learning to live with debt

The Financial Times, in an editorial, supports IMF staff who warn countries to avoid cutting public debt at too fast a pace.

It was a US vice-president who reportedly said: “Reagan showed that deficits don’t matter.” In 2004 Dick Cheney, one of the more right-leaning Republicans, was making the case for a trillion- dollar tax cut, when the public finances were in far from healthy shape.

He was not alone in his view. ….

But years of double-digit deficits left a burden of debt far beyond what most countries would happily bear. The question now is the speed at which they must be reduced.

Staff at the International Monetary Fund have produced an admirably clear answer, and one that might surprise those used to seeing the Washington-based institution as an unbending defender of orthodoxy. A recent paper says that most countries can relax: debt ratios should be allowed to decline “organically” with growth, or through opportunistically pocketing windfalls.

Stop worrying and learn to live with debt“, Financial Times, 8 June 2015 (metered paywall).

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