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Debt, deficits, and inflation
Author(s) -
Capie Forrest,
Wood Geoffrey
Publication year - 2021
Publication title -
economic affairs
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.24
H-Index - 18
eISSN - 1468-0270
pISSN - 0265-0665
DOI - 10.1111/ecaf.12447
Subject(s) - debt , cites , government debt , inflation (cosmology) , economics , internal debt , government (linguistics) , debt to gdp ratio , debt levels and flows , work (physics) , monetary economics , finance , engineering , physics , theoretical physics , mechanical engineering , linguistics , philosophy , fishery , biology
This article sketches the theory of debt finance and cites historical evidence on the sustainability of debt. If it is accepted that the future should under the current circumstances of COVID‐19 help to alleviate the problems of the present, then debt finance is in principle appropriate. It need not lead to an explosive rise in the debt‐to‐GNP ratio. British history shows that the theory can work in practice. A satisfactory outcome, however, depends on government being reliable, honest, and competent. Trust is easily lost and hard to restore.