<html><body><div style="color:#000; background-color:#fff; font-family:times new roman, new york, times, serif;font-size:12pt"><div><span></span></div><div><br></div> <div style="font-size: 12pt; font-family: 'times new roman', 'new york', times, serif; "> <div style="font-size: 12pt; font-family: 'times new roman', 'new york', times, serif; "> <div dir="ltr"> <font size="2" face="Arial"> ----- Forwarded Message -----<br> <b><span style="font-weight:bold;">From:</span></b> D.J.Bezemer <d.j.bezemer@rug.nl><br> <b><span style="font-weight: bold;">To:</span></b> Stephanie Kelton <stephanie.kelton@me.com> <br><b><span style="font-weight: bold;">Cc:</span></b> "gang8@yahoogroups.com" <gang8@yahoogroups.com>; Steve Keen <S.Keen@uws.edu.au>; randall wray <wrayr@umkc.edu> <br> <b><span style="font-weight: bold;">Sent:</span></b> Friday, 29 June 2012, 10:37<br> <b><span style="font-weight: bold;">Subject:</span></b> [gang8] Re:
debt forgiveness or 20 years of surplus<br> </font> </div> <br><div id="yiv973630712">
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<div></div><div>Of course I agree with Stephanie that growth in GDP would be the best solution to derease debt/GDP. </div><div> </div><div>I am writing from a European perspective where growth is strangled by austerity and countries cannot create money in their own currency - i.e. they are in an 'original sin' currency mismatch situation. They've borrewed in a currency they do not control. The ECB behaves like a foreign creditor to its own memebr countries, extracting the surplus in debt servicing.</div><div> </div><div>I don't believe for a moment that 20 yrs of surplus would solve anything - that would be 20 years of recession, so rising debt/GDP ratios. But it illustrates the scope of the problem. What other solution than debt write offs (or change the rules of the game)? </div><div> </div><div>Dirk </div><div> </div><span>On 28-06-12, <b class="yiv973630712name">Stephanie Kelton
</b><stephanie.kelton@me.com> wrote:</span>
<blockquote style="BORDER-LEFT:#00f 1px solid;" class="yiv973630712iwcQuote" type="cite">
<div class="yiv973630712mimepart yiv973630712text yiv973630712plain">I don't follow. US Debt/GDP was near 125 percent after WWII. Around 40 percent by early 2000s. Don't need decades of surpluses to "pay off" numerator, just decent growth in denominator. <br><br>Sent from my iPad<br><br>On Jun 28, 2012, at 8:06 AM, Dirk Bezemer <d.j.bezemer@rug.nl> wrote:<br><br>> Here is a VERY good argument for debt forgiveness NOW:<br>> <br>> "Indeed, the study says the budgets of most advanced economies, excluding interest payments, ³would need 20 consecutive years of surpluses exceeding 2 per cent of gross domestic product starting now just to bring the debt-to-GDP ratio back to its pre-crisis level².<br>> <br>> (with thanks to Michael for the link)<br>> <br>> Remember, the only time the US ran a surplus for consecutive years was in recession years 1999-2000 following the Clinton public debt reduction (and by implication,
private debt buildup) - and also in 1947-48, to be complete.<br>> <br>> Dirk<br>> <br>> <br>> ===============<br>> <br>> <br>> <br>> Norma Cohen, ³Global economy is stuck in a vicious cycle, warns BIS,²<br>> Financial Times, June 25, 2012.<br>> The global economy is experiencing a ³vicious cycle² in which the efforts<br>> of governments, households, businesses and the financial sector to reduce<br>> their debts are worsening each others¹ prospects, the Bank for International<br>> Settlements has warned.<br>> Stephen Cecchetti, chief economist of the BIS often referred to as the<br>> bank for central banks said five years after the financial crisis engulfed<br>> the global economy, the world appears no closer to finding a sustainable<br>> economic model. Not until regulators get to grips with the banking system¹s<br>> woes by forcing banks to recognise losses, take write-offs and
raise capital<br>> can the path to sustainable growth begin, he said. ³The revitalisation of<br>> the banks and the moderation of the financial industry will end this<br>> destructive interaction with the other sectors and clear the way for the<br>> next steps fiscal consolidation and the deleveraging of the private,<br>> non-financial sector,² Mr Cecchetti said, unveiling the bank¹s 2012 annual<br>> report. ³Only then can we return to a balanced growth path.²<br>> The report underscores the challenges facing governments, particularly in<br>> advanced economies, as they struggle to contain spending and recoup revenue<br>> lost as output collapses. Indeed, the study says the budgets of most<br>> advanced economies, excluding interest payments, ³would need 20 consecutive<br>> years of surpluses exceeding 2 per cent of gross domestic product starting<br>> now just to bring the debt-to-GDP ratio
back to its pre-crisis level².<br>> Moreover, monetary policy has been bearing the brunt of efforts to<br>> adjust. These cannot go on forever and carry their own risks as economies<br>> become dependent on ultra-low interest rates, the BIS says. ³There are very<br>> clear limits to what central banks can do,² Mr Cecchetti said, summing up<br>> the annual report. ³They cannot repair balance sheets. They cannot increase<br>> productivity. And they cannot put policy on a sustainable path.²<br>> Every additional year that policy makers fail to get to grips with<br>> long-term fiscal consolidation makes the recovery period even longer, he<br>> warned.<br>> While the risks are greatest for developed economies especially Europe<br>> the BIS notes that risks are rising for emerging economies, particularly<br>> those that have experienced rapid growth through exports to more<br>>
industrialised neighbours. These include Russia, India and Thailand.<br>> <br>> -- <br>> Dirk J Bezemer<br>> <br>> Associate Professor,<br>> Faculty of Economics& Business<br>> University of Groningen<br>> www.rug.nl/staff/d.j.bezemer<br>> <br>> documentary (8 min): youtube.com/watch?v=9JD6uuiiZPY&feature=relmfu<br>> interview (10 min) : ineteconomics.org/video/interviews?page=3<br>> presentation (26 min): youtube.com/watch?v=qvBuK8yQxbY<br>> <br>> <br>> <br>> <br></div></blockquote>
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