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Uhm, sorry, but is the author serious? I mean, how did we come to the point where not being indebted is bad and should be condemned?

• yrro 7y ago
  Because debt issued by a soverign and denominated in its own currency is fundamentally different to debt accrued by a private entity.
  • pgeorgi 7y ago
    One design quirk of the Euro is that there is no sovereign to go with it.
    • jwieczorek 7y ago
      Yes, Euro is a disaster. It's a predominantly ideological project that economically is totally unsound. Okay, it was conceived as a way to boost the German economy (before Euro the German mark was just too strong so Germany couldn't export as much as it does now) but ends up painfully backfiring at all Euro economies. First the weaker economies (Greece and Italy) and now Germany.
      • pgeorgi 7y ago
        > it was conceived as a way to boost the German economy (before Euro the German mark was just too strong Interesting theory, but I wonder when the German economy was so strong that Germany forced the rest of Europe to agree to the Euro: When the first plans for an economic and monetary union within the EEC were brought up in 1969? Or in 1979, when European currencies were pegged against the ECU, stabilizing exchange rates (and taking large parts of monetary policy out of the member states' hands)? Maybe in 1989 when France made German reunification depend on Germany committing to the monetary union?
      • inflatableDodo 7y ago
        >Yes, Euro is a disaster. It's a predominantly ideological project that economically is totally unsound. It has been running for about 20 years, becoming the world's second most traded currency after the dollar and without it Europe would still be a mixed bag of national currencies rather than being one of the big three economic powers. If the euro is totally economically unsound, then I must say that it is doing rather well considering. Personally, I store all my wealth in a 3 ton rai stone sunk in deep water 60 km NNW off the isle of Yap. There are some limits on fungibility, but the transaction security is excellent.
  • starbugs 7y ago
    So why not print all the money everyone needs? I'd start off with a couple of million EURs. Oh, you also want a couple of million? No problem. Oops, hyper inflation and we're back at the start. Seriously, this doesn't work.
    • bryanlarsen 7y ago
      The article claims that German/European inflation is too low, they should be printing more money (or an equivalent, like borrowing)
      • starbugs 7y ago
        The ECB has been "printing money" like crazy for the last decade. Inflation in Germany is between 1 and 2 percent. Why is that a problem? If you've saved some money it's already eating up about 1% (or more) on an annual basis since you don't get any interest anymore. Money has had a value until 2008. Then somehow the rules were rewritten and now you are getting penalized for saving so you can later invest. This doesn't make any sense.
        • bryanlarsen 7y ago
          Of course you should be penalizing for saving. Hiding a dollar away where it's not doing any good to the world economy? You should get rewarded for investing, taking risks and letting that dollar do something.
          • starbugs 7y ago
            You are basically saying that I don't have a right to preserve my wealth for the time period I see fit and that the government (I consider the central banks to be part of the gov) should enforce that by manipulating interest rates. What's next? Prohibit ownership of precious metals (again)?
            • bryanlarsen 7y ago
• azinman2 7y ago
  Keynesian economics
• 40acres 7y ago
  Because government finance is not the same as personal finance. Debt craze gripped the US in the early 2010s shortly after the lows of the great recession, defecit spending would've boosted the economy and allowed the US economy to recover quicker, instead we have a 10 year recovery that only recently started to provide gains for the most marginalized workers. Also, climate change is a existential risk, I'd rather finance solutions with defecit spending now than finance a war over water in the future.
  • starbugs 7y ago
    If I remember correctly, it was a debt crisis that caused this. You basically allowed people who couldn't pay to "own" houses that were so beyond their means that (combined with a couple of financial derivatives) it collapsed the economy. Now the solution is clearly more debt?
    • 40acres 7y ago
      Once again, there is a difference between sovereign debt and personal / corporate debt. Subprime mortgages are subprime because the debtor has a risk of default, the US prints it's own currency, issues debt in its own currency, has some of the strongest institutions in the world, and controls the global reserve currency. The risk of default is essentially nil. When governments spend money on infrastructure and health / education the ROI is positive.
      • starbugs 7y ago
        Germany is not in a position to print the reserve currency of the planet.
        • 40acres 7y ago
          I'm not advocating for Germany to go all MMT here, but negative bonds are a clear indication that government has ample room for debt financing. Germany has notoriously poor internet service, investing in broadband infrastructure could help them transition into more of a service economy, which would be a smart hedge as the slowdown in Chinese consumption led to a slowdown in consumers buying German cars and a contraction last quarter. Also as mentioned, all the European players are big on tackling climate change -- why not fund solutions? Instead, Europeans leaders like Macron have gone with the politically infeasible route of higher petrol prices.
• FabHK 7y ago
  This is a long discussion, but the gist of it is that you cannot compare an economy with a household. An economy that does not issue debt (mostly to itself!) can't invest and grow and build productive assets (and then pay the debt back (mostly to itself) later).
  • chmod775 7y ago
    How does Germany fit into that blanket statement?
