1/5
Good article, in which Gavyn Davies is right to argue that government debt limits in the US are probably pretty far off, although I disagree that government debt sustainability is increased when interest rates are below the GDP growth rate.
ft.com/content/aa63c3…
Good article, in which Gavyn Davies is right to argue that government debt limits in the US are probably pretty far off, although I disagree that government debt sustainability is increased when interest rates are below the GDP growth rate.
ft.com/content/aa63c3…
2/5
This is a systemic fallacy. Low real interest rates are just another way to service the debt through real transfers, no different than inflation or taxes.
I think the problem with much of the discussion about whether or not Washington should run larger deficits is that...
This is a systemic fallacy. Low real interest rates are just another way to service the debt through real transfers, no different than inflation or taxes.
I think the problem with much of the discussion about whether or not Washington should run larger deficits is that...
3/5
it ignores the purpose of these deficits. As long as the fiscal deficit is used to fund productive infrastructure investment, or is used to prevent a larger contraction in GDP, or funds income redistribution that incentivizes further business investment by boosting...
it ignores the purpose of these deficits. As long as the fiscal deficit is used to fund productive infrastructure investment, or is used to prevent a larger contraction in GDP, or funds income redistribution that incentivizes further business investment by boosting...
4/5
domestic demand (although unfortunately until we fix our participation in the global trade and capital regime a large part of this demand will bleed abroad through the current account), there is really no limit to the size of the fiscal deficit.
domestic demand (although unfortunately until we fix our participation in the global trade and capital regime a large part of this demand will bleed abroad through the current account), there is really no limit to the size of the fiscal deficit.
5/5
This is because in each of these cases the deficit is self-liquidating: it results in future GDP growth that matches or exceeds the fiscal deficit. What matters in the end is not the size of the fiscal deficit but its purpose.
This is because in each of these cases the deficit is self-liquidating: it results in future GDP growth that matches or exceeds the fiscal deficit. What matters in the end is not the size of the fiscal deficit but its purpose.
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