needs to be reduced because of the, of the strain on your government resources.
Third, from whom can you borrow?
Okay?
So first, why are you borrowing or when are you borrowing?
All right?
Secondly, what does it cost you to borrow?
Thirdly, from whom can you borrow?
We said before that if you can borrow in your own currency, it's much better.
Than if you have to borrow from foreign institutions in a foreign currency.
Okay?
So, obviously any kind of public debt in your own currency is less onerous.
Less of a burden for you than borrowing a foreign currency.
Then we also want to ask ourselves how much debt do we have already?
Okay.
Think about the business cycle.
If things went in this ideal world where we
had deficits only when we were in recessionary gaps.
And then they turned into surpluses when we had inflationary gaps, then
when I'm in the recessionary gap, I have deficit my debt goes up.
But when I move into that inflationary gap, I have a surplus.
All right?
I take that extra money, I repay the debt that I
acquired during the recessionary gap and I don't have an additional burden.
We saw the picture of Denmark, a country with a very big
welfare state and we see that it's bringing down its debt over time.
So the debt is not much of a burden on the economy in terms
of what it costs me to pay interest on it and finance it, okay?
So, we want to know how big the country's
debt is already, additional borrowing will bring it up.
Will it bring it to a problematic level or not?
If my debt is already low, probably not.
If my debt is already high so I'm Japan or I'm
Italery, I'm Italy or I'm Greece and we are borrowing more.
We're moving up to higher levels and its going to be quite a burden on the economy.
So these are all things we need to ask ourselves.
When we're wondering whether the deficit we have is
a problem, whether the debt we have is a problem.