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I can't help feeling that the question is ill-posed. It's not "how much", but "why" that matters. Think about it: Would you borrow $10,000 to a friend who open

I can't help feeling that the question is ill-posed. It's not "how much", but "why" that matters. Think about it: Would you borrow $10,000 to a friend who opens a dentist with a solid business plan? Probably yes. Would you borrow $1000 to a friend to cover an existing debt? Probably not, or, if you are very generous, you would gift them the money. If a government can demonstrate that it borrows money to invest in the economy and increase future taxes -- e.g., by building infrastructure, educating the population, researching top-notch tech -- by all means, borrow more! However, if all the government does is increase social welfare that it already struggles to afford or satisfy the luxury of a dictator, then stop borrowing now!

sesuximo 6y ago
government does both, but you cannot specify what your loan pays for
- jjk166 6y ago
  If someone loans you money to start a business and you blow it gambling, you're going to have a hard time getting them to give you another loan. The government can say it's taking on debt responsibly, but if there are no subsequent economic improvements eventually their credit rating will fall.
  - toomuchtodo 6y ago
    You don’t have to be faster than the bear, just faster than your slowest friend. The entire first world is headed towards Japanification.
    - jjk166 6y ago
      That analogy only works if lenders can only stop giving loans to one nation at a time. In reality, rates can be raised for any combination of nations simultaneously. It's not like the DRC looks like a good investment just because its not as bad as Venezuela.
notahacker 6y ago
This. Economists may not studied hyperinflations much, they've spent a lot of time looking at inflation, the one economic variable public policy designed by mainstream economists is very good at predicting and influencing. They know it's the result of the amounts people are willing to spend on stuff (including labour) rising faster than the amount of stuff available. They know that government spending more money into the economy can does increase the amount people are willing to spend on stuff (but seldom 1:1) and that it can also increase (or decrease) the amount of stuff available. They know this relationship depends on how the money is spent and also on the structure of the economy and this varies over the economic cycle as well as between countries. They know people look forward with inflation expectations when setting contract prices and wage demands. There really isn't much reason to assume inflation, a rate of change, has a stable relationship with the absolute size of the debt. It seems like the article was inspired by Rogoff and Reinhart's similar argument that a particular debt/GDP ratio was an inflection point leading to a drop in economic growth. But that paper's arguments for there being a specific amount of debt that was the problem were empirical rather than theoretical, and more importantly, were wrong (infamously the paper's main result was shown to be the result of a coding error accidentally excluding countries from their calculation)
- jedharris 6y ago
  Recently the Fed hasn't been good at getting inflation to 2% (their published target) and economists haven't been good at predicting whether the Fed will succeed, or modeling why the Fed has failed. Noah (article) doesn't emphasize this but he does refer to it. We don't really understand ordinary inflation much less hyper-inflation. Even the cause of the famous period of inflation in the 1970s is still very much debated.
  - notahacker 6y ago
    The Fed faces exactly the opposite challenge to hyperinflation though (and there's no shortage of literature about zero lower bounds and liquidity traps, and no real surprise economies find themselves [back] in one) But my point isn't that we know everything about inflation, it's that we know some spending is more likely to trigger it than others and so asking 'how much' the government can borrow before triggering hyperinflation is asking the wrong question, not least because expectations are known to have a large impact on inflation and so Goodhart's Law applies. And whether the current macroeconomic policy emphasis on stabilising inflation is excessive[1] or not, we definitely do know ways to get inflation down [1]a more usual line of criticism than arguing economists don't study inflation enough!
deleted 6y ago
[deleted]
dnautics 6y ago
> If a government can demonstrate that it borrows money to invest in the economy and increase future taxes -- e.g., by building infrastructure, educating the population, researching top-notch tech -- by all means, borrow more! That's remarkably shortsighted. You're missing whole swaths of knock-on effects of borrowing. What if I told you that the government only borrows money on the backs of the working class, who pay for it in increased prices that the economist class doesn't measure because they have lost touch (compare the increase in price of a quarter pounder vs cpi)... Then would it be worth it unlimitedly borrow?
- dctoedt 6y ago
  > What if I told you that the government only borrows money on the backs of the working class, who pay for it in increased prices that the economist class doesn't measure .... "Objection, your honor — assumes facts not in evidence."
- imtringued 6y ago
  Stop with the bogeyman conspiracy. The working class prefers low unemployment and high salaries over losing a few percent on a checking account. Inflation is generally good for workers and bad for owners of unproductive capital. Yeah, sure, owners of productive capital benefit, but only by employing workers which is a net loss compared to getting free money without productive investments.
walleeee 6y ago
> if all the government does is increase social welfare that it already struggles to afford or satisfy the luxury of a dictator Or prioritizes surveillance of its citizens and invasion of foreign countries on flimsy pretext over human health and wellbeing at home and abroad

