Study Developed Sovereign Debt Problems

For a long time, the occurrence of sovereign debt crisis can be normal.Throughout the human history, the debt default happens frequently which reached itspeak after WWII. At that time, debt default trouble emerged in the half of countriesaround the world. At the end of last century, the debt crisis which started from theasset bubble burst had great influence on the world. The occurrence of debt crisistends to be periodical and accompanies with banking crisis. That is, there is a closerelationship between banking crisis and debt crisis.The Subprime lending crisis burst in US triggered a series of effect whichgradually expanded as an international financial crisis. The debt troubles in developedcountries like US and Japan are increasing, the debt crisis in Europe are intensifying,and the economic development in many countries are still under the shadow of debtcrisis since2007.Why is the influence of crisis so great? Why is this last such a longtime? When we dig into those questions, it is not difficult to find that they are causedby national system designing and the political&economic system running.The systematic debt crisis in developed countries are also called sovereign debtcrisis. Because the governments of developed countries failed to pay their insightdebts which trigger the suspect of national sovereign credit, the economy of thosecountries is in trouble which affects nations’ social stability and triggers a globalturbulence in turn. As we can see, it is hard for a government to maintain its owndebt’s stability. In that sense, what investing and financing scale does an enterpriseshould keep? How to limit the debt in certain scope? etc. All of them are meaningfulquestions that deserve a profound consideration.The government debt includes both the debt it owe to its domestic residence andthe debt it owe to residence abroad. That is to say, the government debt not onlyinfluences the running of domestic economy and national stability, but also has a greateffect on the international economy. Especially for the country or regional group likeUS and Europe union who show great influence on the global economy. The sovereign debt of developed countries concerns to the recovering process of worldeconomy. And China, as the pioneer of world economy development, sets a examplefor developing countries’ economic development.This paper which is based on economic development of developed countries,analyzes the debt crisis from course, causes, relative factors profoundly. Meanwhile,by the model testing and analyzing, the author puts forward a relative early-warningsystem, presents his thinking on debt problem in China and summarizes thesuggestions for China’s stable and healthy economic development.