Suggestion: Bonds issued by a City
Posted: Sat Jul 18, 2020 4:20 am
It seems the entire issuing bonds to raise money logic of a City is flawed.
Firstly, it is kind of like a cheat - i can take billions of $$$s of debt and fuel the economy and then just let it default - the penalty is just not high enough - only ousted from my mayor post and within 5 years i can get re-elected. The party should be banned for a longer period like 30 yrs to disincentivize such a borrowing. Additionally the party should be banned from other cities also. Also a max cap limit would be nice - something like not more than 2x GDP (200% debt of GDP is pretty much on higher side realistically speaking)
Secondly, the debt should not be simply written off - there should be austerity measures put forth by the central bank - that can take over the debt - something like for e.g. - you cannot build more buildings, you cannot spend more than xx.xx amounts for Hospital, Education, etc. This will ensure that over time the debt is paid back and accounted for instead of simply having it written off. This is also more realistic.
Thirdly, future credit ratings of such cities should factor this default atleast for another decade. I see here that once there is a default and debt is written off, my city is still rated AA or A - which really doesn't make sense.
Lastly, would be great if there is an option to buyback earlier raised debt and refinance it. It happens all the time. govt take a lot of debt when interests are high lets say at 5%, then if interest rates fall to 3%, govt buys back the earlier debt and raises fresh debt at lower interest. Obviously one needs to keep a penalty for such an early buy back, but its a fair and realistic option.
Firstly, it is kind of like a cheat - i can take billions of $$$s of debt and fuel the economy and then just let it default - the penalty is just not high enough - only ousted from my mayor post and within 5 years i can get re-elected. The party should be banned for a longer period like 30 yrs to disincentivize such a borrowing. Additionally the party should be banned from other cities also. Also a max cap limit would be nice - something like not more than 2x GDP (200% debt of GDP is pretty much on higher side realistically speaking)
Secondly, the debt should not be simply written off - there should be austerity measures put forth by the central bank - that can take over the debt - something like for e.g. - you cannot build more buildings, you cannot spend more than xx.xx amounts for Hospital, Education, etc. This will ensure that over time the debt is paid back and accounted for instead of simply having it written off. This is also more realistic.
Thirdly, future credit ratings of such cities should factor this default atleast for another decade. I see here that once there is a default and debt is written off, my city is still rated AA or A - which really doesn't make sense.
Lastly, would be great if there is an option to buyback earlier raised debt and refinance it. It happens all the time. govt take a lot of debt when interests are high lets say at 5%, then if interest rates fall to 3%, govt buys back the earlier debt and raises fresh debt at lower interest. Obviously one needs to keep a penalty for such an early buy back, but its a fair and realistic option.