Mr Khan said:
Debt is not the issue, deficits are. Sovereign Debt is effectively sustainable ad infinitum under the right conditions, conditions the US finds itself in. Deficits can cause a crowding out effect to stifle investment, but only in robust economies. Nominally one would reign in deficits to arrest growth of or pay down debt in bull economies, so that they have more leeway to step on the gas in bear economies. |
Yes and no. I disagree with reigning in bull and gassing bear economies because government can only create money out of nothing--not goods or services. Governments can displace the creation of goods and services, but all government spending must be balanced by a combination of taxation, inflation, or the one people tend to forget: forcing a surplus on the debt instruments market. How you spent money on the bull market really doesn't change any of that.
The last one is a bad thing because it actually decreases the liquid money available to the economy.
Government spending is really a very poor way out of any situation; it is almost never as efficient as equilibrium prices. Besides, the primary function of government is to arbitrate markets. It does not NEED to spend money when it writes the global rules of how money is exchanged.
