Tanya Said:

What is the basic idea behind bonds in finance?

We Answered:

The basic idea is that a company that doesn't have enough cash to do what it wants to do issues bonds to generate cash. The people who buy bonds receive a percentage return on the amount of cash they have provided and after a set period, the person who bought the bond gets their money back.

Wikipedia has a decent explanation.

Wallace Said:

How long will China continue to buy US treasury bonds to finance Obama's Santa Clause like giveaways?

We Answered:

China is worried about America’s decision to resort to “credit easing”—a modern way of printing money—to try and get out financial troubles. This may force China to find alternatives to the dollar.

Cheng Siwei, former vice-chairman of the Standing Committee and China’s green energy chief, said that Americans change their policy “as soon as they have positive growth again.” “If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in U.S. bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen and other currencies,” he said.

France, Russia and India have also called for an end of the dollar’s role as the world’s reserve currency. And on Monday the United Nations conference on Trade and Development joined the chorus. “An economy whose currency is used as a reserve currency is not under the same obligation as others to make the necessary macroeconomic or exchange-rate adjustments for avoiding continuing current account deficits,” said the report. “Thus, the dominance of the dollar as the main means of international payments also played an important role in the build-up of the global imbalances in the run-up to the financial crisis.”

As more and more countries begin to look for an alternative for the dollar, watch for that alternative to emerge.

To put it bluntly, we're screwed.

David Said:

Why doesn't the US Govt. use the selling bonds to finance everything it needs rather than tax US citizens?

We Answered:

A bond is just a certificate of loan. When our government issues bonds, we are actually borrowing money and promise to pay back the money at a specific time in the future (i.e., up to 30 years.)

When the U.S. borrow money, we -- as a nation -- will have to pay principal (the money we borrow) plus the interests on those loans. As of now, we are borrowing new money (= issuing new bonds) in order to pay the interests on outstanding loans (= old bonds) and to pay back loans that are due. We have been borrowing more and more money in order to pay the interests and pay back old loans.

We started borrowing heavily back in the 1980s during the Reagan era. When Reagan went crazy on tax cut, he was actually borrowing heavily to set off those tax cut. Well, it's been almost 30 years. A lot of those loans/bonds are due and will due very soon...

That is why the value of the U.S. dollar has been losing value recently. That is why oil and everything else has getting more and more expensive so quickly. The value of our currency -- how much we can buy with our dollars -- is tied to bonds, how much we have already borrowed and how much we have to pay back soon. The more we have borrowed, the harder it becomes for us to borrow again, and the less valuable our currency (the dollar) becomes. If we keep on borrowing excessively, our currency will become worthless.

We just can't keep on borrowing forever. At some point, foreign nations will refuse to lend any more money to us because they assume we will be unable or refuse to pay back the money. (More likely, we will refuse to pay back what we borrowed. Let's face it: Americans are deadbeats. The last thing we have on our mind is paying back the money we have already borrowed and used from foreigners.)

Then, other nations will refuse to lend us any more money. Our creditors (people who lent money to us) will then "fire sell" the U.S. bonds they already have. (It's suspected that China has already started selling U.S. bonds to protect their own financial interest.) When that happens, the U.S. dollar will quickly lose almost all its value, and everything in America will quickly become very expensive (= hyperinflation.) Everything we buy and need -- including oil and food -- will double in prices in just a few hours, again and again, as our currency the dollar quickly becomes worthless papers. It'll be a total economic meltdown. It has happened before in other countries -- and many believe it will soon happen to us.

For a long time, economists knew that would happen to the U.S., sooner or later, because of the way we -- the people and nation -- have been borrowing and living on debts. Many believe we are very close to the point of an economic meltdown; we just don't know exactly how close we are. That's why we can't keep on "selling bonds" to borrow money. We will just burn out our economy even faster.

Ian Said:

Give an evaluation of long term finance alternatives such as stocks, bonds, and leases?

We Answered:

Buy stocks when the economy is in a recession and has already bottomed out. Advantage: you will be buying at the low end of a market cycle. Buy low, sell high. Disadvantage: risk = uncertain about forecast of economic behavior.
Buy Bonds when interest rates are topping. Bond prices are at their lows. ADV: rates drop and you bonds go up in value.
Leases depend upon each individual property occupancy percentage and the length of the existing lease, Safest to buy as economy is in an uptrend. Adv: good cash flow, Disadv: occupancy rate drops and cash flow can turn negative.

Carole Said:

Explain how an organization can use stocks, bonds,and leases as long-term finance alternatives?

We Answered:

First, there are public and private organizations that use these strategies for long-term financing. But, for answering this question, I shall only refer to public companies.

First, public companies arrange for public financing through investment banking firms like Morgan Stanley, Merrill Lynch, etc. Bonds are basically loans to the corporation from the public. These will be paid first if the company goes belly up. Stocks are sold to share-holders who are also owners of the company. That money is then put to use in the company for purposes such as research and development, mergers and acquisitions of other companies, paying employees, etc. Long-term leases are basically loans to the company from a real-estate management firm that allows the corporation to occupy space.

Jacob Said:

where to file compaint against power finance corp ltd for less payment of interest on bonds?

We Answered:

Every bond emission comes with a data sheet, expliciting all conditions. Maybe you understodd something incorrectly? Such texts are normally very dense and arcane? Another possibility is that the conditions have changed, without you knowing it, which is possible if a majority of bondholders agrees.

Rebecca Said:

What is the best book to buy that best explain stocks, bonds, and just finance in general?

We Answered:

The best book is one that doesn't cost any thing. Go to the library and check out: The Bogleheads' Guide to Investing: Taylor Larimore, Mel Lindauer, Michael LeBoeuf, John C. Bogle

Also, use the planning and education section at: http://www.vanguard.com