My comment in Krugman’s blog

This is a slightly edited version of a comment I posted in Paul Krugman’s blog. It’s a propos of David Einhorn’s (see photo above) op-ed in today’s New York Times.

* * *

A propos http://nyti.ms/a6cHkI: “Are you worried that we are passing our debt on to future generations?”

No, I’m not! We are also bequeathing them our wealth! (If we don’t destroy it or let it decay with Hooverian economic policies.)

“The question we need to ask is this: If we don’t change direction, how long can we travel down this path without having a crisis?”

Well, if by “crisis” Mr. Einhorn means (as he probably does) a severe economic contraction, my answer is another question: What does the public (or private) debt have to do with whether the economy functions at its full potential? Public (or private, for that matter) debt has to do with how existing wealth is distributed, i.e. how claims over future flows of goods are alloted. That has nothing to do with our production possibilities.

For more:

https://juliohuato.wordpress.com/2010/05/07/on-public-debt/

https://juliohuato.wordpress.com/2010/05/19/imf-outlook-and-public-debt/

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