SCHQ - With Low Interest Rates Should We Really Ignore Budget Deficits?
A dangerous idea seems to have gained wide currency in both academic and economic policymaking circles. It is the notion that in a world of low interest rates, governments should not feel themselves constrained in their public spending decisions by budget deficit considerations. This idea risks taking many countries further down the path toward unsustainable public finances that, in the end, could lead to economically disruptive government debt crises.
Here is the basic argument of those who suggest that low interest rates should give governments license to increase public spending at will: In a world