Large debts shrink in real terms when growth outpaces the debt

Evidence

Other commentators, such as Paul Krugman, take a more relaxed view, arguing that large debts can be accommodated quite cheaply by running a balanced budget in a positive growth environment, so that real GDP grows faster than the debt, which shrinks the debt stock in real terms over time. — Mark Blyth, Austerity, 52

Categorization

• XREF: Krugman’s growth-absorption position contrasts with the austerity consensus; connects to Mattei’s mapping of whose ideas shaped austerity policy. — connects to: Financial repression shrinks debt through negative real interest rates on captive bondholders — Mark Blyth, Austerity: The History of a Dangerous…, 651; Linear debt projections assume a future that other trends will upend — Mark Blyth, Austerity: The History of a Dangerous…, 685; Austerity logic ignores that growth, not cuts, may resolve debt — Mark Blyth, Austerity: The History of a Dangerous…, 53 (+3 more)

Broader Connections

• Inflation erodes the real cost of fixed-interest debt #expands (0.78)
• Inflation acts as a class-specific tax benefiting debtors over creditors #expands (0.74) — Mark Blyth, Austerity, 46
• Fighting inflation transfers wealth from debtors to creditors and is not value-free #qualifies (0.72) — Jessica Whyte, The Morals of the Market, 339