Saturday Quiz – October 3, 2009
Welcome to the billy blog Saturday quiz. The quiz tests whether you have been paying attention over the last seven days.
See how you go with the following five questions. Your results are only known to you and no records are retained.
“Mainstream economic theory adopts a government budget constraint framework to analyse the consequences of fiscal policy and predicts that budget deficits now result in higher taxes and interest rates in the future.” It doesn’t matter – except to academic theoreticians – whether these guys are right or wrong. Read my lips: for socio-political reasons, during the lifetime of anyone reading this, there will NEVER be a democratically elected government ANYWHERE that does not use income (taxes and borrowing)and expenditure describing budgets which create a constraint framework that characterizes deficits as a liability and a formally-stated problem which requires an official position that they must be reduced at some future point.
A pessimistic outlook Michael, though understandable.
Don’t forget that for all of human history up until a couple of hundred years ago, slavery was broadly considered to be perfectly natural and hence, inevitable – a world without forced labour and ownership of human beings as no different to any other piece of property would probably have seemed inconcievable to most.
Do we think that way today?
Further, the fallout effects from the GFC may ultimately alter the public perception of budget surpluses if their misguided application causes economies to flounder and entrenches high unemployment. Remembering that this period just gone has been atypical in history, the manic desire to run surpluses may collide head on with a newly returned private sector desire to net save (historically the normal situation) resulting in unpleasant consequences.
For a long time, deficits were not seen as some economy wrecker to be loathed – they were the norm. I see no reason why it is impossible for public attitude to shift back in this direction in our lifetimes.