Saturday, March 14, 2009

Linday Tanner is lying awake at night

worrying about debt

Kerry O'Brien: "Lindsay Tanner, you said today that the Government’s debt position, after all its big stimulus spending, is like a person who earns $100,000 a year taking out a $5,000 loan. If that’s all it is, why are you losing sleep? I would have thought you could probably take out another $5,000."

Bill Mitchell helps him out

There is no analogy between a person who earns x and takes out a smaller loan y. The Federal government does not have to finance its spending and can issue debt up until the markets decline to purchase any more of it.

There is much more.

It's good.


David said...


Is Bill Mitchell's argument - that 'deficit' does not necessarily = 'debt' - accurate? It (mostly) make sense - although the bit about central banks having to offer bonds to prop up interest rates is a bit confusing at the moment.

I've been reading his blog for a little while now and he seems to be the only one making this argument (if there are others, my quick google didn't find them - or as a non-economist I couldn't understand them).

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