07 February 2010

Implications Of Borrowing From Our Children

Not only does the post below make a good point, but click through to the articles listed, they are worth reading.

Volokh Conspiracy: Borrowing from Our Children? And Hegemony

[W]hat does it mean to “borrow from our children”? The children who mostly don’t yet exist, and in any case don’t have any money from which to borrow.

As soon as it’s put that way, it is obvious that what we actually mean is, we will borrow today from people who do have money — and who are willing to forego consumption today, presumably in China and the rest of Asia — and our children will repay the principal and interest.

It might be more accurate to say that we have exercised an option with regards to the future — we are the holders and they the involuntary writers of an option. But the fundamental public policy point is that in order to engage in this borrowing exercise today, even if we are going to “put” the repayment to our children, someone today has to be willing to give up consumption now and lend us those resources today.

To that end, David Sanger has a nice piece in the New York Times Week in Review, “The Debtor the World Still Bets On.”

While we’re at it, Irwin Steltzer’s Weekly Standard essay, “Government Intervention Will Leave a Nasty Hangover.”

And finally Joshua Kurlantzick, in the Boston Globe, “Dazzled by Asia,” arguing that if you’re assuming an emerging Chinese hegemony, you might be disappointed.

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