Do you remember the justifications given for the austerity we are all now facing?
George Osborne said in February, 2010 said:
So while private sector debt was the cause of this crisis, public sector debt is likely to be the cause of the next one. As Ken Rogoff himself puts it, “there’s no question that the most significant vulnerability as we emerge from recession is the soaring government debt. It’s very likely that will trigger the next crisis as governments have been stretched so wide.”
The latest research suggests that once debt reaches more than about 90% of GDP the risks of a large negative impact on long term growth become highly significant. If off-balance sheet liabilities such as public sector pensions are included we are already well beyond that. And even on official internationally comparable measures of debt, we are forecast to break through 90% of GDP in just two years time…
To entrench economic stability for the long term, we need fundamental reform of our fiscal policy framework….As I have made clear, our aim will be to eliminate the bulk of the structural current budget deficit over a Parliament.
The key phrase above, is one used by right wing politicians all over the world as justification for their austerity and its:
"The latest research suggests that once debt reaches more than about 90% of GDP the risks of a large negative impact on long term growth become highly significant."
And that research was carried out by economists Carmen Reinhart and Kenneth Rogoff. But there's a problem they got it wrong.
The New Yorker Blog has an excellent summary of where they went wrong.
"To sum up, there may well be a threshold at which high levels of public debt tend to be associated with very bad growth outcomes and financial crises, but it isn’t ninety per cent of G.D.P., or even a hundred per cent. Maybe it’s a hundred and twenty per cent, although that figure isn’t a firm one, either".
And Chris Hayes explains further in this following video:
George Osborne said in February, 2010 said:
So while private sector debt was the cause of this crisis, public sector debt is likely to be the cause of the next one. As Ken Rogoff himself puts it, “there’s no question that the most significant vulnerability as we emerge from recession is the soaring government debt. It’s very likely that will trigger the next crisis as governments have been stretched so wide.”
The latest research suggests that once debt reaches more than about 90% of GDP the risks of a large negative impact on long term growth become highly significant. If off-balance sheet liabilities such as public sector pensions are included we are already well beyond that. And even on official internationally comparable measures of debt, we are forecast to break through 90% of GDP in just two years time…
To entrench economic stability for the long term, we need fundamental reform of our fiscal policy framework….As I have made clear, our aim will be to eliminate the bulk of the structural current budget deficit over a Parliament.
The key phrase above, is one used by right wing politicians all over the world as justification for their austerity and its:
"The latest research suggests that once debt reaches more than about 90% of GDP the risks of a large negative impact on long term growth become highly significant."
And that research was carried out by economists Carmen Reinhart and Kenneth Rogoff. But there's a problem they got it wrong.
The New Yorker Blog has an excellent summary of where they went wrong.
"To sum up, there may well be a threshold at which high levels of public debt tend to be associated with very bad growth outcomes and financial crises, but it isn’t ninety per cent of G.D.P., or even a hundred per cent. Maybe it’s a hundred and twenty per cent, although that figure isn’t a firm one, either".
And Chris Hayes explains further in this following video:
