A lot of people believe or rather assume that debt does not matter as governments around the world owe money to the public, and not the aliens.
However, it matters for two main reasons. Firstly, if the debt grows at a faster rate than the economic output, it implies higher interference of the government in the price mechanism/free market economy. This results in higher taxes being levied (strict fiscal policy) to finance the deficits and we all know that taxes are bad in the current scenario as they discourage spending.
Secondly, the issues faced by current and succeeding governments. No sane government would like to lay an impression on the public that the debt per citizen is on an increasing trend. This comes with political repercussions.
This is indeed a vicious cycle and I am still figuring out the start and end points of the cycle. Kindly, assist!
However, it matters for two main reasons. Firstly, if the debt grows at a faster rate than the economic output, it implies higher interference of the government in the price mechanism/free market economy. This results in higher taxes being levied (strict fiscal policy) to finance the deficits and we all know that taxes are bad in the current scenario as they discourage spending.
Secondly, the issues faced by current and succeeding governments. No sane government would like to lay an impression on the public that the debt per citizen is on an increasing trend. This comes with political repercussions.
This is indeed a vicious cycle and I am still figuring out the start and end points of the cycle. Kindly, assist!
