TLDR: the last time someone that didn’t understand economics paid off the national debt, it didn’t end well.
If there is a finite amount of money you can print before suffering the effects of inflation, deficit spending allows you to increase the amount of money in circulation without just printing more. If I owe you 100 trillion dollars, you owe Japan 100 trillion dollars, and Japan owes me 100 trillion dollars, this is good for the economy. Yes, it probably sounds like voodoo magic. No, I’m not qualified to help with that.
Now, there is still an upper limit on how much debt is okay, generally tied to interest rates. We’re beginning to scratch that upper limit thanks to deficit spending during covid, but it’s by no means problematic and things would overall probably have been worse without the extra spending.
Maybe…but we did less during the financial crisis of 2008 and had a worse outcome. When we analyzed that data from 2008, we decided that it would probably work better if we spent more next time, which is what we did this time…and the result matched the prediction, which is pretty much how you prove something works scientifically. Make a prediction, test the prediction, and if the test results match your prediction, that is evidence for your hypothesis. So, the evidence we have says it’s probably better to increase deficit spending to avoid economic collapses. This isn’t a lab, so we can’t control for every variable to really prove it, and we probably never could…we can just keep evaluating our results after a problem and see if the changes we made resulted in a better or worse outcome than we predicted.
I meant, the way the debt was repaid was possibly what caused the crisis, it’s possible to repay a country’s debt through better economic policies as a very long term project instead of just selling land…
https://www.history.com/this-day-in-history/andrew-jackson-national-debt-reaches-zero-dollars
TLDR: the last time someone that didn’t understand economics paid off the national debt, it didn’t end well.
If there is a finite amount of money you can print before suffering the effects of inflation, deficit spending allows you to increase the amount of money in circulation without just printing more. If I owe you 100 trillion dollars, you owe Japan 100 trillion dollars, and Japan owes me 100 trillion dollars, this is good for the economy. Yes, it probably sounds like voodoo magic. No, I’m not qualified to help with that.
Now, there is still an upper limit on how much debt is okay, generally tied to interest rates. We’re beginning to scratch that upper limit thanks to deficit spending during covid, but it’s by no means problematic and things would overall probably have been worse without the extra spending.
At the same time, the way it was done might have been the issue, right?
Maybe…but we did less during the financial crisis of 2008 and had a worse outcome. When we analyzed that data from 2008, we decided that it would probably work better if we spent more next time, which is what we did this time…and the result matched the prediction, which is pretty much how you prove something works scientifically. Make a prediction, test the prediction, and if the test results match your prediction, that is evidence for your hypothesis. So, the evidence we have says it’s probably better to increase deficit spending to avoid economic collapses. This isn’t a lab, so we can’t control for every variable to really prove it, and we probably never could…we can just keep evaluating our results after a problem and see if the changes we made resulted in a better or worse outcome than we predicted.
I meant, the way the debt was repaid was possibly what caused the crisis, it’s possible to repay a country’s debt through better economic policies as a very long term project instead of just selling land…