

Debt Is Good - smacktoward
http://www.nytimes.com/2015/08/21/opinion/paul-krugman-debt-is-good-for-the-economy.html?_r=0

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beat
tl;dr Economies need something safe to invest in with a decent return (more
than inflation). Government treasury bonds provide that flexible safe haven.

If T-bond interest rates are too low (a function of supply and demand),
investors will avoid them and seek higher-risk investments, adding risk to the
economy. So when governments run low/no deficits, there's no motivation for
them to create bonds with attractive interest rates for investors. This raises
the risk profile across the economy.

Meanwhile, the private sector cannot be fully trusted to create safe, low risk
investments. Remember the housing crash? That was the result of CDOs, a very
clever derivatives game that indirectly coupled AAA mortgages to the worst
subprime junk bonds. The private sector is full of very bright people who are
paid lots of money to find clever new ways to game the system. That means it
can all be gamed. So government-backed securities mean there's at least one
honest(ish) game in town.

The triumph of ideology over evidence, and "common sense" over deep thought,
causes no end of economic problems. Austerity is common sense and ideology.
Debt is bad, right? Except when you need a certain amount of government debt
out there to stabilize markets. When investors are practically begging for
government bonds to shelter them from the private sector storm and there are
no bonds to be hand because the austerity police think the common sense thing
is to reduce spending, they're actually making it worse, not better. They're
leaving private investments out in the rain.

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andygambles
For the Government to run at a surplus the private sector must run at a
deficit which is clearly not good for the economy.

