The following is the conclusion from an NBER paper by Anmol Bhandari, David Evans, Mikhail Golosov and Thomas J. Sargent. Published in September, it looked at the relationship between taxes, debts and wealth transfers, and how economic context effects them.
In other words, when it can, or cannot, be helpful to run high debt.
What’s interesting, of course, is that the paper’s findings contradict those of the famous Reinhart and Rogoff paper of 2010:....
But the main point is that in the context of a recession it’s sometimes better to think of the national debt as the national saving, or the national equity, rather than debt outright.The Financial Times | FT Alphaville
Why the level of government debt may not matter
Izabella Kaminska
Not wholly in paradigm, but a huge improvement over R&R.
Essentially, taking a blanket approach to debt-to-GDP ratios across the world is not necessarily effective at all. What applies to one country, may not apply to another country.
2 comments:
Most MMTers could explain to a fifteen year old how government can make a PROFIT out of its national savings (or “national debt” as it is sometimes called.)
All government needs to do is keep the rate of interest it pays BELOW the rate of inflation. If the interest rate looks like rising, then print some money and buy back some debt. And if that’s too stimulatory, then raise taxes.
Easy.
Right all this is easy and I suspect that most economists know this already. The problems are incompatible cognitive-affective biases and interests along with a power structure that prevents their resolution other than through continuous conflict. Part of this conflict involves presenting one-sided approaches that fudge assumptions, methods and data selection to achieve persuasive superiority in elections.
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