I have previously written about how to evaluate and think about public debt in stable, developed countries. There, the overall message was that the dangers of debt were often (but not always) overhyped and cynically used by certain politicians. In a throwaway remark, I suggested the case was rather different for developing countries. This post unpacks that remark. It looks at why things go so poorly when developing countries take on debt and lays out a set of policies that I think could help developing countries that have high debt loads.
The very first difference in debt between developed and developing countries lies in the available terms of credit; developing countries get much worse terms. This makes sense, as they’re often much more likely to default on their debt. Interest scales with risk and it just is riskier to lend money to Zimbabwe than to Canada.
But interest payments...
Friends, lend me your ears.
I write today about a speech that was once considered the greatest political speech in American history. Even today, after Reagan, Obama, Eisenhower, and King, it is counted among the very best. And yet this speech has passed from the history we have learned. Its speaker failed in his ambitions and the cause he championed is so archaic that most people wouldn’t even understand it.
I speak of Congressman Will J Bryan’s “Cross of Gold” speech.
William Jennings Bryan was a congressman from Nebraska, a lawyer, a three-time Democratic candidate for president (1896, 1900, 1908), the 41st Secretary of State, and oddly enough, the lawyer for the prosecution at the Scopes Monkey Trial. He was also a “silver Democrat”, one of the insurgents who rose to challenge Democratic President Grover Cleveland and the Democratic party establishment over their support for gold over a bimetallic (gold...
I watch a lot of political debates with my friends. A couple of them have turned to me after watching heated arguments about public debt and (because I have a well-known habit of reading monetary policy blogs) asked me who is right. I hear questions like:
Is it true that public debt represents an unfair burden on our hypothetical grandchildren? Is all this talk about fiscal discipline and balanced budgets pointless? Is it really bad when public debt gets over 100% of a country’s GDP? How can the threat of defaulting on loans lead to inflation and ruin?
And what does all this mean for Ontario? Is Doug Ford right about the deficit?
This is my attempt to sort this all out in a public and durable form. Now when I’ve taken a political debate drinking game too far, I’ll still be able to point people towards the answers to...