That’s a record breaking amount. It’s also more than two times the size of the entire global economy.
The problem is: It’s simply not enough.
How do I know it’s not enough? Paul Krugman, Larry Summers and other Keynesian economists tell us that.
Not Enough Debt
Paul Krugman tells us Debt is Good.
Krugman says … “Believe it or not, many economists argue that the economy needs a sufficient amount of public debt out there to function well. And how much is sufficient? Maybe more than we currently have. That is, there’s a reasonable argument to be made that part of what ails the world economy right now is that governments aren’t deep enough in debt.”
Too Much Savings
Larry Summers speaks of The Age of Secular Stagnation.
Summers says … “The core problem of secular stagnation is that the neutral real interest rate is too low. This rate, however, cannot be increased through monetary policy. Indeed, to the extent that easy money works by accelerating investments and pulling forward demand, it will actually reduce neutral real rates later on. That is why primary responsibility for addressing secular stagnation should rest with fiscal policy. An expansionary fiscal policy can reduce national savings, raise neutral real interest rates, and stimulate growth.”
There you have it. Despite being $152 Trillion in debt, we actually have too much in savings.
How Much Additional Debt Do We Need?
So, how much debt do we need? It’s hard to say. Perhaps another $200 trillion would be enough. To be safe, perhaps a quadrillion dollars in new debt is necessary.
Then again, perhaps Krugman and Summers are trapped in academic wonderland or some alternate universe.
Those in the real world may wish to consider the distinct possibility debt is the problem, not the solution.
Mike “Mish” Shedlock