{"id":58179,"date":"2021-06-08T06:22:01","date_gmt":"2021-06-08T11:22:01","guid":{"rendered":"https:\/\/olduvai.ca\/?p=58179"},"modified":"2021-06-08T06:22:01","modified_gmt":"2021-06-08T11:22:01","slug":"the-abuse-of-public-debt-and-how-it-sets-the-stage-for-economic-disaster","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=58179","title":{"rendered":"The Abuse of Public Debt&#8211;And How It Sets the Stage For Economic Disaster"},"content":{"rendered":"<header class=\"wrapper entry-header page-header\">\n<div class=\"title-with-sep single-title\">\n<h3 class=\"entry-title\"><a href=\"http:\/\/www.cobdencentre.org\/2021\/06\/the-abuse-of-public-debt-and-how-it-sets-the-stage-for-economic-disaster\/\">THE ABUSE OF PUBLIC DEBT\u2014AND HOW IT SETS THE STAGE FOR ECONOMIC DISASTER<\/a><\/h3>\n<\/div>\n<\/header>\n<div class=\"entry-media\">The 2020\u201321 recession has been devastating for the global economy. It has been ninety years since the global economy last suffered through a recession of this magnitude (in the Great Depression). Nonetheless, it seems that the social effects of the current recession have not yet come about. The reason for this disparity between cold macroeconomic data and popular sentiment can be found in the enormous public spending by practically all of the countries in the world.<a href=\"https:\/\/mises.org\/wire\/abuse-public-debt-and-how-it-sets-stage-economic-disaster#footnote1_uw1km4k\">1<\/a><\/div>\n<div class=\"wrapper\">\n<div class=\"grids\">\n<div class=\"grid-8 column-1\">\n<div class=\"single-box clearfix entry-content\">\n<ul>\n<li><a href=\"https:\/\/trends.ufm.edu\/en\/article\/recession-2007-great-lockdown-2020\/\" target=\"_blank\" rel=\"noreferrer noopener\"><em>In a previous article, we explored the enormous expansion of public debt in the world that resulted from the Great Lockdown of\u00a02020<\/em><\/a><\/li>\n<\/ul>\n<p>This article argues that exorbitant increases in public debt, such as those seen in\u00a02020, are not free. It examines the potential economic effects of accumulating vast quantities of public debt.<\/p>\n<h4>The First Problem: Less Economic Growth<\/h4>\n<p>The countries with the greatest amount of public debt saw per capita income grow the least, as seen in chart\u00a01.<\/p>\n<p><strong>Chart 1: GDP Growth per Capita<\/strong><\/p>\n<figure class=\"wp-block-image\"><a href=\"https:\/\/cdn.mises.org\/df1.jpg\" target=\"_blank\" rel=\"noreferrer noopener\"><img decoding=\"async\" title=\"\" src=\"http:\/\/www.cobdencentre.org\/wp-content\/uploads\/2021\/06\/df1-1.jpg\" alt=\"df\" \/><\/a><\/figure>\n<h6>Source: Kumar and Woo. Created with\u00a0<a href=\"https:\/\/www.datawrapper.de\/_\/Up4et\" target=\"_blank\" rel=\"noreferrer noopener\">Datawrapper<\/a><\/h6>\n<p>The economic mechanism that explains this statistical relationship is relatively simple. An excessive public debt causes the so-called expulsion effect, in which credit is redirected from the private sector to the public sector. The growth of public debt deprives the private sector of loanable funds, reducing the generation of wealth. (It is the private sector that generates economic activity. The most the public sector can aspire to do is to establish a framework that favors private endeavors.)<\/p>\n<h4>The Second Problem: Disincentivizing Investment and Reducing Productivity<\/h4>\n<p>This second problem is an extension of the first. One of the best indicators of an economy\u2019s future growth is its investment rate. When investment increases, so too does productivity, which is accompanied by economic growth.<\/p>\n<p>\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>THE ABUSE OF PUBLIC DEBT\u2014AND HOW IT SETS THE STAGE FOR ECONOMIC DISASTER The 2020\u201321 recession has been devastating for the global economy. It has been ninety years since the global economy last suffered through a recession of this magnitude (in the Great Depression). Nonetheless, it seems that the social effects of the current recession [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[7380,31306,195,391,3053],"class_list":["post-58179","post","type-post","status-publish","format-standard","hentry","category-economics","tag-cobden-centre","tag-daniel-fernandez-mendez","tag-debt","tag-growth","tag-public-debt"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/58179","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=58179"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/58179\/revisions"}],"predecessor-version":[{"id":58180,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/58179\/revisions\/58180"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=58179"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=58179"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=58179"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}