In 2019, the President of the American Economics Association, Olivier Blanchard, gave a keynote address. He summarised sensible fiscal policy into a simple rule of thumb. If the interest rate a country pays on its debt is lower then the country’s growth rate, then it can keep on borrowing. This is because taxes will grow faster than interest payments. It is much like an ordinary person borrowing money to buy a rental property - if the rent you get on the property pays for the bond, it is a no-brainer.
Unpleasant fiscal maths
Unpleasant fiscal maths
Unpleasant fiscal maths
In 2019, the President of the American Economics Association, Olivier Blanchard, gave a keynote address. He summarised sensible fiscal policy into a simple rule of thumb. If the interest rate a country pays on its debt is lower then the country’s growth rate, then it can keep on borrowing. This is because taxes will grow faster than interest payments. It is much like an ordinary person borrowing money to buy a rental property - if the rent you get on the property pays for the bond, it is a no-brainer.