AEIdeas

The public policy blog of the American Enterprise Institute

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Discussion: (1 comment)

  1. John Barton

    I wish I could fully agree that it’s clear that growth holds the answer. It normally would, and economies should be managed so that it does.

    But Europe may have crossed the line beyond which the higher rates that would follow growth are instead a catalyst for collapse. I believe that Japan certainly has crossed this line. In that clearer case, even marginally higher rates would bring about the long anticipated Japan collapse. The debt they have accumulated during decades of ever declining interest rates cannot be refinanced should money demand from growth reverse the trend.

    Is Europe there? It’s not clear. But they’re heading that way. So too are we for that matter.

    I don’t think this is debatable in the case of Japan. I recognize that it is in the case of Europe or the US. But, in the meantime, I think the idea that that the “growth solution”, always true in the past, may fail after you reach a certain debt load is an under recognized truth.

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