----- Forwarded Message ----- From: D.J.Bezemer <[email protected]> To: Stephanie Kelton <[email protected]> Cc: "[email protected]" <[email protected]>; Steve Keen <[email protected]>; randall wray <[email protected]> Sent: Friday, 29 June 2012, 10:37 Subject: [gang8] Re: debt forgiveness or 20 years of surplus Of course I agree with Stephanie that growth in GDP would be the best solution to derease debt/GDP. I am writing from a European perspective where growth is strangled by austerity and countries cannot create money in their own currency - i.e. they are in an 'original sin' currency mismatch situation. They've borrewed in a currency they do not control. The ECB behaves like a foreign creditor to its own memebr countries, extracting the surplus in debt servicing. I don't believe for a moment that 20 yrs of surplus would solve anything - that would be 20 years of recession, so rising debt/GDP ratios. But it illustrates the scope of the problem. What other solution than debt write offs (or change the rules of the game)? Dirk On 28-06-12, Stephanie Kelton <[email protected]> wrote: I don't follow. US Debt/GDP was near 125 percent after WWII. Around 40 percent by early 2000s. Don't need decades of surpluses to "pay off" numerator, just decent growth in denominator. > >Sent from my iPad > >On Jun 28, 2012, at 8:06 AM, Dirk Bezemer <[email protected]> wrote: > >> Here is a VERY good argument for debt forgiveness NOW: >> >> "Indeed, the study says the budgets of most advanced economies, excluding >> interest payments, ³would need 20 consecutive years of surpluses exceeding 2 >> per cent of gross domestic product starting now just to bring the >> debt-to-GDP ratio back to its pre-crisis level². >> >> (with thanks to Michael for the link) >> >> Remember, the only time the US ran a surplus for consecutive years was in >> recession years 1999-2000 following the Clinton public debt reduction (and >> by implication, private debt buildup) - and also in 1947-48, to be complete. >> >> Dirk >> >> >> =============== >> >> >> >> Norma Cohen, ³Global economy is stuck in a vicious cycle, warns BIS,² >> Financial Times, June 25, 2012. >> The global economy is experiencing a ³vicious cycle² in which the efforts >> of governments, households, businesses and the financial sector to reduce >> their debts are worsening each others¹ prospects, the Bank for International >> Settlements has warned. >> Stephen Cecchetti, chief economist of the BIS often referred to as the >> bank for central banks said five years after the financial crisis engulfed >> the global economy, the world appears no closer to finding a sustainable >> economic model. Not until regulators get to grips with the banking system¹s >> woes by forcing banks to recognise losses, take write-offs and raise capital >> can the path to sustainable growth begin, he said. ³The revitalisation of >> the banks and the moderation of the financial industry will end this >> destructive interaction with the other sectors and clear the way for the >> next steps fiscal consolidation and the deleveraging of the private, >> non-financial sector,² Mr Cecchetti said, unveiling the bank¹s 2012 annual >> report. ³Only then can we return to a balanced growth path.² >> The report underscores the challenges facing governments, particularly in >> advanced economies, as they struggle to contain spending and recoup revenue >> lost as output collapses. Indeed, the study says the budgets of most >> advanced economies, excluding interest payments, ³would need 20 consecutive >> years of surpluses exceeding 2 per cent of gross domestic product starting >> now just to bring the debt-to-GDP ratio back to its pre-crisis level². >> Moreover, monetary policy has been bearing the brunt of efforts to >> adjust. These cannot go on forever and carry their own risks as economies >> become dependent on ultra-low interest rates, the BIS says. ³There are very >> clear limits to what central banks can do,² Mr Cecchetti said, summing up >> the annual report. ³They cannot repair balance sheets. They cannot increase >> productivity. And they cannot put policy on a sustainable path.² >> Every additional year that policy makers fail to get to grips with >> long-term fiscal consolidation makes the recovery period even longer, he >> warned. >> While the risks are greatest for developed economies especially Europe >> the BIS notes that risks are rising for emerging economies, particularly >> those that have experienced rapid growth through exports to more >> industrialised neighbours. These include Russia, India and Thailand. >> >> -- >> Dirk J Bezemer >> >> Associate Professor, >> Faculty of Economics& Business >> University of Groningen >> www.rug.nl/staff/d.j.bezemer >> >> documentary (8 min): youtube.com/watch?v=9JD6uuiiZPY&feature=relmfu >> interview (10 min) : ineteconomics.org/video/interviews?page=3 >> presentation (26 min): youtube.com/watch?v=qvBuK8yQxbY >> >> >> >> > __._,_.___ Reply to sender | Reply to group | Reply via web post | Start a New Topic Messages in this topic (3) Recent Activity: Visit Your Group The gang8 list is devoted to Creditary Economics. To unsubscribe, email: [email protected] Switch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use . __,_._,___
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