<p>There are a lot of potential definitions of "public debt," and differing statistical agencies use different ones. (They may have more specific names, such as "Federal debt held by the public.")</p>

<p>A lot of these definitions exclude debt held by the central bank, based on theoretical arguments that may or may not make sense. (These debt holdings would roughly correspond to the money supply, which is allegedly not "debt" according to some economists.)</p>

<p>Is any particular definition "correct"? It seems that the "correct" definition would be practically useful. However, as Professor Reinhart discovered the hard way (the "90% debt limit paper"), government debt levels (however defined) do not appear to offer much predictive power for economic outcomes. If this is indeed the case, why worry about what definition is used?</p>

<p>Arguing that ECB "debt" is meaningful implies a belief that the ECB can default on euro-denominated debts. It is very unclear how such an event can occur, other than in the context of a disorderly break up of the euro area. However, that would imply the end of the existence of the euro itself -- in which case, why care about euro-denominated debt values? It will all have to be defaulted on anyway.</p>

CC BY-SA 3.0
2017-10-04T21:27:18.150Z
2017-10-04T21:40:57.143Z
2017-10-04T21:40:57.143Z
Brian Romanchuk
<p>In this <a href="https://www.project-syndicate.org/commentary/advanced-economy-recovery-vulnerable-by-carmen-reinhart-2017-08" rel="nofollow noreferrer">text by Carmen Reinhardt</a>, there's the following sentence:</p>

<blockquote>
  <p>For Greece, Italy, Portugal, and Spain, public-sector debt must now also include the central bank’s sharply rising debts. </p>
</blockquote>

<p>What does she mean by this? Isn't all public debt usually considered? </p>

<macroeconomics><debt>
«public-sector debt must now also include the central bank’s sharply rising debts». It didn't before?
An old man in the sea.
# «public-sector debt must now also include the central bank’s sharply rising debts». It didn't before?

(Asked by: username_0 on 2017-10-03)

In this [text by Carmen Reinhardt](https://www.project-syndicate.org/commentary/advanced-economy-recovery-vulnerable-by-carmen-reinhart-2017-08), there's the following sentence:

> For Greece, Italy, Portugal, and Spain, public-sector debt must now also include the central bank’s sharply rising debts.

What does she mean by this? Isn't all public debt usually considered?

**Tags:** macroeconomics, debt


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## 1 answers

### Answer by username_1 on 2017-10-04. Score: 1

There are a lot of potential definitions of "public debt," and differing statistical agencies use different ones. (They may have more specific names, such as "Federal debt held by the public.")

A lot of these definitions exclude debt held by the central bank, based on theoretical arguments that may or may not make sense. (These debt holdings would roughly correspond to the money supply, which is allegedly not "debt" according to some economists.)

Is any particular definition "correct"? It seems that the "correct" definition would be practically useful. However, as Professor Reinhart discovered the hard way (the "90% debt limit paper"), government debt levels (however defined) do not appear to offer much predictive power for economic outcomes. If this is indeed the case, why worry about what definition is used?

Arguing that ECB "debt" is meaningful implies a belief that the ECB can default on euro-denominated debts. It is very unclear how such an event can occur, other than in the context of a disorderly break up of the euro area. However, that would imply the end of the existence of the euro itself -- in which case, why care about euro-denominated debt values? It will all have to be defaulted on anyway.


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