sesuximo 6y ago

government does both, but you cannot specify what your loan pays for

jjk166 6y ago
If someone loans you money to start a business and you blow it gambling, you're going to have a hard time getting them to give you another loan. The government can say it's taking on debt responsibly, but if there are no subsequent economic improvements eventually their credit rating will fall.
- toomuchtodo 6y ago
  You don’t have to be faster than the bear, just faster than your slowest friend. The entire first world is headed towards Japanification.
  - jjk166 6y ago
    That analogy only works if lenders can only stop giving loans to one nation at a time. In reality, rates can be raised for any combination of nations simultaneously. It's not like the DRC looks like a good investment just because its not as bad as Venezuela.

notahacker 6y ago

This. Economists may not studied hyperinflations much, they've spent a lot of time looking at inflation, the one economic variable public policy designed by mainstream economists is very good at predicting and influencing. They know it's the result of the amounts people are willing to spend on stuff (including labour) rising faster than the amount of stuff available. They know that government spending more money into the economy can does increase the amount people are willing to spend on stuff (but seldom 1:1) and that it can also increase (or decrease) the amount of stuff available. They know this relationship depends on how the money is spent and also on the structure of the economy and this varies over the economic cycle as well as between countries. They know people look forward with inflation expectations when setting contract prices and wage demands. There really isn't much reason to assume inflation, a rate of change, has a stable relationship with the absolute size of the debt. It seems like the article was inspired by Rogoff and Reinhart's similar argument that a particular debt/GDP ratio was an inflection point leading to a drop in economic growth. But that paper's arguments for there being a specific amount of debt that was the problem were empirical rather than theoretical, and more importantly, were wrong (infamously the paper's main result was shown to be the result of a coding error accidentally excluding countries from their calculation)

jedharris 6y ago
Recently the Fed hasn't been good at getting inflation to 2% (their published target) and economists haven't been good at predicting whether the Fed will succeed, or modeling why the Fed has failed. Noah (article) doesn't emphasize this but he does refer to it. We don't really understand ordinary inflation much less hyper-inflation. Even the cause of the famous period of inflation in the 1970s is still very much debated.
- notahacker 6y ago
  The Fed faces exactly the opposite challenge to hyperinflation though (and there's no shortage of literature about zero lower bounds and liquidity traps, and no real surprise economies find themselves [back] in one) But my point isn't that we know everything about inflation, it's that we know some spending is more likely to trigger it than others and so asking 'how much' the government can borrow before triggering hyperinflation is asking the wrong question, not least because expectations are known to have a large impact on inflation and so Goodhart's Law applies. And whether the current macroeconomic policy emphasis on stabilising inflation is excessive[1] or not, we definitely do know ways to get inflation down [1]a more usual line of criticism than arguing economists don't study inflation enough!

deleted 6y ago

[deleted]

dnautics 6y ago

> If a government can demonstrate that it borrows money to invest in the economy and increase future taxes -- e.g., by building infrastructure, educating the population, researching top-notch tech -- by all means, borrow more! That's remarkably shortsighted. You're missing whole swaths of knock-on effects of borrowing. What if I told you that the government only borrows money on the backs of the working class, who pay for it in increased prices that the economist class doesn't measure because they have lost touch (compare the increase in price of a quarter pounder vs cpi)... Then would it be worth it unlimitedly borrow?

dctoedt 6y ago
> What if I told you that the government only borrows money on the backs of the working class, who pay for it in increased prices that the economist class doesn't measure .... "Objection, your honor — assumes facts not in evidence."
imtringued 6y ago
Stop with the bogeyman conspiracy. The working class prefers low unemployment and high salaries over losing a few percent on a checking account. Inflation is generally good for workers and bad for owners of unproductive capital. Yeah, sure, owners of productive capital benefit, but only by employing workers which is a net loss compared to getting free money without productive investments.

walleeee 6y ago

> if all the government does is increase social welfare that it already struggles to afford or satisfy the luxury of a dictator Or prioritizes surveillance of its citizens and invasion of foreign countries on flimsy pretext over human health and wellbeing at home and abroad