Money & Banking Blog

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The Risks of Continuing To Borrow & Spend

Debt & Deficit Primer (part 2). Measuring the risks of prolonged debt- financed government spending. The important concept here is “fiscal sustainability”, which basically says that if the interest rate on the debt is less than nominal GDP growth, the relative debt burden is improving. From Professors Cecchetti & Shoenholtz: “Ultimately, debt sustainability requires that…