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In a modern industrialized country, the government issues bonds to cover the majority of their debt. There is an individual, or group, that wishes to push policy to favor their morals. What percentage of the debt would need to be purchased that threats of divesting would work?

assume:

  • democratic country
  • total debt at 90% GDP
  • good credit standing, for the government
  • willingness to purchase at a loss
  • policy requested goes against public good
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    $\begingroup$ Isn't bribing more "effective"? Also because bonds are not shares, they do not mean you "own" something, they are just "loans" that the country asks and should pay back sometimes in the future. If it cant, it can go bankrupt, but the bond owner can't force anything, even if he owns 100% of the debt.. At least in theory $\endgroup$ – frarugi87 Jan 3 '17 at 15:24
  • $\begingroup$ It can't be done by a bond holder. A potential bond purchaser does have a certain amount of leverage especially against a government struggling for funds, but of course it's never that simple. $\endgroup$ – Separatrix Jan 3 '17 at 15:29
  • $\begingroup$ You could rework your scenario to reflect recent US history. Get your individual or group to manipulate your country's highest court to legalize bribery (the Citizens United decision). Once bribery is legal, your person or group will have all of the influence that he or they can afford. Who "wins" just becomes a question of who has more money. (edit - cleaned up typo) $\endgroup$ – Jym Jan 3 '17 at 15:48
  • $\begingroup$ Unless they control something similar to the Federal Reserve or ECU, this cannot be done. As of now in Western democracies, using nothing, operating in secret, and with no checks and balances, the Fed / ECU control the amount of debt in circulation. $\endgroup$ – Just Someone Jan 3 '17 at 16:09
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As long as gov has got a good credit standing that would be rather unworkable (unless request is really minor, or it is a situation of general market distress like during crisis of 2007).

Let's think... The debt is NOT redeemable right now, so the conspirator could not demand his money back, but just put a huge sell offer on the market. Needless to say, in order for such offer to work, the conspirator would have to sell it with significant discount.

The debt could be bought:

-by other investors (who simply see a really good offer and don't care about any politics)

-by central bank of affected gov using freshly created money (in such distress situation, possibility of inflation hike in long term would not be an issue)

-international bodies, like IMF.

Realistic result of such fire sale of debt:

Some short term disturbances on market which would affect incoming rolling over of debt. Would increase for a few months or a year the interest rate and force the gov to sell only short term papers.

Serious expenses for the one who had to sell all such bonds at loss.

Don't give it much chances, unless the moment is REALLY good.

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The Global Capital Market is big

The nation you are describing has good credit. If so, you may be underestimating the mass of the world's liquid capital. Unless that nation is the United States or Japan, then its total debt is not that significant on the scale of world capital.

Using data from the IMF's 2014 year-end report statistical appendix to get some perspective: the world GDP is about \$74 trillion, total equity and security market is is \$162 trillion, and total bank assets plus equities/securities is \$283 trillion. Because we live in an age of fiat money, where both bank and government can 'create' money by lending out money that they do not have, there is more money than there is produced value.

This is the important thing to know about debt: since money is a flexible concept, a country can (up to a certain limit) generate more money simply by lending it out from its central bank. And a bank can do the same thing; while individual banks do it on a smaller scale, taken together all banks in the world have lent over \$120 trillion dollars.

The amount of this money that changes hands every day is staggering. Some blogs suggest that \$14 trillion per day travel through the American financial system. The Bank for International Settlements (BIS) does over \$5 trillion in foreign exchange transactions per day between central banks, 88% of that to or from dollars.

The United Kingdom's sovereign debt amounts to \$2.06 trillion; France at \$2.44 trillion; Germany at \$2.42 trillion. Japan's (\$9 trillion) or the US's ($19 trillion) debt are significantly larger, while I'm not sure anyone knows how much China's debt is, if such a concept even exists for China. The point is that for all but the biggest two capitalist economies in the world, their total national debt is not even half of daily currency exchange flows.

Conclusions

From this data we can draw two conclusions. First, for the truly large countries (including UK, France, etc), you would need to be able to make $200 billion in payments to purchase around 10% of their debt. I don't see where you might conceivably get that kind of money, other than from a national government. That figure is about half of the annual revenue (not profit) of the biggest companies in the world, like Walmart. US total corporate profits were about 1.8 trillion, so you would need own about 1/5 of the US economy to get that much money in a year.

Second, for any country smaller, even if you were to sell \$200 billion dollars of some government's debt for a low price, in an attempt to prevent that country from borrowing more and thus wrecking their economy, that amount of money would be snapped up in a heartbeat by the existing global financial system. \$200 billion is a very large amount to buy as a single person/entity, but a relatively small amount compared to the vast scale of daily equity, debt, and bank transactions.

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