Friday, 4 November 2016
Bank of England worries about the “sustainability” of national debt.
If you want to progress your career, it’s very important to use fashionable phraseology, and the word “sustainable” is very much in vogue at the moment. So congratulations to the BoE authors for that. To be more exact, they are concerned with what they call “sustainability in the long run”.
This short BoE article is concerned with the rise or fall in real (i.e. inflation adjusted) interest payments on the national debt relative to GDP. As the article rightly points out, a rise in interest payments relatively to GDP is not “sustainable”.
Well my answer to that is: “OK, but so what?” I mean an accelerating car is not a sustainable system: it cannot go on accelerating for ever! But that doesn’t prove there is anything wrong with a car accelerating for a while.
Thus the entire “sustainable” concept, fashionable as it may be, is twaddle. The important question (one that MMTers have answered) is: what’s the OPTIMUM size of the debt? Unfortunately as I’ve pointed out several times on this blog, the concept “optimum” is too difficult for most people and for most economists.
So let’s stick with fashionable twaddle like “sustainable” shall we?