Is it time to ditch our obsession with austerity and deficit?

antrobus

theEnd wrote: »

Keen always seems to make sense, so I'll have a good listen to this interview. ....

I thought it had been established some time ago that Keen can't do math.:)

theEnd wrote: »

...Krugman is a different story.

It's well known that Krugman and Keen don't like each other.:)

N1AK

Linton wrote: »

Current government debt as a % of GDP is still below what it has been for 50 of the past 100 years according to...

Holding back growth by say 1% by austerity would have more impact than the interest saved.

A time period that nicely includes two of the largest and most expensive conflicts we've ever been involved in. Where exactly would we be if a major conflict came along now, when we're already heavily indebted?

There's a reason why people recommend keeping at least a few months wages in savings for a rainy day: If you have no savings and have maxed out the credit card, then if something goes wrong you're in a world of trouble.

I'd be the first to agree that cutting back some spending to allow for more funded investment is a good idea. The problem is that you'll never get a government elected that proposes for example dropping pensioner benefits for wealthy pensioners, and removing the triple lock, which cost a huge amount of money and aren't investments in the future. So where are we going to find billions of extra savings that wouldn't be extremely unpopular with a large chunk of the population (and thus not politically viable).

cells

i read an article not long ago that said about two thirds of government debt issued by the USA Germany UK France etc was at zero or negative rates

why not spend if there are investors happy to lend to you at zero rates


also debt have a counterpart which is savings.
If UK PLC takes on £100B more debt, UK PLC gained £100B more savings

princeofpounds

read an article not long ago that said about two thirds of government debt issued by the USA Germany UK France etc was at zero or negative rates

why not spend if there are investors happy to lend to you at zero rates

Just because debt is currently cheap does not mean it is a no-brainer to keep increasing it. Remember that the biggest 'investor happy to lend at zero rates' are the central banks, and that is not quite the same thing as a 'real' investor.

purch

cells wrote: »

i read an article not long ago that said about two thirds of government debt issued by the USA Germany UK France etc was at zero or negative rates

why not spend if there are investors happy to lend to you at zero rates

Just because some paper at the shorter end currently trades that way, does not mean that we can borrow at zero rates.

We borrowed that money some time ago, and we will still be paying the coupon.

Last year the average issuance rate for Gilts was about 2 1/2 %

Somewhat higher than zero.

cepheus

Europe: Joseph Stiglitz

there are very few economists who think there is any validity in austerity

The economist Joseph Stiglitz, who won the Nobel Prize for Economics in 2001 and has just written a new book focusing on inequality, debates with entrepreneur Luke Johnson about Europe.

http://www.channel4.com/news/catch-up/?599

antrobus

cepheus wrote: »

...there are very few economists who think there is any validity in austerity

Nobel-prize winning economists including Robert Mundell, Reinhard Selten and Myron Scholes favor tough austerity measures to tackle deficits in Europe and the U.S. amid debt crises that shook the euro and saw the world’s largest economy lose a triple-A rating.

The Nobel winners, meeting in Lindau, Germany and St. Gallen, Switzerland at a four-day symposium, said “draconian” measures were needed in economies from the U.S. to Greece, to tame debt levels even as global growth cools.

http://www.bloomberg.com/news/articles/2011-08-27/nobel-economists-back-austerity-as-europe-u-s-slash-budgets

cells

purch wrote: »

Just because some paper at the shorter end currently trades that way, does not mean that we can borrow at zero rates.

We borrowed that money some time ago, and we will still be paying the coupon.

Last year the average issuance rate for Gilts was about 2 1/2 %

Somewhat higher than zero.

Issuance rate is irrelevant as it doesn't take into account the price sold

for example if I issue a ten year bond with a face value of £100 and an annual interest of 10%....and I sell you this bond for £150 you are indeed getting 10% interest on the £100 bond but a hell of a lot less on the £150 you used to buy it

antrobus

cells wrote: »

Issuance rate is irrelevant as it doesn't take into account the price sold

for example if I issue a ten year bond with a face value of £100 and an annual interest of 10%....and I sell you this bond for £150 you are indeed getting 10% interest on the £100 bond but a hell of a lot less on the £150 you used to buy it

Currently nominal yield gilts are being auctioned at a premium to face value. But the interest rates thereone are still positive; they are not zero or negative. I suspect that they are being sold at yields that are pretty close to those prevailing in the market;

http://www.bloomberg.com/markets/rates-bonds/government-bonds/uk/

Thrugelmir

N1AK wrote: »

A time period that nicely includes two of the largest and most expensive conflicts we've ever been involved in. Where exactly would we be if a major conflict came along now, when we're already heavily indebted?

Middle East looks increasingly unstable.