Some of the developing countries, such as China, are generating large financial surpluses. Chinese banks place their large financial surpluses in, among others, US Treasury bonds, thus financing the US budget deficit. In contrast, some developed countries in Europe and the US have high public debts, which strongly increased, among others by the global financial crisis of 2008. What will happen if in the development of the current technological revolution, Industry 4.0, is the developing world going to take precedence in technological development? Will it be a sidetrack of the existing highly developed countries of the Western world?
Please, answer, comments.
I invite you to the discussion.
Dear Friends and Colleagues of RG,
The issues of risk management in the context of determinants of the global financial crisis, globalization processes, technological progress and other factors I described in the publications:
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Article ACTIVATING INTERVENTIONIST MONETARY POLICY OF THE EUROPEAN C...
Article A safe monetary central banking policy as a significant inst...
Article Determinants of credit risk management in the context of the...
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I invite you to discussion and cooperation.
Best wishes
According to Lisa Smith, the following are some actions that could be taken by governments to reduce its public debts
1- Issue of Bonds to get money and to avoid raising taxes and provides money to stimulate the economy through public spending, theoretically generating additional tax income from prosperous businesses and taxpayers.
2- Interest Rate Manipulation. Maintaining low-interest rates is another way governments seek to stimulate the economy, generate tax revenue and, ultimately, reduce the national debt. Low-interest rates make it easy for individuals and businesses to borrow money. In turn, the borrowers spend that money on goods and services, which creates jobs and tax revenues.
3- Spending Cuts.
4- Raise Taxes. Tax increases are a common tactic. Despite the frequency of the practice, most nations face large and growing debts. It is likely that this is largely due to the failure to cut spending. When cash flows increase, and spending continues to rise, the increased revenues make little difference to the overall debt level.
5- Cut Spending and Raise Taxes
6- Pro Business/Pro Trade. A pro-business, pro-trade approach is another way a nation can reduce their debt burdens.
Debt reduction and government policy are incredibly polarizing political topics. Critics of every position take issues with nearly all budget and debt reduction claims, arguing about flawed data, improper methodologies, smoke and mirrors accounting and countless other issues.
While there are a variety of methods countries have employed at various times and with various degrees of success, there is no magic formula that works equally well for every nation in every instance.
Some comments on the answer of Jorge Morales Pedraza.
1. Issuing bonds to collect more finance from the international market further increases the public debt. Higher indebtedness leads to ever higher costs of servicing the debt and borrowing extra money.
2. Interest rate manipulation basically banned by the IMF. Achieving lower interest rate levels provides solid and stable fundamentals of the economy in the long run. F.ex. a low base inflation rate is necessary for building trust in the economy. Low inflation and low interest rates go hand in hand!
3. Spending cuts. Fine, but selectively! Highly promising and profitable productional investments should be enhanced with the public spending.
4. Lower corporate taxes make an incentive to foreign companies and other investors to invest in the country, which gradually increases government tax revenues - not higher taxes!
5. Cut spending and raise taxes is a very short-term and short-sighted solution. High taxes lead to outflow of capital and ultimately taxpayers from the country.
Generally speaking, in the global freely competitive market the surpluses of all countries together equal the deficits of all countries together. Producer and consumer prices would equalize in the long run, if there were no barriers to trade. And the same would happen with interest rates and inflation, if there were totally free capital flows in the international financial markets. Maybe this kind of world is the one we are slowly entering in!
Dear Friends and Colleagues of RG
Some of the developing countries, such as China, are generating large financial surpluses. Chinese banks place their large financial surpluses in, among others, US Treasury bonds, thus financing the US budget deficit. In contrast, some developed countries in Europe and the US have high public debts, which strongly increased, among others by the global financial crisis of 2008. What will happen if in the development of the current technological revolution, Industry 4.0, is the developing world going to take precedence in technological development? Will it be a sidetrack of the existing highly developed countries of the Western world?
Do you agree with me on the above matter?
Please reply
I invite you to the discussion
Best wishes
Despite the improvement in economic growth in recent years, there are still high budget deficits and a high level of public debt in some countries. In order to reduce the high public sector debt ratios that are unfavorable for the economy, high economic growth in the following years is necessary.
Best wishes
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