Britain: For the Love of God, Please Stop David Cameron

Another take on the UK recovery. Says much the same as Paul Krugman but with lots of graphs and no snazzy graphics. But you can’t have everything.

If only economics was a science the politicians would have to listen to them, but perhaps they would get the same treatment as climate scientists…..

Benjamin Studebaker

On May 7 (this Thursday), Britain has a general election. I care deeply about British politics–I did my BA over there and will return to do my PhD there this fall. But more importantly, David Cameron’s government has managed the country’s economy with stunning fecklessness, and I couldn’t live with myself if I didn’t do my part to point this out.

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Debt 101

Aside

I am worried.

One of the blogs I watch is published by Steve Keen and he has recently (at the beginning of the month) published a three blogs looking at whether governments should run surpluses or not.  This was in response to a proposition from the Australian National Commission of Audit that the government should “live within its means.”

His three blogs are:

Should governments run budget surpluses?

Should Governments run Deficits? a Minsky Model?

Should governments run permanent surpluses? (2)

His conclusion (based on some numbers using his modelling software) is that running budget surpluses takes money out of an economy and effectively reduces growth.

On the other hand running a balanced economy (no surplus or deficit) will see public debt reducing.  But running a deficit has higher growth.

So is a deficit economy a good idea?

It matters because if we remove the possibility of debt (commercial lending) from an economy, then it must follow that a government cannot run a deficit – because it cannot borrow.

Or is lower growth a price worth paying for the advantages of taking debt out of the system?