tag:blogger.com,1999:blog-2546602206734889307.post8120344029372075625..comments2024-03-29T12:16:15.785+00:00Comments on mainly macro: Chris Giles on UK AusterityMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-2546602206734889307.post-49486048026061512922012-02-04T02:49:03.161+00:002012-02-04T02:49:03.161+00:00It is what is not done that is the real debt on fu...It is what is not done that is the real debt on future generations, the real capital that is not invested, the real factories and roads that are not built, the opportunities wasted. The financial debt is distributional. Some people, usually many, owe others, usually a few, money. The few, by imposing austerity, impose a poorer future on the whole of society, because things that should and could be built are not. They hope, by advantage of their position, and the fact that they are 'owed,' to be even richer in this poorer society, than they are now.greghttps://www.blogger.com/profile/08201906679062960215noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-70418127299779043322012-02-03T16:02:03.325+00:002012-02-03T16:02:03.325+00:00Certainly comprehensive! Not sure I'd say pers...Certainly comprehensive! Not sure I'd say persuasive generally though. As Anonymous says below, it's not the debt but the drag of the financing that's important. Clearly wouldn't be an intertemporal problem if you were to pass on an undated debt with no coupon that never gets repaid. And, apart from the interest, that's close to what happens in practice because it never really gets repaid.<br /><br />The FASAB in the US raised the possibility of intergenerational accounting for national accounts a few years ago. I can't find the link just now but I've typed out a bit from a paper by Galbraith, Wrey and Mosely discussing the proposals:<br /><br />"Many of the FASAB’s proposed procedures appear to rely on the notion of intergenerational accounting. This exercise attempts to assess financial burdens through time, especially with a view to claiming that financial decisions taken in one generation can impose burdens on another. But this argument is specious. It refuses to count as real assets the infrastructure and other national assets that the current generation will leave for future generations.<br /><br />And it does not understand that federal government debt never needs to be retired, anymore than private sector net saving needs to be eliminated.<br /><br />In real terms, there obviously are no intergenerational<br />transfers, except for the knowledge, physical assets, and larger environment that the present leaves to the future. The real goods produced in 2050 will be distributed to those alive in 2050, regardless of the public debt in existence at that time. Then, just as now, the deficits of the state will fund the nominal savings of the nongovernment sectors. In short, intergenerational accounting is a deeply flawed, experimental, and unsound concept. It should not be included in any government accounting."<br /><br />My impression is that a lot of the comment about passing on future debt burdens is more political than economic.Roy Lonerganhttps://www.blogger.com/profile/11678551093889946242noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-51485640152118572482012-02-03T11:34:21.352+00:002012-02-03T11:34:21.352+00:00Roy, that burden of debt argument got comprehensiv...Roy, that burden of debt argument got <a href="http://worthwhile.typepad.com/worthwhile_canadian_initi/2012/01/robert-waldmann-and-others-on-dean-baker-and-hence-paul-krugman-and-the-burden-of-the-debt.html" rel="nofollow">comprehensively shot down</a> by Nick Rowe and others.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-81977783317378495482012-02-03T11:32:42.226+00:002012-02-03T11:32:42.226+00:00As the temporary budget deficits during a recessio...As the temporary budget deficits during a recession are supposed to be compensated by budget surpluses during the next boom we talk about timespans of years, not generations. Furthermore, as you rightly pointed out, the actual economic costs of public debt are not caused by debt itself but by the disincentive effects of taxation.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-85580488907472223402012-02-02T18:07:59.959+00:002012-02-02T18:07:59.959+00:00The stimulus does not necessarily imply a huge int...The stimulus does not necessarily imply a huge intergenerational transfer. True the debt will be repaid by future generations but it will also be owed to future generations - so the future generations more or less get an equal asset and liability. There is interest to pay of course and the asset/liability may not be shared equally amongst the future generations, but that's a question of fairness within generations and not betwen them.<br /><br />The best thing about the post for me is the idea that the interest rate is a market price. Everyone seems to miss that. It's as if there's a general idea that the debt markets are acting on a crack dealer principle: first loan really cheap just to get you hooked and then raise the price and before long we're out mugging small countries to make the interest payments.Roy Lonerganhttps://www.blogger.com/profile/11678551093889946242noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-13941062912392385582012-02-02T16:26:30.217+00:002012-02-02T16:26:30.217+00:00Thanks for another very interesting post.
There’s...Thanks for another very interesting post.<br /><br />There’s one thing that seems to be missing from the entire debate about stimulus vs. austerity, namely intergenerational equity.<br /><br />Commentators from both sides seem to take as given that if government spending can stimulate output and can do so without significantly increasing borrowing costs, then stimulus would be the way to go. Of course there's disagreement on whether that is possible and what a good stimulus looks like.<br /><br />But even if this effective stimulus could be achieved, it still implies a huge intergenerational transfer from taxpayers of the future to beneficiaries today. And as someone who has only recently left education and joined the labour force, I’m not sure I like the sound of that.<br /><br />I wouldn’t say this puts me in the camp of being anti-stimulus. But it is an important effect to take in to account, and at the moment few commentators seem to be doing so.thomadhttps://www.blogger.com/profile/14540922991762549435noreply@blogger.com