国际英语新闻:Worries About Government Borrowing Stir Markets

Worries about government borrowing are a key reason for the recent downgrade of U.S. debt, the economic crisis in Europe, and the wild swings from gains to losses and back again on global financial markets.

A bond is an agreement between a borrower and a lender.  In government bonds, the lender provides money used to build bridges, schools, or pay for other things governments need, and the government promises to repay the money in a specific period of time.

Finance Professor Gerry Hanweck of George Mason University says these bonds, which are written agreements by borrowers to pay someone in the future, are often sold.  The buyer of the debt pays the original investor in the hope of making a larger amount of money in the future.  "They are registered on exchanges, and traded electronically in huge markets.  One of the biggest markets in the world," he said.

That gain would come in part from interest, a fee that borrowers pay to lenders.  Think of it as rent.  If you rent an apartment, you get to use that living space for a specific period of time, say one year, in return for an agreed amount of money.  Bonds work pretty much the same way.  A government gets to use money for a period of years, if it agrees to return the original loan money and an additional fee, or interest.

It is very important for lenders to determine just how likely the borrower is to repay the loan and the interest and do it on time, in full, as agreed.  The recent one-level downgrade of the U.S. credit rating by Standard & Poor's showed the agency's opinion that Washington became slightly less likely to pay its bills.

A group that urges Washington to manage its money better, the Center for A Responsible Federal Budget, says the ugly spectacle of partisan bickering in Washington damaged the country's once top-level credit.  "(S&P) has lost confidence in the American political system to make hard choices when push comes to shove," he said.