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The prime ministers of Sweden, Netherlands, Denmark and Austria, ask: “How could it suddenly be responsible to spend €500bn of borrowed money and send the bill into the future?” and answer: “We are all affected by this crisis, and it puts all national... https://www.ft.com/content/7c47fa9d-6d54-4bde-a1da-2c407a52e471
...budgets under severe strain. So we must all have a realistic level of spending.”
This is true, of course, in the way most empty abstractions tend to be true, but the important question shouldn’t be about repaying the rescue funds, but whether the rescue creates the...
This is true, of course, in the way most empty abstractions tend to be true, but the important question shouldn’t be about repaying the rescue funds, but whether the rescue creates the...
...resources that fund the repayment (which we conventionally call “GDP”) or are repaid in the form of transfers. European spending can be used to boost GDP directly, for example by rebuilding needed European infrastructure, or indirectly, for example by boosting household...
...income so that the lack of demand doesn’t cause businesses to fail. In either case GDP rises (or, which is the same thing, it doesn’t fall), in which case the debt is effectively “repaid” out of the higher GDP.
The point here is that while notional debt may rise, the debt...
The point here is that while notional debt may rise, the debt...
...burden will actually fall with a decline in the debt-to-GDP ratio. It is only in an economy with low unemployment and at more-or-less full capacity that government spending might have no effect on boosting GDP growth, and where the impact of increasing demand will cause...
...inflation. This doesn’t mean that the EU can spend money on anything it likes, but it does mean that it will be a long time before the economy reaches the upper limits of its spending capacity.
People who think that debt doesn’t matter – or that government debt doesn’t...
People who think that debt doesn’t matter – or that government debt doesn’t...
...matter as long as the government can control the currency – simply do not understand debt. Debt matters, because beyond a certain level a rising debt burden puts downward pressure on growth and is likely to increase income inequality. But it is important to realize that...
...a 20% decline in GDP with no increase in debt is just as bad as a 25% increase in debt with no increase in GDP. Preventing GDP from falling, in other words, is no less important to debt management than preventing debt from rising needlessly.
