The debt of a government which issues its own currency and floats it in international markets is not really a liability because the government can just continuously roll it over without ever having to pay it back. This is different to a household, the user of the currency, which not only has to service its debt but also has to repay them at the due date.
Answer: False
The answer is False.
First, households do have to service their debts and repay them at some due date or risk default. The other crucial point is that households also have to forego some current consumption, use up savings or run down assets to service their debts and ultimately repay them.
Second, a sovereign government also has to service their debts and repay them at some due date or risk default.
No difference there.
But, unlike a household it does not have to forego any current spending capacity (or privatise public assets) to accomplish these financial transactions.
But the public debt is a legal obligation on government and so is a liability.
Now can it just roll-it over continuously?
Well the question was subtle because the government can always keep issuing new debt when the old issues mature and maintain a stable (or whatever).
But as the previous debt-issued matures it is paid out as per the terms of the issue.
So that nuance was designed to elicit specific thinking.
The other point is that the liability on a sovereign government is legally like all liabilities - enforceable in courts the risk associated with taking that liability on is zero which is very different to the risks attached to taking on private debt.
There is zero risk that a holder of a public bond instrument will not be paid principle and interest on time.
The other point to appreciate is that the original holder of the public debt might not be the final holder who is paid out.
The market for public debt is the most liquid of all debt markets and trading in public debt instruments of all nations is conducted across all markets each hour of every day.
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