate restrictions, and debt management policies all affect the demand for money and the possibilities for inflationary finance. Since a well-established model of inflationary finance exists in the literature cited, I will confine myself to an analysis of the links between the policies in question and the demand for money, and will point out that both an increase in the demand for money and a reduction in its elasticity with respect to the nominal interest rate will increase inflationary tax possibilities in the traditional model.2

India's nuclear option: Atomic diplomacy and decision making

Abstract: Australian and New Zealand joint approach to be formulated so that the Pacific region might gain a new direction in the aftermath of Tokyo. Cline et al have certainly not used a narrow notion of America's welfare in their survey; but the fact remains that the North American grain market exerts a preponderant influence on the world's agricultural, food distribution and supply systems. It would appear that the EEC has no intention of trying to think for herself in this matter, let alone for her LDC trading brethren. Again, it may well be that only if the LDCs examine their case severely, will there be progress in reducing NTBs. Since the Pearson Report pointed out that we must realise that we belong to a world community where famines, wars, bankruptcies and other social horrors have left the question of international indebtedness and the world capitalist system relatively untouched. Yet deep debt and faltering debt services are central to whatever attempts may be made to bring about a New International Economic Order. Abbott keeps the issues of debt and development in livelyjuxtaposition. For him, the question is the supply 9f foreign aid and the drying up of long-term concessional capital. Those who believe that debt cancellation or debt relief should be an end in itself will find welcome echoes in every chapter. Abbott argues also that debt relief would provide additional funds for development, and that the initiative would not cost the developed countries very much. Like the other books, this would gain more readers if the ecological crises were joined to the ones studied here. Waldheim defined 'six primary problems': food, energy, population, mass poverty, military expenditure, and world monetary system. That was in 1974. While these matters are not seen in relationship, the hands of history's clock continue to move towards midnight. To use energy for growing food, to trap sunlight in desert lands where groundwater and sand can with several high technology methods (and several low ones also) be brought into most fruitful relationship: that is to help man to survive in his diversity. It also helps a New International Economic Order to be achieved; for petrodollars have an obvious part to play in it.

Aristotle and Absolute Rule

Abstract: This article deals with three aspects of Aristotle's account of absolute rule in the Politics: firstly, the extent of Aristotle's debt to and divergence from Plato; secondly, the exact nature of the qualities which fit a man for absolute rule; thirdly, the relevance of Aristotle's account of absolute rule to his general political principles. Ancient historians will be eagerly waiting for the name of Alexander. They will not be altogether disappointed but will have to be content with a few general and inconclusive remarks at the end.

Reply: “The Dynamics of Corporate Debt Management, Decision Rules and Some Empirical Evidence”

Abstract: This study deals with the problem of debt — composition of the firm — specifically, the optimal mix of short- and long-term debt, or the optimal maturity composition of the total debt. It can be viewed as a subproblem of the more familiar determination of the optimal mix between total debt and owner's equity (Modigliani and Miller [15 and 16], Durand [3], Schwartz [18], Solomon [20], etc.).

Development and the Debt Trap: Economic Planning and External Borrowing in Ghana

Abstract: 1. Introduction 2. The Root of the Problem: Economic and Political Conditions and Objectives in the Decade Before Independence 3. The Transition from Financial Self-Reliance to External Dependence, 1957-1961 4. The Plunge into Insolvency (1962-65) 5. The Nkrumah Legacy 6. Post-Nkrumah Efforts at Rehabilitation and Debt Settlement 7. Summary and Lessons

An economic alternative to concessional farm interest rates: reply

Abstract: A variable amortization plan is proposed, indexing annual payments made by farm mortgage borrowers. A debt reserve balance also is proposed to stabilize payments received by lenders. Research implied by the proposal is outlined, together with modelling suggestions for investigating effects of the plan on farm income after debt servicing requirements have been met.

Are Government Bonds Net Wealth

Abstract: The assumption that government bonds are perceived as net wealth by the private sector is crucial in demonstrating real effects of shifts in the stock of public debt. In particular, the standard effects of "expansionary" fiscal policy on aggregate demand hinge on this assumption. Government bonds will be perceived as net wealth only if their value exceeds the capitalized value of the implied stream of future tax liabilities. This paper considers the effects on bond values and tax capitalization of finite lives, imperfect private capital markets, a government monopoly in the production of bond "liquidity services," and uncertainty about future tax obligations. It is shown within the context of an overlapping-generations model that finite lives will not be relevant to the capitalization of future tax liabilities so long as current generations are connected to future generations by a chain of operative intergenerational transfers (either in the direction from old to young or in the direction from young to old). Applications of this result to social security and to other types of imposed intergenerational transfer schemes are also noted. In the presence of imperfect private capital markets, government debt issue will increase net wealth if the government is more efficient, at the margin, than the private market in carrying out the loan process. Similarly, if the government has monopoly power in the production of bond "liquidity services," then public debt issue will raise net wealth. Finally, the existence of uncertainty with respect to individual future tax liabilities implies that public debt issue may increase the overall risk contained in household balance sheets and thereby effectively reduce household wealth.

