Alex Douglas raised the mainstream view of government budget constraintsagain this week, where he was ably assisted in his argument by Brian Romanachuk.
The bone of contention is whether governments can continue borrowing indefinitely. Alex and Brian demonstrate that the mathematics of the mainstream is based upon assumptions that cannot and do not hold in reality.
The popular defence at the moment is that everything fails if r > g. Bad things happen if the growth in the rate of debt/interest is greater than the growth in GDP. But what does that actually mean in practice?
To show what it means, I’ve built a little three agent model in a spreadsheet. This model is the mainstream economist and basic income fan’s dream scenario. Everybody gets a payment straight from government and all anybody cares about is earning interest....Modern Money Matters
The Bond Economy
Neil Wilson
