Monday 11 December 2017

Public debt warning lights are still flashing amber

Brendan Keenan

Brendan Keenan

ECONOMIC policy can sometimes seem like sub-atomic physics: as soon as one observes something, the something changes. Not to mention the uncertainty principle.

Think of inflation - as soon as it was targeted, it disappeared. Or money supply: as soon as it was targeted, it seemed not to matter; and once they ignored it again it turned out to matter very much.

Those remain somewhat mysterious events. There is less mystery about government debt. With the collapse of interest rates, its characteristics really have changed from those which would have been observed even a few years ago. But that still leaves the problem that policies based on those observations may no longer be valid.

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