...it's the first thing that comes out of Krugman's mouth in response to this (somewhat long-winded) opening question.
By the way - in case people didn't gather, the separate posts about Krugman, DeLong, Romer, and others on the long-term debt were all tied to the problems raised in this post about the indefensible accusations made by Chris Edwards about the priorities and policy views, or as James Buchanan (also mistakenly) put it many years ago, "political biases" of Keynesians. Edwards's was easily the most absurd blog post I've read in a while.
Monday, May 7, 2012
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Frankly, all this talk of "long term debt problems" is just a paranoid worst-case-scenario mentality.
ReplyDeleteUnited States has been running on deficits for over 90 years. And...? And nothing! Nothing happens. It won't go bankrupt, because the Federal Reserve can just buy back the bonds any time. It won't have exchange rate problems, because the whole world trades in dollars. It won't have interest rate problems, because it will always have foreign capital inflows and will never suffer a Third World style capital flight. And at the moment, barring a supply shock, it sure as hell won't have any inflation problems.
And if a supply shock does happen, then it would merely be a situation that would have left the economy worse off anyway, irrespective of the fiscal position of the US government.
Why me worry? Why anyone worry?