What’s the optimum long term debt to GDP ratio?

“As to what is the appropriate debt-to-GDP ratio to pursue in the long run, that is a difficult empirical question….”

As one of the leading MMTers, Warren Mosler has pointed out (2nd last paragraph), there is no point in government debt rising to the point where government has to pay any interest on such debt. I.e. government should not issue interest paying debt.

Put another way, most of the alleged and popular reasons for government borrowing are bunk, as I point out here.

The only reason for having government issue liabilities is to ensure that the private sector has sufficient net financial assets to ensure that the private sector spends at a rate which brings full employment. Indeed, the latter point is simply a re-statement of Keynes’s “paradox of thrift” point. That is, if the private sector is intent on saving money, rather than spending it, the result will be excess unemployment unless government prints enough money to satisfy the private sector’s savings desires.

Just Google the phrases “private sector net financial assets” and “savings desires”. You’ll find MMTers grossly over-represented in the first ten or twenty items that Google finds.

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Ralph Musgrave - Ralphanomics

COMMENTARIES (SOME OF THEM CHEEKY OR PROVOCATIVE) ON ECONOMIC TOPICS BY RALPH MUSGRAVE, DURHAM, UK. THIS SITE IS DEDICATED TO ABBA LERNER. I DISAGREE WITH SEVERAL CLAIMS MADE BY LERNER, AND MADE BY HIS INTELLECTUAL DESCENDANTS, THAT IS ADVOCATES OF MODERN MONETARY THEORY (MMT). BUT I REGARD MMT ON BALANCE AS BEING A BREATH OF FRESH AIR FOR ECONOMICS.

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