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Discussion => Politics => Topic started by: Bison66 on August 07, 2011, 12:32:54 PM

Title: In-depth look at the economics behind the debate on debt and spending
Post by: Bison66 on August 07, 2011, 12:32:54 PM
Quote
A source frequently cited by the Republicans in the fiscal consolidation debate is Carmen Reinhart and Kenneth Rogoff’s This Time Is Different: Eight Centuries of Financial Folly (Princeton University Press, 2009), which presents research showing that countries with national debt exceeding 90% of GDP have growth rates averaging 1.3ppt lower than economies with less debt.

That finding was based on a study of financial crises over the past 800 years, but—as Paul Krugman has noted—the causality is not necessarily one-way.

There are cases in which growth rates have fallen because of large fiscal deficits, but there are also instances in which fiscal deficits have increased because growth has slowed. In the former cases, excessive government deficits crowded out private investment and depressed growth rates, while in the latter, governments administered fiscal stimulus to prevent further declines in the growth rate as the private sector paid down debt during a balance sheet recession.

On the surface, the two patterns appear similar since they are both characterized by large deficits and low growth rates. What sets them apart is yields on government debt, which are high in the first case and low in the second.

The three countries in which the most clamor has arisen over fiscal deficits—Japan, the US, and the UK—are all characterized by record low yields on government debt, and their private sectors are engaged in deleveraging on a massive scale.

The conclusion we should draw from this is that all three economies are in a balance sheet recession and that fiscal deficits should be used to prevent growth rates from falling any further.

http://www.businessinsider.com/reinhart-and-rogoff-dangerous-debt-ceiling-2011-8
O0
Title: Re: In-depth look at the economics behind the debate on debt and spending
Post by: iceman4221 on August 07, 2011, 01:28:26 PM
Quote
A source frequently cited by the Republicans in the fiscal consolidation debate is Carmen Reinhart and Kenneth Rogoff’s This Time Is Different: Eight Centuries of Financial Folly (Princeton University Press, 2009), which presents research showing that countries with national debt exceeding 90% of GDP have growth rates averaging 1.3ppt lower than economies with less debt.

That finding was based on a study of financial crises over the past 800 years, but—as Paul Krugman has noted—the causality is not necessarily one-way.

There are cases in which growth rates have fallen because of large fiscal deficits, but there are also instances in which fiscal deficits have increased because growth has slowed. In the former cases, excessive government deficits crowded out private investment and depressed growth rates, while in the latter, governments administered fiscal stimulus to prevent further declines in the growth rate as the private sector paid down debt during a balance sheet recession.

On the surface, the two patterns appear similar since they are both characterized by large deficits and low growth rates. What sets them apart is yields on government debt, which are high in the first case and low in the second.

The three countries in which the most clamor has arisen over fiscal deficits—Japan, the US, and the UK—are all characterized by record low yields on government debt, and their private sectors are engaged in deleveraging on a massive scale.

The conclusion we should draw from this is that all three economies are in a balance sheet recession and that fiscal deficits should be used to prevent growth rates from falling any further.

http://www.businessinsider.com/reinhart-and-rogoff-dangerous-debt-ceiling-2011-8
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Great Article - thanks for posting... 
Title: Re: In-depth look at the economics behind the debate on debt and spending
Post by: Cats4ever on August 07, 2011, 01:41:51 PM
Quote
A source frequently cited by the Republicans in the fiscal consolidation debate is Carmen Reinhart and Kenneth Rogoff’s This Time Is Different: Eight Centuries of Financial Folly (Princeton University Press, 2009), which presents research showing that countries with national debt exceeding 90% of GDP have growth rates averaging 1.3ppt lower than economies with less debt.

That finding was based on a study of financial crises over the past 800 years, but—as Paul Krugman has noted—the causality is not necessarily one-way.

There are cases in which growth rates have fallen because of large fiscal deficits, but there are also instances in which fiscal deficits have increased because growth has slowed. In the former cases, excessive government deficits crowded out private investment and depressed growth rates, while in the latter, governments administered fiscal stimulus to prevent further declines in the growth rate as the private sector paid down debt during a balance sheet recession.

On the surface, the two patterns appear similar since they are both characterized by large deficits and low growth rates. What sets them apart is yields on government debt, which are high in the first case and low in the second.

The three countries in which the most clamor has arisen over fiscal deficits—Japan, the US, and the UK—are all characterized by record low yields on government debt, and their private sectors are engaged in deleveraging on a massive scale.

The conclusion we should draw from this is that all three economies are in a balance sheet recession and that fiscal deficits should be used to prevent growth rates from falling any further.

http://www.businessinsider.com/reinhart-and-rogoff-dangerous-debt-ceiling-2011-8
O0
Say What? :o
Have OS read this? ;D This only shows the gov't can not be ran like everyone's household.