Government and Debt, Essay Example

The economy of the country over the past four years faced a great recession that was felt by many countries across the globe. This was so evident in a research done to determine the relationship between the state and the money. In its efforts to trim the deficits, the government ha resorted to creation of more debts as a way of handling the economic crisis problem in this recession period.

Even though many people might against the idea of creating more debts, the government has tried to justify why such an approach is important. It argues that there should be concern for dismal prospect of a burdened economy in the future if more debts are not created. Even though more debt is said to weigh heavily on the country’s GDP, the government maintains that creation of more debts ensures the availability of the finances that are required to get out of the current to make sure that there will be enough money in future to pay these debts. In addition to this, it is argued that most of the debts are domestic and even if payment is made, the money will still remain within the economy. There is also a justification that more than 90% of the debt created by the government will assist in the development of the GDP.

There is also an argument that this is not new but with the experience the country has on the previous inflations, like the one that took place immediately after WW II, the government created debt in order to get out of that particular recession. The economic growth of the country was flagged past 6%, the government debt to GDP ratio exceeded 90%; the country was able to work down the ratio after the recession. In the same way, the government is confident that whatever debt created during this time will be flagged down in a few years to follow. In these points, the government has managed to justify why it is safe to create more debts in this recession period.

Reference

Beuzon, C. R., and D. W. Holden. 2001. Use of mixed types of debts to offset the economic crisis. The Economic Journal31345-1352.