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government bonds (government borrowing)

Almost all governments borrow money to fund their operations (e.g. borrowing money to build a bridge; it then pays the interest with tax income). Governments usually borrow money by issuing bonds to investors. If a government borrows in its local currency, it’s unlikely that they will ever not pay it back (e.g. default on it), because they can simply print more money. However, the value of their currency is a concern to potential investors. If a US investor lends Zimbabwe $1 million Zimbabwean dollars, she will almost certainly get paid back. But if Zimbabwe’s currency has plummeted in value in the meantime, then the $1 million Zimbabwean dollars that the investor gets back will be worth a lot less to them in US dollar terms (and so that would be a bad return for them). Governments do borrow money in currencies other than their own sometimes (like US dollars), especially emerging market countries. The ability of the country to pay back that money becomes the main risk for investors.

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