Debt continues to grow around the globe, regularly creating cause for concern. Are today’s economies really nothing but a house of cards?
The
Covid pandemic has not helped matters: the debt of most Western
governments has soared as a result. Will our governments go bankrupt,
and who will foot the bill? While debt can be a catalyst for crisis, it
is also crucial to economic growth, because one person’s debt liability
is another’s debt claim. If nobody borrows, then nobody can set money
aside. In a market economy, Aesop’s fable does not hold true: the ants
need the grasshoppers.
As long as households want to save more than private agents are
willing to borrow, governments not only can, but should, continue to
take on debt. They are not just ‘borrowers of last resort’, they are
also ‘insurers of last resort’. Faced with a future fraught with risks,
borrowing gives governments a means of investing today to avert at least
some of these risks and avoid taking on even more debt tomorrow. If
they use their resources wisely, they will not go bankrupt.
This book tackles these issues in an original and thought-provoking
way. By looking at the rise in debt from a macroeconomic and empirical
viewpoint, the authors highlight the underlying forces while also
pointing out the limits to public and private indebtedness.
Full book
© CEPS - Centre for European Policy Studies
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