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Debt ‐ Is It Still A Problem?
Author(s) -
Moore Des
Publication year - 1990
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/j.1467-8462.1990.tb00357.x
Subject(s) - economics , externality , debt , recession , intervention (counseling) , government (linguistics) , argument (complex analysis) , point (geometry) , monetary economics , financial crisis , economic interventionism , default , economic policy , public economics , macroeconomics , finance , microeconomics , political science , politics , psychology , linguistics , philosophy , biochemistry , chemistry , geometry , mathematics , psychiatry , law
The argument that once the public sector ceases to be a net borrower levels of external debt should cease to be a policy concern, overlooks two key points. First, private savings behaviour may be distorted due to government intervention, leading to excessive drawing on overseas savings. Second, given this, a potential externality exists to justify government intervention to prevent overseas borrowing reaching the point where a financial crisis and loss of confidence occur, leading to a recession or an extended period of stagnation, or both. The Australian situation fits this scenario.