Tuesday, November 23, 2010
Krugman argues over and over that we need more government spending, that we should not worry about government debt, that government debt will bring recovery.
In my recent series on debt (beginning here) I have shown that government debt is not the debt that is holding our economy down. Private debt holds us down.
Note that there is no mention of government debt in this sentence: Private debt holds us down.
Increases in government debt have not brought recovery, not yet, and not since the 1970s. We never really recovered from that 1974 recession. Why? Because private debt holds us down.
Krugman is right: Increases in government debt should bring recovery. But the other guys are right, too: Increases in government debt don't bring recovery. So, are we gonna argue about this until we end up in a Dark Age? Or are we gonna take a step back and try to see what's missing from the discussion?
What's missing is any consideration of private debt.
Posted by The Arthurian at 4:28 AM