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Debt Derangement Syndrome

Summary:
Standard policy economics dictates that the public sector needs to fill the gap in aggregate demand when the private sector is not spending enough. After a decade of denial, the Global North may finally be returning to economic basics. BERKELEY – For the past decade, politics in the Global North has been in a state of high madness owing to excessive fear of government debts and deficits. But two recent straws in the wind suggest that this may at long last be changing. Fred Dufour - Pool/Getty Images Chip Somodevilla/Getty Images Mark Wilson/Getty Images Previous Next Earlier this month, I read a Brexit-related column in The Sunday

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Standard policy economics dictates that the public sector needs to fill the gap in aggregate demand when the private sector is not spending enough. After a decade of denial, the Global North may finally be returning to economic basics.

BERKELEY – For the past decade, politics in the Global North has been in a state of high madness owing to excessive fear of government debts and deficits. But two recent straws in the wind suggest that this may at long last be changing.

Earlier this month, I read a Brexit-related column in The Sunday Times of London by the eminent and highly knowledgeable Ken Rogoff. He is perhaps best known for his declarations early in this decade that governments should not let their debt-to-GDP ratios rise above 90%. But here, Rogoff mused that it had “never been remotely obvious to [him] why the UK should be worrying about reducing its debt-GDP burden [currently 84%], given modest growth,...

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