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The Macroeconomic Implications of the CARES Act (Ed Dolan’s Econ Blog, 7 min read) US debt to GDP ratio could accelerate to 170% in the coming years. However, as the interest rate on the national debt remains lower than the growth rate of GDP, the ratio of debt to GDP will have a finite ceiling (default or hyperinflation scenario is avoided as debt wouldn’t explode). Provisions like loans to small businesses will mitigate supply-side constraints.
“Whatever it takes.” Getting into the specifics of fiscal policy to fight COVID-19 (Peterson Institute for International Economics, 7 min read) Olivier Blanchard argues that roles for fiscal policy in the COVID-19 crisis are crucial for; fighting infection disaster relief and supporting aggregate demand. He believes even if the fiscal deficit for advanced economies rises by 30% – the low-interest rate would make welfare cost for future generations small. However, the Emerging market wouldn’t have this fiscal liberty and would require grants.
The Saving Glut Of The Rich And The Rise In Household Debt (NBER, 47-page read) The study finds saving glut of the rich has been linked to a large accumulation of debt by the non-rich (household debt). Since the Great Recession, the saving glut of the rich has also been significant in financing government deficits.