The Deficit Hysterics Have no Case
In much of the world, including the United States and Europe, a debate is taking place about whether the government's first responsibility should be to reduce unemployment – which is at elevated levels – or to reduce government deficits and debt. Many of the arguments for deficit reduction are simplistic, based on ignorance or derived from ideology.
"Some portray Japan, with nearly a 200% government debt to income ratio, as a poster child for extremely indebted countries with low interest rates. Japan's 'success', of course, has a lot to do with its government's ability to sell debt domestically. How the country will handle its finances as saving by retirees shrinks, and as its labour force rapidly shrinks, remains to be seen."
"Importantly, governments that emphasize long-term fiscal sustainability are likely to have an easier time inducing their central banks to maintain highly supportive monetary conditions."