Odd Lots
Barry Eichengreen on the New Era of High Government Debt
Aug 29, 2023
Barry Eichengreen, a Professor of Economics at UC Berkeley and an expert on government debt, discusses the rising global government debt and its implications for central banks. He delves into the shift from fiscal policies of the 2010s to more proactive approaches now, comparing 'good' versus 'bad' debt. Eichengreen shares insights on political will using historical examples like Greece and Iceland, and examines the relationship between global savings and currency stability. His analysis sheds light on the challenges of managing debt in an inflationary environment.
38:20
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Quick takeaways
- Governments borrow for both emergency responses and prolonged fiscal deficits, emphasizing the need to reduce heavy debt burdens for fiscal sustainability.
- Central banks may become the primary tool during economic downturns due to increased debt-to-GDP ratios but face challenges with managing interest rates and financial stability risks.
Deep dives
Living in a World with More Debt
The podcast episode discusses the emerging theme of living in a world with more debt. This is highlighted by recent events such as credit rating downgrades and concerns about buying bonds due to high supply. The conversation explores the technical factors of debt absorption and the shift towards fiscal authorities taking a more active role in economic management. The implications for inflation, central banking, and policy trajectory are debated, with a recognition that these questions will be discussed for years to come.
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