Article;
http://economictimes.indiatimes.com/opinion/columnists/jaideep-mishra/go-slow-on-debt-office-plan/articleshow/8524089.cms
Comment;
An independent debt office for handling government debt will be a big mistake since the chances are that it will be influenced be political ambitions. Central banks have their own functions and the most important among them is to choose between inflation and employment. And, as far as debt is concerned it has a direct bearing on the level of inflation and employment since the funds are spent on developments projects which affect the level of demand in an economy which determines level of employment and prices/inflation. Employment and prices also affect the distribution of income, and, therefore also affect the level of inequality within an economy. Any government that comes to power comes on some promises or on prior performance and tries to maximize the chances of being elected next time. Central banks purpose is to address inequality by managing money supply and economics cycles that consumption and investment produces. The rate of increase in debt and money supply should not be more than 5% of GDP which should equal the natural rate of inflation and unemployment, i.e. 5%. Anyways, inflation/price-rise is nothing but rate of increase in money-supply. In his paper "The Stagnation Regime of the New Keynesian Model and Current US Policy'' George W Evans has talked of Rainy-Day-Funds (RDF) to be used during recession which he feared that politicians would spend the fund before appropriate time.
http://economictimes.indiatimes.com/opinion/columnists/jaideep-mishra/go-slow-on-debt-office-plan/articleshow/8524089.cms
Comment;
An independent debt office for handling government debt will be a big mistake since the chances are that it will be influenced be political ambitions. Central banks have their own functions and the most important among them is to choose between inflation and employment. And, as far as debt is concerned it has a direct bearing on the level of inflation and employment since the funds are spent on developments projects which affect the level of demand in an economy which determines level of employment and prices/inflation. Employment and prices also affect the distribution of income, and, therefore also affect the level of inequality within an economy. Any government that comes to power comes on some promises or on prior performance and tries to maximize the chances of being elected next time. Central banks purpose is to address inequality by managing money supply and economics cycles that consumption and investment produces. The rate of increase in debt and money supply should not be more than 5% of GDP which should equal the natural rate of inflation and unemployment, i.e. 5%. Anyways, inflation/price-rise is nothing but rate of increase in money-supply. In his paper "The Stagnation Regime of the New Keynesian Model and Current US Policy'' George W Evans has talked of Rainy-Day-Funds (RDF) to be used during recession which he feared that politicians would spend the fund before appropriate time.
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