How Christian Lindner can get more into debt – economy

The main German debt manager will almost certainly be the leader of the FDP, Christian Lindner. As an unwitting welcome gift to the appointed finance minister, a House advisory group is now fundamentally critical of the Federal Republic’s debt management. The scientific advisory committee of the Ministry of Finance calls for an extension of the maturities of the national debt. In times of extremely low interest rates, the government should guarantee later repayment dates.

Home buyers also know a financial benefit behind this of their bank loans: the slower you have to pay off debt, the more feasible it becomes. Most importantly, unlike many homebuyers, the Federal Republic of Germany has a more than good credit rating: if it takes out loans through so-called government bonds, it often does not even have to pay interest, but even receives money.

The Scientific Advisory Board is professionally large and expertly composed, the Advisory Board is not a courtesy reporting body. The national debt document has been discussed at length scientifically and is therefore not a short-term reaction to the results of the coalition negotiations. Economists argue that subsequent repayment periods protect the federal budget from interest rates that rise again at some point.

George Soros even advocated infinite travel times

German debt management has moved away from the international trend. On average in the OECD area, government bond maturities are getting longer, from around five years in 2003 to more than eight years recently. In the Corona crisis, the Federal Republic even opted for the opposite route, although in the fight against the pandemic a particularly large number of billions of debts were contracted. but the proportion of government bonds with a maturity of ten years and more has fallen considerably.

“The advisory council advocates a moderate extension of the terms of the national debt,” the newspaper said. The committee does not go as far as the great financial lord George Soros, who wanted not only to go one step further in terms of national debt terms in the corona crisis, but infinitely far: he had advocated unlimited bonds, which would therefore never be reimbursed would be (but could). It sounds strange from a homebuyer’s perspective, but it is possible in financial markets because, from a financial mathematical standpoint, states, unlike homebuyers, don’t die after a few decades.

The Advisory Board also points to a risk in state accounting. German government bonds are currently so popular in the financial markets that the federal government often receives some kind of bonus, called premium income, when the bonds are auctioned. However, these are accounted for in such a way that the cash position appears surprisingly better, which makes budget planning more unreliable. And the effect can be reversed if interest rates rise again: then the treasury suddenly appears more empty than initially expected. The Advisory Board therefore proposes to reform the treatment of these bonus payments. The problem is technical, but not minor: in 2020, it was around twelve billion euros.

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