Part two: For most of the period covered by Blanchard’s research (1950-now in the United States), g>r, i.e., the GDP growth rate has exceeded the interest rate (same with the U.K., the euro area and Japan). One reason the extent of public debt matters is because it tends to lead to less private capital — machines, structures — than would otherwise accumulate. In some of Blanchard’s analysis, that comparison shows the return rate to be a bit higher than the growth rate. In this analysis, all public debt is created equal. Sounds simple, but replacing bad, ill-founded ideas with good, analytically sounds ones is way harder than it should be, and it’s not getting any easier.

Source: Washington Post January 10, 2019 11:03 UTC