In the current Forbes, Nouriel Roubini writes in The Spend-And-Borrow Economy that:
The fiscal implications of the current policy package are particularly serious. For the time being, fiscal policy has been put at the service of survival, but the current price of survival is that net public debt is going to double as a share of GDP between 2008 and 2014. Even using the very optimistic forecasts of the Congressional Budget Office, which anticipate growth of around 4% over the next few years, the net debt burden will rise from 40% of GDP to 80%--that's an increase in the debt stock of about $9 trillion. The interest charge alone on that increased debt will be in the region of $300 billion to $400 billion a year, which in turn may mean more borrowing to pay the interest if primary deficits are not reduced. When governments reach the point where they are borrowing to pay the interest on their borrowing they are coming dangerously close to running a sovereign Ponzi scheme.
This is from the same piece, referring to the recent crisis actions:
This massive escalation of central government spending and borrowing was necessary.
This is a lengthy article. It ends with an extended back-and-forth about inflationary and deflationary risks and perceptions thereof. He brings back the caution about the 1937 economic downturn in arguing for "growth" and tilting toward inflationary risks. People of Dr. Roubini's big-government persuasion are forever bringing up that downturn, without mentioning that we have suffered no Great Depression and that by the time 1937 rolled around, there was not just the fear but the fact of rising inflation and a Dow Jones Industrial Average that was at its all-time high except for about a 1-year period in 1929-30. So the Fed and the Feds took away the punchbowl. Absent the Great Crash, no one would remember that downturn, just as no one talks about the 1921 Depression that was treated conservatively and from which strong growth occurred without government intervention.
The other best thing besides its thoughtfulness and completeness about this Roubini article is that it avoids predicting the path of the stock averages or interest rates.
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