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  • Debt, deficits, and inflation

    Author(s)
    Capie, Forrest
    Wood, Geoffrey
    Griffith University Author(s)
    Wood, Geoffery
    Year published
    2021
    Metadata
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    Abstract
    This article sketches the theory of debt finance and cites historical evidence on the sustainability of debt. If it is accepted that the future should under the current circumstances of COVID‐19 help to alleviate the problems of the present, then debt finance is in principle appropriate. It need not lead to an explosive rise in the debt‐to‐GNP ratio. British history shows that the theory can work in practice. A satisfactory outcome, however, depends on government being reliable, honest, and competent. Trust is easily lost and hard to restore.This article sketches the theory of debt finance and cites historical evidence on the sustainability of debt. If it is accepted that the future should under the current circumstances of COVID‐19 help to alleviate the problems of the present, then debt finance is in principle appropriate. It need not lead to an explosive rise in the debt‐to‐GNP ratio. British history shows that the theory can work in practice. A satisfactory outcome, however, depends on government being reliable, honest, and competent. Trust is easily lost and hard to restore.
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    Journal Title
    Economic Affairs
    Volume
    41
    Issue
    1
    DOI
    https://doi.org/10.1111/ecaf.12447
    Subject
    Applied Economics
    Economics
    Publication URI
    http://hdl.handle.net/10072/403019
    Collection
    • Journal articles

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