Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Because unwinding (consolidated) government debts reduces the money stock of society. Which you only get to do when people decrease their (money) savings relative to the size of the economy, or, what comes to the same thing, when the velocity of money increases rapidly.

If you attempt to reduce your consolidated government debt faster than society reduces its need for government money, you get deflation, which increases the magnitude of the government's obligation relative to GDP, both directly through shrinking nominal GDP for the same real GDP and indirectly by wrecking real GDP.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Dec 14th, 2011 at 10:53:00 AM EST
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