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Tag Archives: Debt

What about Japan?

What about Japan? It's a question I often hear from advocates of fiscal expansion. Japan has huge debts and no crisis or inflation (so far). Doesn't that prove the US can borrow a ton more money painlessly? I offer two new points today: 1) Not every high debt country is so happy. 2) Just what did Japan get for all its fiscal stimulus? Indeed, I will start asking "What about Japan?" Japan seems a tough case for those who advocate that fiscal stimulus will save us from secular stagnation,...

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Brazilian Inflation

This marvelous plot comes from an interesting article, The Monetary and Fiscal History of Brazil, 1960-2016 by Joao Ayres, Marcio Garcia, Diogo A. Guillén, and Patrick J. Kehoe. The article is part of the Becker-Friedman Institute Project, complete with a big and now easily available data collection effort, and forthcoming book. If you want a deep historical and economic analysis of fiscal and monetary interactions, this is an amazing resource. And it summarizes historical episodes that...

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Inflation outlook at NRO. 1970s all over again?

Essay on monetary policy in National Review Online. Short version: The Fed's monetary policy has returned to the intellectual framework of the late 1960s. At best "expectations" now float around as an independent force, manipulable by speeches, but not tied to patterns of action by the Fed as analysis since the 1980s would require. If you follow the conventional reading of how monetary policy works, that observation leads to a natural prediction:  we're on the verge of reliving...

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r < g

r<g is an essay on the question whether r<g means the government can borrow and not worry about repaying debts. No. Abstract: A situation that the rate of return on government bonds r is less than the economy's growth rate g seems to promise that borrowing has no fiscal cost. r<g is irrelevant for the current US fiscal problems. r<g cannot begin to finance current and projected deficits. r<g does not resolve exponentially growing debt. r<g can finance small...

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Low Interest Rates and Government Debt

MathJax = { tex: { tags: 'ams' // should be 'ams', 'none', or 'all' } }; This is a talk I gave for IGIER at Bocconi (zoom, sadly) Jan 11 2021. Olivier Blanchard also gave a talk and a good discussion followed. Yes, some content is recycled, but on an important topic one must go back to refine and rethink ideas. This post has mathjax equations and graphs. If you don't see them, come back to the blog or read the pdf version Low Interest Rates and Government Debt John...

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Debt denial

Our national debt denial is a new essay on debt. Yes, it repackages many themes from previous essays, but debt is important, and I'm refining things through many efforts. This one is better, I think, than previous efforts. This appears in a new biweekly column in National Review Online, "Supply and Demand," which I'll be doing with Casey Mulligan. ***Does debt matter? As the Biden administration and its economic cheerleaders prepare ambitious spending plans, a radical new idea is...

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1933 lessons for today

Nov 11, Eric Leeper presented "Recovery of 1933" with Margaret  Jacobson and  Bruce Preston, at the Hoover "Road Ahead for Central Banks" series, and it was my pleasure to discuss it. This is a really important and insightful paper.  Since Japan hit the zero bound more than 25 years ago, economists have been thinking about how to avoid deflation. The answer seems obvious -- "helicopter money," or "unbacked fiscal expansion." But this has proved remarkably hard to do. Jacobson,...

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Challenges for central banks.

On October 20, I was graciously invited to give a talk at the  ECB Conference on Monetary Policy: bridging science and practice. I survey six challenges facing central banks: 1. Interest rates and inflation; 2. Policy reviews; 3. Financial reform post 2008 4. New challenges to finance post covid; 5. The many risks ahead; 6. Central banks and climate.  For the whole thing, go here for a pdf. (The conference website will have video soon.) Items 1-5 are mostly interesting for...

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Muni haircuts

"Municipal bond investors have to share the burden in state bailouts" writes my colleague Josh Rauh, and he is exactly right.Background: State and local governments borrowed a lot of money and blew it. They borrowed further by not funding their pensions. Now covid comes along, people are fleeing cities, and they don't have tax revenue to fund ongoing expenses. The big question hanging over Washington: If we are going to help state and local governments weather the storm of their current...

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