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As Britain enters a severe recession that will lead to large fiscal deficits and growing public debt, a question presents itself — when are deficits and debt too large?
Far from a problem, moderate rates of price increase signal a healthy, expanding economy.
Market economies tend to generate unemployment not full employment. Real economies produce many goods and services with quite different process of price determination. Governments and central banks at most influence not determine money in circulation. Inflation is not the result of too much money. That is its consequence.
There is a need for massive reform of tax after the coronavirus crisis
To avert permanent economic damage during the worst slump for 300 years, the government has to provide emergency credit to business, guarantee loans, offer grants, defer tax and rate payments and directly pay the wages of furloughed workers
To achieve sustained recovery, the government might need to have household debt partially cancelled. The chancellor’s recovery programme addresses corporate debt to some extent, by providing businesses with loans with generous payback conditions and other support.
UK household debt hit an all-time high before the Coronavirus. Now it’s the next crisis the government has to tackle – and only a suspension of repayments will do.
PEF’s Council Coordinator summarises the argument of his latest work, The Debt Delusion, confronting the household budget fallacy that has been used to rationalise a decade of needless austerity.
Of the nineteen UK governments since the Second World War, only two have torn up the rule book and tried to build a better future, instead of simply recycling the
“The Office of National Statistics recently released the public debt numbers for the second quarter of this year. As I show in my forthcoming book, Debt Delusion, the media and politicians misrepresent few public policy issues as frequently as they do the public debt. The misrepresentations begin with the basics, failure to treat the debt as an asset as well as a liability.”
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