Trust In the Future Tax Incomes
Obviously the only reason people are willing to loan the government money by buying bonds is because they believe the government will pay them back at some point. This trust is based on the fact that the governments have the exclusive right to assess things. Basically, all of the government capital loans are guaranteed by the future income taxes.
However, the connection between the taxes and the payment of the bonds is not direct. In other words, the fact that a government has a lot of bonds that are about to expire does not imply that it is necessarily obligated to increase the taxes abruptly to pay them, because the governments frequently refinance bonds that are about to expire; they simply emit new bonds to obtain enough money to pay the old ones. This process is called extended debt, and all governments use it in a routine way.
Do not think, however, that indefinitely postponing the payment of the debt is a big fraud. The only reason why investors are willing to participate in an extension is because they trust the government can at any moment use their capacity of imposing assessments to pay their debts. The trust of the investors allows the government to continue borrowing, whether it be to finance new loans or to pay previous extended debts.
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