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Was the financial crisis caused by too little government debt?
These two posts provide additional context.The majority of assets were safe:http://ftalphaville.ft.com/blog/2011/07/15/623881/the-aaa-bubble/Until they weren't:http://ftalphaville.ft.com/blog/2011/12/05/778301/the-decline-of-safe-assets/It's not just that a lack of available treasuries pushes investors further out the risk curve, unsafe instruments have continually be relabeled as safe.
meant to say "have continually been"
This is powerful in combo with the observation that a depression has followed nearly every major reduction in govt debt.
John's getting a bit back on track here wrt the MMT paradigm... But he should look at it as "the deficit became too small" rather than having to do with how few govt securities were required to be issued for monetary policy purposes given the small fiscal deficit.The type of govt securities per se dont have anything to do with it, people could always leave balances in a FDIC bank account. It's the govts policy of directing NFA flow that matters (net levels of spend and tax), coupled with the external deficit (which had/has been dangerously rising over this same time period).Resp,
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