The Question of the Public Debt

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GV4D4 week 10

advanced countries are richer, but also greater levels of debt
indicating that the problem of public debt is a distributional one (between public/private), not a matter of absolute wealth levels
three main solutions to reduce debt:
raising taxes (esp on capital)
inflation (which he says could work if the former doesn't, but less predictable distributional consequences)
austerity (which he sees as the worst solution)
European public debt is mostly owned by European households (at least, the ones that own any assets)
summarises Milton Friedman's monetarist theory on the Great Depression
the New Deal was unnecessary; everything could have been fixed via Federal Reserve policies alone
on the power of central banks to create money by making loans
theoretically no limits on their balance sheets---if they wanted, and had the right mandate, they could expand them significantly and (say) finance transition to renewable energy
the problem is that they are not democratically accountable and so (in his opinion) it's best to limit their scope
on financial opacity as a barrier to collecting more tax revenue, which can force govts to turn to austerity and similar destructive policies (see Greece, Cyprus)
on the problems unique to the ECB (as the central bank for a monetary union without a political union, administering a stateless currency)
recall that it can't purchase new govt debt on its own; can only facilitate private bank lending & then buy the bonds on the secondary market
another useful avenue for cooperation: stabilising corporation tax across nations (centralised reporting/collection)
the arbitrariness of the Maastricht treaty deficit/debt levels (3% and 60% of GDP, respectively)
capital saturation strategy: get r=g such that all capital needs to be reinvested in order to maintain capital stock
eventually results in the euthanasia of the rentier
but of course this could take forever, and who knows what it'll require to get there
also depends on demographic growth: if the population doesn't increase, it's tricker
a (very) few pages devoted to climate change and its potential for damaging growth in some way (meaning we need to discount r accordingly)
on the need for democratic control of capital in order to attain democratic control of capitalism, via financial transparency


        Piketty, T. (2014). The Question of the Public Debt. In Piketty, T. Capital in the Twenty-First Century. Belknap Press, pp. 540-570

(stagnation + inflation) when inflation is high, the economic growth rate slows, and unemployment remains steadily high

557

The “stagfl ation” of the 1970s had convinced governments and people that central banks ought to be independent of political control and target low inflation as their only objective.

—p.557 by Thomas Piketty

notable

7 years ago

The “stagfl ation” of the 1970s had convinced governments and people that central banks ought to be independent of political control and target low inflation as their only objective.

—p.557 by Thomas Piketty

notable

7 years ago

treay for creating the EU; signed on 7 February 1992 by the members of the European Community in Maastricht, Netherlands

565

In 1992, when the Treaty of Maastricht created the euro, it was stipulated that member states should ensure that their budget deficits would be less than 3 percent of GDP and that total public debt would remain below 60 percent of GDP.

—p.565 by Thomas Piketty

notable

7 years ago

In 1992, when the Treaty of Maastricht created the euro, it was stipulated that member states should ensure that their budget deficits would be less than 3 percent of GDP and that total public debt would remain below 60 percent of GDP.

—p.565 by Thomas Piketty

notable

7 years ago

Capital in the Twenty-First Century
by Arthur Goldhammer, Thomas Piketty

Capital in the Twenty-First Century
by Arthur Goldhammer, Thomas Piketty

Capital in the Twenty-First Century
by Arthur Goldhammer, Thomas Piketty