Author Topic: The limits of government borrowing - The Economist  (Read 301 times)

ergophobe

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The limits of government borrowing - The Economist
« on: June 09, 2021, 10:49:32 PM »
https://www.economist.com/finance-and-economics/2021/06/05/what-are-the-limits-to-government-borrowing

Short version: it depends on growth, but actually, we might have a long ways to go

Rupert

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Re: The limits of government borrowing - The Economist
« Reply #1 on: June 10, 2021, 05:22:02 AM »
Thats good, I should subscribe to the economist.  There is an interesting BBC podcast, I think it is Money Box, Called the shaking of the money tree. A simplistic view of the mechanics of this in the UK.

Ah here it is:
https://www.bbc.co.uk/programmes/b09pl66b
Quote
Michael Robinson takes a critical look at Britain's policy of 'quantitative easing' and finds out how 435 billion has been created from nowhere - and where all the money has gone.

I found it interesting as it was before the pandemic...
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ergophobe

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Re: The limits of government borrowing - The Economist
« Reply #2 on: June 10, 2021, 05:41:26 PM »
I think the short answer according to both old-school and... what's it called?... modern monetary theory (something like that) is that whether it causes a lot of inflation or little or none depends on excess capacity in the economy.

If there's enough excess capacity in the economy to absorb that new money, there's no inflation or very little. So if I have a plant running at 80% and I get a 10% boost due to the new money, that doesn't appreciably drive inflation. But when the government money drives businesses to make choices - I can serve this customer or that customer - because they're at 95% when they get the 10% boost, then it's strongly inflationary.

The hard part with a giant infusion of money is knowing what the actual capacity of the economy is.