Your Gateway to Financial Literacy
Overview of Underlying Debt Underlying debt represents an essential aspect of municipal bonds, encapsulating an implicit understanding that the debt obligations of smaller government entities are indirectly supported by the creditworthiness of larger entities within their jurisdiction. This concept applies primarily to general obligation municipal bonds. By tapping into the
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What Is Overlapping Debt? Overlapping debt, also referred to as interconnected or shared debt, occurs when financial obligations arise for one political jurisdiction but are partly borne by neighboring jurisdictions. This phenomenon is especially prevalent in the U.S., where the intricate network of local governments often results in overlapping jurisdictions.
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Overview of General Obligation Bonds General obligation bonds (GO Bonds) represent a critical part of the municipal bond market, serving as debt securities backed by the full faith and credit of the issuing government. Unlike revenue bonds, GO bonds rely solely on the issuer’s taxing power and creditworthiness to meet
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Introduction to Build America Bonds (BABs) Build America Bonds (BABs), a critical component of President Obama’s American Recovery and Reinvestment Act of 2009, represented a significant shift in government finance and investment strategies. These taxable municipal bonds featured federal tax credits or subsidies for bondholders or state and local government
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Introduction to Budget Surpluses A budget surplus is an essential concept in the realm of finance and economics that represents a situation when income or revenue exceeds expenditures, as opposed to a deficit where spending overshoots revenue. This article delves into the significance and implications of having a budget surplus
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Introduction to Budget Deficits A budget deficit is a financial situation where government expenses outweigh revenues. This concept is commonly applied in discussions regarding the financial health of governments, and it’s essential for individuals to understand the implications of this phenomenon. A budget deficit results in an increase to a
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Introduction to Balanced Budgets A balanced budget is a critical concept within finance and investment circles, most notably in the context of government finances. In simple terms, a balanced budget refers to a situation where expected total revenues equal total planned spending. This idea holds significant relevance due to the
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What is Austerity? The term “austerity” refers to stringent economic measures adopted by governments to reduce public spending and boost revenue, with the ultimate goal of reducing debt and deficits. These policies are typically enacted when a government’s debt exceeds its revenues and the risk of default becomes imminent. Austerity
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