Since we are going with a household or individual debt/credit card analogy (which isnt good to begin with) I will try to make it simple.
The US effectively has an unlimited credit card. There is no ceiling, period. Unlike you or your household, major sovereign govt's are both the credit card holder and the credit card company.
Pause and think about that for a moment.
As the credit card company, the US govt has the ability to alter the rate of growth and importance of the total debt through monetary policy.
You or your household has a credit card that charges you something like 15-18%. That is where individuals get into trouble. You miss a few payments, things snowball, unless you get a new job that pays more it will become increasingly harder.
But if you are also the credit card company, what happens if you choose to lower your own interest rate? Make it easier, not harder, to pay yourself back. Indeed, what if in theory you could charge yourself negative interest rates?
This is the importance of understanding inflation and interest rates. The understanding of this in the early 80s was and is pivotal to the world economic situation.
Unless you understand these monetary policy concepts, you cannot really grasp the issues. This is because your frame of reference is fiscal policy. E.g. I have a budget , therefore I have to live within it. This isn't case for govts because they can effectively reestablish what the underlying value of $1 is in the first place through inflation and interest rates.
This is especially true for the US because of the size and importance of the economy relative to the world. And this is amplified through collective action...if the major economies work together.
The economic world was going to end in 2008-09. It would be worse than the great depression and would take a generation or two to correct. So said many who don't understand monetary policy.
Nope. We just printed huge sums of money and injected large doses of liquidity into the financial markets and 2 years later we were at the start of a decade run of milk and honey.
This time around, govts around the world are going to accept higher inflation rates as we come out of covid and we are going to reduce the importance of all those payments aka debt that govts around the world did for their own businesses and citizens to keep them afloat. And we will yet again do this through monetary policies by managing inflation and interest rates.
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