tag:blogger.com,1999:blog-5713178645208582139.post8701060471130624501..comments2024-03-17T03:26:42.785-05:00Comments on Macro Musings Blog: The President's Economic Report and the Right CounterfactualDavid Beckworthhttp://www.blogger.com/profile/04577612979801459194noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-5713178645208582139.post-71444938594641626762014-03-15T13:50:49.308-05:002014-03-15T13:50:49.308-05:00"My answer is that there is no reason they sh..."My answer is that there is no reason they should “limit demand” and I notice you don’t give any actual reasons. But that’s not surprising: no one has produced any convincing reasons as to why high debt should limit demand, far as I know."<br /><br />I think that's very representative of the thinking in the academic community , as I said in my first comment here.<br /><br />Should Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-86747897974979325872014-03-15T11:45:07.562-05:002014-03-15T11:45:07.562-05:001. Sumner doesn’t refer to debt rising “without li...1. Sumner doesn’t refer to debt rising “without limit” which is what you referred to. He refers to it growing to 100% of GDP.<br /> <br />2. You ask, “Are you saying that high rates of debt don’t limit demand and can’t cause down turns?” My answer is that there is no reason they should “limit demand” and I notice you don’t give any actual reasons. But that’s not surprising: no one has produced Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-57842333136053782442014-03-15T02:41:57.002-05:002014-03-15T02:41:57.002-05:00If you noticed I was mainly talking about private-...If you noticed I was mainly talking about private-sector debt , and you seem to be just one of the economists I was talking about. With the R&R blunder as your proof , you seem to have concluded that high public - or private - debt burdens won't impede growth , and that has been by far the most common attitude. Post-crisis more seem to be coming around , but very few had concerns before Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-68104399293106124222014-03-15T00:19:39.870-05:002014-03-15T00:19:39.870-05:00I agree that QE involves a “nebulous transmission ...I agree that QE involves a “nebulous transmission mechanism”. In addition, QE and indeed monetary policy as a whole, is distortionary. That is it feeds stimulus into the economy just via investment. At least it has that effect if monetary policy actually influences investment, and the evidence seems to be that interest rate adjustments at least have little effect on investment. See: <br /><br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-3350479305083393522014-03-15T00:11:24.427-05:002014-03-15T00:11:24.427-05:00I do like the idea that “most academic economists”...I do like the idea that “most academic economists” think that the debt/GDP can “grow without limit”. Can you quote me a single “academic economist” who as argued that the debt/GDP might rise to, or should be allowed to rise to 1,000%, never mind “without limit”?<br /><br />Re your phrase “high debt burdens slow growth” I assume you are trying to say that high debt reduces growth. As you doubtlessRalph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-16222818394017687602014-03-12T21:06:09.189-05:002014-03-12T21:06:09.189-05:00What if the Fed's inflation target can be supe...What if the Fed's inflation target can be superceded by other targets ? What if , unlike most academic economists , they understand that debt/gdp can't grow without limit , and that high debt burdens slow growth ? Then they might like to see , at worst , a stable level of debt/gdp or , at best , a gradually declining burden. It sure looks like someone is paying attention to this :<br /><Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-6946786986466104422014-03-12T11:14:42.640-05:002014-03-12T11:14:42.640-05:00Clearly, fiscal stimulus did not prevent core infl...Clearly, fiscal stimulus did not prevent core inflation starting to fall. And even if it meant that core inflation fell less than it would have done otherwise, I'm not sure the Fed knew a) how big the fiscal effect was going to be or b) how much less activist it would have to be to offset any effect.<br /><br />Deling with a slump of unknown but potentially massive proportion, it doesn't Anonymoushttps://www.blogger.com/profile/17797928102421103389noreply@blogger.com