US debt and growth: Keynesian illusions

Do we want to examine in this paper a simple question: to what extent is the US economy a debt economy?

This seems obvious, the US has seen to increase their total national debt more and more strongly since more than thirty.

The cumulative debt of households, general government, non-financial and financial enterprises has steadily increased, the country is getting indebted to the outside world by accumulating a net debt consolidation (assets held on the foreign by the USA – Assets held on the USA by the foreigner) more and more important (7500 billion of dollars in 2013).

However, this idea that we have often advanced deserves verification. Evidence – especially in statistical economics – is a source of surprises. Crossing data can raise questions. By linking GDP growth and debt (s), we were surprised at what we found. GDP is well driven by debt, but we must specify which, and especially we must ask the relationship of debt and crises, the culmination of which was the crisis of 2008. The US is still not out.

This paper is also part of the continuity of a small series of contributions contesting the Keynesian idea that it would be enough to use a redistributive taxation or to involve the public debt to revive the activity.

We have already expressed doubts about the use of redistributive taxation by raising questions about its implementation.

There is no hidden treasure or capital gains taxation solution to hand over if growth is patrimonialism. It remains to be seen whether it would have been possible – as Krugman and Stiglitz invite us – to emerge from the crisis by making demand play a greater role in stimulating activity. The staggering growth of federal debt makes this option questionable.

But it is the problem of the general indebtedness of the country and the effects of this debt on the growth of wealth that can shed light on this issue. By comparing the level of GDP and the country’s indebtedness, we tried to provide some answers. And to our surprise, the response elements have raised new questions.

We chose this connection because it seems to us the simplest; it also offers the possibility of reasoning in an orderly way by distinguishing the dynamics – real or supposed – of the different types of debt on growth. It is on this path that we encounter crises in a somewhat unexpected way. The fall of this paper suggests that the attempts to resolve the crisis implemented by the FED-Treasury couple are a delusion in the medium term, it may be that they induce a new crisis in the coming years.

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