Is the Government Debt Fiscal Theory a Prediction?

2min Snip

00:00

Play full episode

Summary

Transcript

Episode notes

Fiscal theory is not particularly special here. It just opens the possibility that if you have too much debt and you can't pay it back, and bon markets get tired of you there will be a sharp inflation to get rid of that debt rather than a default. The mechanism is like a runnets, like an earthquake. We're in danger of a roll over crisis. If you could predict it happening, it would already have happened. And now everythin that looks sustainable is all of a sudden not sustainable. You're sitting on a powder keg and tat a powder keg, a run, a crisis. But let me tell youisca theorhy says, in partnow

What unites John Cochrane the finance economist and “grumpy” policy blogger with John Cochrane the accomplished glider pilot? For John, the answer is that each derives from the same habit of mind which seeks to reduce things down to a few fundamental principles and a simple logical structure. And thus, piloting a glider can be understood as an application of optimal portfolio theory, and all of monetary policy can be made to fit within the structure of a single equation.

John joined Tyler to apply that habit of mind to a number of puzzles, including why real interest rates don’t equalize across countries, what explains why high trading volumes and active management persist in finance, how the pandemic has affected his opinion of habit formation theories, his fiscal theory of price level and inflation, the danger of a US sovereign debt crisis, why he thinks Bitcoin will eventually die, his idea for health-status insurance, becoming a national gliding champion, how a Renaissance historian for a father and a book translator for a mother shaped him intellectually, what’s causing the leftward drift in economics, the need to increase competition among universities, how he became libertarian, the benefits of blogging, and more.

Read a full transcript enhanced with helpful links, or watch the full video.

Recorded January 4th, 2021 Other ways to connect

Follow us on Twitter and Instagram
Follow Tyler on Twitter
Follow John on Twitter
Email us: cowenconvos@mercatus.gmu.edu
Subscribe at our newsletter page to have the latest Conversations with Tyler news sent straight to your inbox.