Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
generic:
I think it is quite possible that a growing economy needs either a private or public deficit.
Productivity growth is a deflationary pressure. To counteract that pressure you need an expansive monetary policy. Otherwise, servicing debt becomes increasingly difficult, a crisis ensues and growth is halted.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Tue May 25th, 2010 at 11:27:58 AM EST
[ Parent ]
True. So either find a way to run an economy entirely without debt or have continuous deficits. Basing monetary expansion on private deficits hasn't worked out all that well so why not try public deficits for a change?
by generic on Tue May 25th, 2010 at 11:50:14 AM EST
[ Parent ]
generic:
So either find a way to run an economy entirely without debt or have continuous deficits.
You need debt to fund capital development.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Tue May 25th, 2010 at 11:52:28 AM EST
[ Parent ]
I'd agree, but I think Chris Cook wouldn't.
by generic on Tue May 25th, 2010 at 12:10:39 PM EST
[ Parent ]
Productivity growth is a deflationary pressure. To counteract that pressure you need an expansive monetary policy. Otherwise, servicing debt becomes increasingly difficult, a crisis ensues and growth is halted.

Is this conventional wisdom? i.e. recognised by serious economists?

It certainly fills in a blank in my naive understanding of things economic.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Tue May 25th, 2010 at 12:19:42 PM EST
[ Parent ]
I think it was recognised by Veblen, Keynes, Fisher and Minsky. All of whom are dead and cannot contradict me. See also my diary The Credit Bubble theory of the Business Cycle (I: Veblen) (February 13th, 2010)

See also this thread.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Carrie (migeru at eurotrib dot com) on Tue May 25th, 2010 at 12:29:19 PM EST
[ Parent ]
So in answer to the original question, no, it is not considered by any Serious economists.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 25th, 2010 at 06:58:22 PM EST
[ Parent ]

Display:

Occasional Series