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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, defe
by 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 agoIf 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 agoOnce 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 agoGermany is not in a position to print the reserve currency of the planet.
- 40acres 7y agoI'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.
- starbugs 7y agoGermany has invested substantially into tackling climate change. Google "Energiewende". Maybe also do some research on the internet infrastructure in Germany. It's a cartel. That's why service is so bad. I'm not saying I'm against good infrastructure investments. But just telling us to "keep spending" because "debt is cheap" won't cut it.
- marcosdumay 7y agoThings may very well be different this time, but there aren't many examples of government backed internet investments working since the 80's.
- singularity2001 7y ago>> Because government finance is not the same as personal finance. Not the same but similar. Look at Argentina and Greek to see what happens if countries overspend. Germany is one of the forerunners against climate change without going in too much dept.
- dukoid 7y agoThat's exactly my problem with the whole idea of "more debt is better". There is obviously a limit. Where is it exactly? How do you know?
- RockIslandLine 7y agoModern Monetary Theory tells us that the important limits are "when you run out of Labor" and "when you run out of resources". So what nations are facing low unemployment, and what nations are facing resource shortages?
- 40acres 7y agoI'd add an additional criteria of: "when inflation is out of control". I don't know about other central banks but The Federal Reserve and Bank of Japan have been trying to raise inflation for years now, interest rate cuts are not as effective when inequality is high because it just leads to asset bubbles. It's time for fiscal policy to direct spending to productive areas.
- AnimalMuppet 7y agoSo MMT says so. So what? We don't automatically take what every non-mainstream economic theory says as gospel. You need a bit more reason for us to accept this one than "MMT says so".