Documents Gagna, Emile 2 results

"This book provides an update to the major 2012 study by the same authors on the dual role of the public sector as the provider of the ultimate riskless asset and, at the same time, the source of a potential major systemic risk. In this second edition, Brender and his colleagues concentrate again on the tension between the need for the public sector to sustain demand in the face of a deleveraging private sector and the longer-term challenges of sustainability for fiscal policy in the major developed economies of the US, Japan and the euro area. In short, their principal thesis is that sovereign debt is in crisis.  This crisis is apparent in the euro area, but it is also real, if at present only latent, in the US and Japan. The book shows how this process has evolved in these three big developed economies – and how their policy choices impact on global financial markets."

"Debt continues to grow around the globe, regularly creating cause for concern. Are today's economies really nothing but a house of cards? The Covid pandemic has not helped matters: the debt of most Western governments has soared as a result. Will our governments go bankrupt, and who will foot the bill? While debt can be a catalyst for crisis, it is also crucial to economic growth, because one person's debt liability is another's debt claim. If nobody borrows, then nobody can set money aside. In a market economy, Aesop's fable does not hold true: the ants need the grasshoppers.

As long as households want to save more than private agents are willing to borrow, governments not only can, but should, continue to take on debt. They are not just ‘borrowers of last resort', they are also ‘insurers of last resort'. Faced with a future fraught with risks, borrowing gives governments a means of investing today to avert at least some of these risks and avoid taking on even more debt tomorrow. If they use their resources wisely, they will not go bankrupt.

This book tackles these issues in an original and thought-provoking way. By looking at the rise in debt from a macroeconomic and empirical viewpoint, the authors highlight the underlying forces while also pointing out the limits to public and private indebtedness."