    • FabHK 7y ago
      My statement was in response to the blanket question "how did we come to the point where not being indebted is bad?". The (somewhat blanket) response was that debt is not always bad. Second, I second Krugman's conclusion that rebus sic stantibus, Germany should borrow more (very cheaply) and invest more (for example, in fixing the shamefully neglected infrastructure). This a fairly specific statement, tied to a place and time.
      • AnimalMuppet 7y ago
        Germany's infrastructure is "shamefully neglected"? Compared to what? (I'm in the US, so maybe my standards are too low...)
        • FabHK 7y ago
          Neglected compared to the past. Many bridges and roads are in bad repair. These are all very long term assets, and with rates as they are it seems a good time to repair them now. (Unemployment is relatively low in Germany, but high elsewhere in the EU.)
    • skybrian 7y ago
      As I understand it, Germany relies on exports and foreign investment? It doesn't work if every country does it. In order for some countries to export more than they import (resulting in savings invested abroad), other countries need to import more than they export and pay for it by satisfying international demand for investments. So, on the one side you have counties like Japan and Germany and on the other you have the US. The demand for savings is apparently what drives this. People need to invest their savings somewhere. If "safe" investments aren't available, financial markets will somehow invent them. This may or may not actually be safe or productive.
• bryanlarsen 7y ago
  If you can print money to discharge your debt than the debt itself isn't bad, it's just another tool in the monetary policy toolbox. Of course the Germans have a particular aversion to printing money.
  • luckylion 7y ago
    > Of course the Germans have a particular aversion to printing money. They also cannot, the ECB decides on monetary policy with the Euro, not Germany or Germany's Bundesbank (which, if they were, also weren't directly taking orders from the federal government regarding monetary policy).
  • tonyedgecombe 7y ago
    Of course the Germans have a particular aversion to printing money. That's not really surprising though is it: https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_R...
• number6 7y ago
  In economics there are four parts that can go into debt: the state, the citizens, the industry or the foreign countries. If the state does not go into debt and the industry doesn't do it then there are only a) the other countries or b) your own citizens. Just ask yourself - who lends a country money? So it is considered good for a country to go into debt if it uses the money for infrastructure. With this money people and companies get paid and thus produce GDP. With this GDP growth the debt can be paid. But this would be in a perfect world.
  • phkahler 7y ago
    >> So it is considered good for a country to go into debt if it uses the money for infrastructure I dont agree. The debt still has to be paid back with interest, and the infrastructure will require maintenance (costs) in the future. If a country or municipality is debt free they can build new with excess revenue. If not, there is little hope of getting the budget under control by borrowing to create more obligations.
    • marcosdumay 7y ago
      If the new infrastructure will lead to a larger GDP growth than the interest and maintenance, then I don't think anybody can argue that taking the loan is bad. No, the municipality can't use excess revenues, because those will not exist if not enabled by the infrastructure. There is an obvious catch, but this uncritical "debt is baaad" rationale does not stand.
    • number6 7y ago
      > The debt still has to be paid back with interest That's true but kinda also not true. There has to be the possibility that the debt is to be paid back. More important: the interests have to be payed. Rest is cashflow management. Hypothetically more infrastructure would mean more taxes and so one. Like in SimCity. Just think of it this way: where does the money comes from that the state makes? If it is not spend the state has all the money but no one else. It's more like activa and pasica on a balance sheet
      • 7y ago
• audunw 7y ago
  Since the whole world economy developed around a monetary system based on debt. It's good not be too deep in debt, but if nobody was borrowing money, the economy would grind to a halt. There is such a thing as a good middle ground when it comes to debt.
• User23 7y ago
  Because of sectoral balances[1]. If the public sector doesn’t issue debt, then the private sector can’t accumulate financial assets modulo exports. This is why, incidentally, the Germans want a devalued Euro. Unfortunately we can’t all be net exporters, so Germany is basically defecting in an iterated game. [1]https://en.m.wikipedia.org/wiki/Sectoral_balances https://en.m.wikipedia.org/wiki/Sectoral_balances
  • marcosdumay 7y ago
    There is a huge "in nominal values" that has to be appended at the end of that claim. Reality is always more complicated.
• luckylion 7y ago
  Especially when there's nothing about "not being in debt" in Germany. They have barely gotten a "no new debt" once, but that's also with a lot of book keeping (i.e. the bank bail-out doesn't count etc). Germany is heavily indebted on all levels, federal, state, and county.
• AnimalMuppet 7y ago
  Well, it's Krugman. Government spending and Fed money printing are his two magic cures for everything that ails the economy. (Note that his column at least used to be titled "The Conscience of a Liberal". He's writing primarily as a liberal, not as an economist.) Under current conditions, though, he could in fact be right. But there are two problems with government borrowing. First, while there may be very good things to spend the money on, instead the spending decisions are going to be made by Congress, politically rather than economically. That's a recipe for a bunch of wasteful spending, with perhaps some good things done as well, but the good things are almost a result of chance. Second, Congress may be right to decide to spend money now, but the time comes when it is no longer time to borrow and spend. Will Congress stop when it's time to stop? History does not lead to optimism here. This time may in fact be different. But it's different a lot less often than people say it is, especially people who say "it's different" in order to throw away rules that keep them from doing what they want.