
Archive for November, 2015
Why running a budget deficit can reduce the national debt

YESTERDAY, at an event hosted by the Resolution Foundation, a think-tank, the organisation’s chief economist, Matt Whittaker, said something that made a few people sit up. He remarked that it would be simultaneously possible to run a budget deficit (ie, where government spending exceeds taxation) and reduce the burden of government debt at the same time. Now, to British ears this sounds impossible. Running a budget surplus, as the chancellor of the exchequer, George Osborne, is desperate to do (on the wisdom of that, see here) is often elided with paying down the national debt, which currently stands at around 80% of GDP (bailed-out banks notwithstanding).
And in a way, that does make sense. If the government gets more in taxes than it spends, it will have money left over to repay debt. And given the government does not have to borrow more money, it does not need to issue any more debt. So eventually, the stock of debt will fall.
However, the stock of debt doesn\’t really matter, for…Continue reading
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A world of debt
LIKE the sub-prime mortgage crisis in America and the sovereign debt crisis in Europe, emerging markets could be on the cusp of their own debt reckoning