Depreciation in a Simple Regulatory Model: Comment

Abstract: In a recent paper, Jaffee concludes that a regulated firm, seeking to maximize the present worth of cash flows, should adopt a certain form of decelerated depreciation He assumes the firm is financed solely by debt, and does not take account of the constraint that earnings must at least cover interest The present note considers a firm financed by a mixture of debt and equity, and includes the interest constraint; it is shown that under these circumstances the optimal depreciation schedule is fastest during the earlier portion of the life of an item of plant

Een faktoranalyse van de Nederlandse schuldpolitiek 1953–1971

Abstract: Over the period 1953-1971 the interdependence of twenty-one variables relating to the issue of the over-all public debt (central and local authorities) is tested against the development of the trade cycle, the over-all budget, interest rates and the capital market. Debt management was constrained by pro-cyclically large budget deficits and a tight capital market in periods of excess demand. In times of slack in the economy and an easy capital market, deficits were relatively small. Efforts to use debt management more activily as an instrument of monetary policy would appear to depend largely on a less pro-cyclical budgetary development.

The United States Interest Equalization Tax

Abstract: The United States Interest Equalization tax is a one-time tax levied on certain foreign securities, proposed by President Kennedy in order to reduce the balance-of-payments deficit by restricting portfolio investment. Although the tax was enacted in 1964 as a short-term measure, it was continually extended and amended. This article explores the contours of the tax. Prior to the tax, many foreign debt issues were attracting large amounts of capital due to their high interest rates. The IET attempts to equalize the yield of foreign debt issues with domestic debt issues by imposing a tax on the foreign issues and thus diminish the attractiveness of the foreign issues. The IET’s success in reducing foreign investment resulted in six extensions of the tax and it is now set to expire on July 1, 1974. Current international monetary condition may necessitate yet another extension of the tax. The IET functions by levying a tax on the acquisition by a United States person of a foreign issuer or foreign obligor based on the actual value of the security acquired. The tax rate on stock acquisitions is 11.25% of the stock’s actual value, while the rate on debt obligations is a function of the period remaining until maturity and is intended to equal the present value of the difference between European interest rates and the United States interest rate. The term “acquisition” includes any purchase, transfer, distribution, exchange, or any other transaction by virtue of which ownership is obtained. The IET also specifies that certain transactions, even though outside the definition of acquisition, will be considered taxable under the IET. This Article explores the rates on debt obligations, the various exemptions from the tax that exist where United States balance-of-payments is not adversely affected, as well as the elective provisions that the IET legislation contains to allow United States persons to be treated as a foreign issuer or obligor.

Abstract–Determinants of Systematic Risk

Abstract: In this paper a model is presented to explain the structure of systematic risk. The starting point is the expression for the total dollar return to investors who hold the securities from period t - 1 to t assuming no new securities have been issued in the interim:where Xt is earnings before interest, preferred dividends, and taxes; T is the corporate tax rate; Dd,t is the interest paid on debt in year t; Dp,t is the dividend paid to preferred shareholders in year t; Dc,t is the dividend (total) paid to equity shares-holders in year t; ΔPt · Nt-1 is the aggregate capital gains for the Nt-1 shares of common stock outstanding as of t-1 and ΔGt is the change in the capitalized value of future growth opportunities. The hypothesis is that the risk associated with the left-hand side variables, the market determined systematic risk, is derived from the corporate variables on the right-hand side of the equation. The market determined level of systematic risk is a linear function of the sensitivity of percent changes in revenues of the firm to percent changes in GNF (asset betas), financial leverage, and changes in growth potential.

Money, Debt and Wealth

Abstract: Over many years, like most economists, I have taught that the national debt differs from personal debt. Since it is owed only to ourselves, it is not a burden to the nation to be subtracted from our assets in measuring our national wealth, by analogy with the necessity of subtracting personal debt in figuring personal wealth. The false analogy has recently surfaced again, though presented as a burden not on ourselves but on future generations, in apparent justification of President Eisenhower’s frowning on the immorality of imposing this burden on our grandchildren. The results of the ensuing debate may be summarised as follows.

The value of information and the optimal governmental guarantee on its agencies' issues

Abstract: This paper, a theoretically oriented presentation, examines the social optimality of the current policy of one-hundred per cent guarantees for public agencies' debt issues. The analysis suggests and explores an alternative policy: Coordinating debt repayment with the performance of the assets underlying the debt. The limits of this alternative are analyzed under conditions of uncertainty, characterized by imperfect and expensive information. The first section of the paper will introduce the problem of socially optimal agency debt policy. The classical solution for the optimal agency behavior and its modifications, necessitated by costly imperfect information, will be the focus of the following two sections. The analysis in the next two sections will examine optimal agency policy in a state-preference world utilizing a Pareto criteria for social welfare. The final section of the paper will study the implications for agency optimality in a log utility/

An analysis of the efficiency of the market for new corporate bonds in reflecting two sources of essentially free information, 1960–1971*

Abstract: THE ABILITY to generate interest rate forecasts which are better than a simple nocharge extrapolation (the optimal forecast implied by an efficient market) is essential to the solution of the problem of timing the issuance of new bonds. A number of authors have suggested algorithms which they suggest can be used to determine the optimal time to issue new debt. However, the question that must be answered before any timing algorithm can be seriously applied is that of bond market efficiency. This thesis involves an analysis of the efficiency of the market for newly issued corporate bonds. Specifically, the market for new corporate debt is tested for its full reflection of the information contained in the time series of new issue yields (weak form information and the information contained in past errors in market anticipations. With respect to the latter source of information, the pure expectations, liquidity preference, and market segmentation hypotheses of the term structure were considered in estimating market anticipations of the six-month holding period yield on a newly issued corporate bond.