Question:

What effect does the national debt...?

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have on an individual citizen of the respective nation?

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  1. Crowding out.

    Governments often borrow money (by issuing bonds) to fund additional spending. The problem occurs when government debt 'crowds out' private companies and individuals from the lending market. Increased government borrowing also tends to increase market interest rates. The problem is that the government can always pay the market interest rate, but there comes a point when corporations and individuals can no longer afford to borrow.

    Usually the Fed will artifically keep the interest rate low by using monetrary policy. This sometimes causing deflation to occur as what happened to Japan in 1991.

    second article is a pdf file about preventing deflation from 2002 published by the fed.

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