CNN just reported (here) that US National debt reaches grim $40 trillion milestone. Here’s why that matters says the article: "The United States is digging itself into an ever-deeper debt hole." Modern Monetary Theory advocates argue that:
From the standpoint of World-Systems Theory, it might be argued that as long as US Debt keeps in line with growth of the US Economy (or maybe the World Economy, W) the debt should be sustainable. On the other hand, if US Debt was growing in an unstable, Business-as-Usual (BAU) fashion without regard for economic conditions, it might be considered a problem.
Unfortunately, if you think $40T in Debt is unsustainable, none of the models (other than the Random Walk, RW) continue to much "worse" levels in the future!
Notes
Wikipedia Links
- Modern Monetary Theory (MMT) a heterodox macroeconomic theory concerning the role of fiscal and monetary policy in sovereign governments that borrow and issue government debt in their own currency.
USL20 BAU DEBT Model
The model is unstable using US Debt Data from the FRED Database.
USL20 BAU DEBT AIC Statistics
The best stable model, using the Akaike Information Criterion (AIC, smaller-the-better) is driven by the US20 Model. You can run the USL20 BAU Model on my Google Site using R-code.
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