I mean, the deficit expansion has been dramatic.
Now is not the time to worry about the national debt.
Actually running budget deficits is a good thing.
That is not something that the general public should be worried about
for the time being at all.
I think what we have to remember is that the deficit expansion was
happening even before COVID hit, so we were seeing, you know, in a
way an unsustainable path for the deficit.
And then obviously once COVID hit And we had this incredible amount
of support from Washington that is ongoing deficit continue to swell.
So, you know, what's the concern?
I think the concern is what happens on the other side.
So once we get past the crisis, you know, do we start to see some,
you know, efforts to rein in the deficit, shrink the deficit?
And what does that mean for, you know, reductions in spending?
What does that mean for policies going forward, especially since we
do have a, you know, potential change of government?
There's lots of moving parts in terms of how I think about the budget
going forward. But I think for the time being, the consensus is very
much on both sides of the aisle is for more deficit expansion as we
do what's needed to stimulate the economy.
even though we've been running budget deficits that are kind of
stupid, if you were if you were going to run budget deficits, you
should be using the money to build infrastructure to help education,
to work on the future.
And instead, we've been using it to get big windfalls to corporations
and rich people I don't want to say debt never matters.
I'm not going to go all that way.
But interest rates remain low.
There's no sign that the markets are disturbed.
The arithmetic of debt is really encouraging because interest rates
are well below the economy's normal growth rate, which means that you
don't get increased debt, really doesn't require that you make any
special sacrifices to pay it down.
And historically advanced countries, Britain came out of World War
Two with debt. That was two hundred and fifty percent of GDP.
Nothing bad happened.
So there really is no, we're not anything like at a crisis point.
And at this point, with everything else going on, I think the great
danger is that we spend too little, not too much.
In a sense, We'll never have to repay the debt.
The American economy credit is good.
It's going to continue to be good even if there is a huge crisis in
the world. American debt is something that's one of the safest assets
to hold. So nobody is going to come and say, please, reimburse,] the
debt that you owe me.
When you have this much unemployment, when you have this much
underutilized capacity, this is the time when government has got to
be the spender of last resort.
We know this.
I mean, even people who don't like Keynes and didn't and rejected
Keynes, this is where Keynes comes in.
This is where Keynesianism is most applicable.
If you don't do it, we're just going to continue to sputter at 80 to
90 percent of capacity for on and on and on.
If we are going to take our debt from 25 to 50 trillion dollars, that
is when U.S. sovereignty begins to become at risk because other
countries see that we've run up so much debt that we're no longer
beholden to anybody else but the kindness of strangers.
And at that point, you start to have real discussions about the
sanctity of the US dollar reserve currency status.
And I don't want for my children and grandchildren to be faced with
those issues. I would rather that the Congress people in Washington,
DC act like adults.
I mean, I think by definition the enormous amounts of debt created is
in itself, another one of the massive uncertainties out there.
I am advocating also for many countries that this is an opportunity
for the governments is a bit tricky.
Again, in the US to in those countries where there's independent
central banks from a legal perspective on the US could do this, I
guess, but it'd be a bit trickier because of Congress.
You essentially give them a different target instead of just
inflation targeting to one of nominal GDP targeting.
It was very intellectually fashionable to debase about this, you know,
a good 10 years ago and it never happened.
But a great way of trying to ensure that debt to GDP ratios do come
down is by forcing the central bank to have something other than a
low inflation target.
And part of that would be deliberately trying to probably higher
target, higher inflation but in a modest way than we have today.
But it would it would oblige the central banks to pursue very
friendly monetary policies for even longer than we have now.
So that would seem to me to be a really logical way to try and deal
with the debt problem.
And then beyond that, some kind of clever
domestic versions of the sovereign wealth fund where you're trying to
convert some of this debt into equity as we go forward?
Because otherwise, at some points, it would seem to me that the sheer
scale of this debt is going to end up being some kind of problem.
We need to think of the debt.
Are you creating money for real economic activity?
If you're doing that just to give somebody money, then, yeah, you've
got a problem. But if I'm a private individual and I go to the
bank and say, I got this wonderful new idea, I just need the money to
build my factory.
Nobody says, oh, that's horrible, you just increase the money supply
because we all go. Yeah, but there's a factory there.
It's a real thing. The public sector says we need
to open schools, we need to pay teachers.
We need to have kids in the classroom.
We need extra bus drivers in order to run split shifts for the
school. We need computers in order for the kids to be able to do
distance learning. There are real things, real economic activity tied
to that. So that's not really different.
And so I, I don't think it's as big a problem as people make it out
to be. Ultimately, all of these decisions do make some people very
rich. I mean, again, you know, people want to act like, oh, I made it
myself. No, there are a bunch of policy decisions that give me that.
The federal government says American kids need to continue education.
We don't have enough computers.
You're going to make somebody rich by deciding we're gonna go out and
buy millions of computers in order to have an educated workforce so
that our economy can be competitive.
It's not a stupid decision.
It's a smart decision.
But you just made somebody rich.
And it's not because they came up with some new idea or whatever.
It's because we made a policy decision.
This is what our country needs.
So I think people have to get used to the idea, you know what a lot
of our decisions make a lot of people rich got to pay.
Well, I think, first of all, there needs to be a bit more sharper
thinking about what we're doing.
It's absolutely the case to my mind, that government is going to is
big and it's going to get bigger.
We already have a situation where welfare payments in Europe and the
United States combined is 90 percent of world welfare payments.
I think government is going to also have not just a bigger role, but
a more important role in terms of the economy, both in terms as as an
arbiter of capital and labor.
And we're seeing that government is bailing out industry.
Government is is earmarking or targeting capital towards different
projects. We're seeing in the United Kingdom, for example, the
government step in and pay salaries in the labor market.
So to me, government is definitely getting bigger.
But also at the same time, which is quite worrisome from my side, is
that we're seeing corporations in the private sector shrink in terms
of publicly traded companies.
In the past 10 years, we've seen that number come down by about 50
percent. We're seeing much more concentration in sectors.
The idea of companies are becoming much more oligopolies.
So with this technology sector, banking sector, pharmaceutical
sector, airlines, energy sector, I mean, there are fewer and fewer
competitors in the space.
And so, again, there are real questions about what fundamentally
happened. So, you know, I'm being a bit long winded, but just that is
the backdrop that we're dealing with.
And it seems to me that we can't all just defer to government given
their own fiscal constraints.
I think it's really going to be important to to try and engage the
private sector, as we've done before, but really help get the private
sector involved in a manner that's not just for the financial
shareholder, much broader for the stakeholder given where we are.
And that means that more private sector engagement is required.
The first rule of crisis is in crisis management phase, Don't let the
perfect be the enemy of the good, because by the time you figure out
what the perfect is, it's too late.
And that's absolutely right.
But there's a second rule which is continuously learn and
continuously course correct.
Because while you may not get to perfection in the beginning, when
you do the good, you may have unintended consequences.
You may have collateral damage.
So be be willing to learn and address as you go along.
And we tend to forget.
And that's why I said the biggest mistake we made coming out of the
2008 financial crisis is that we won the war against the threat of a
global depression. But we lost the peace.
We failed to establish high, sustainable and inclusive growth and our
economy got weaker and weaker and weaker and our financial system got
more and more distorted because central banks couldn't exit.
This time around, It's really important that we both win the war and
secure the peace. Again, it's not an issue of engineering.
It's an issue of implementation.