Guets post by Azizonomics.
There has been an awful lot of discussion in recent months about whether government debt is a burden for future generations. The discussion has gone something like this: those who believe government debt is a burden claim that it is a burden because future generations have to repay taxes for present spending, those who believe that it is not claim that every debt is also credit, and so because the next generation will inherit not only the debt but also the credit, that government debt is not in itself a burden to future generations, unless it is largely owed to foreign creditors.
It is relatively easy to calculate what the monetary burden of government debt is. Credit inheritance and debt inheritance are not distributed uniformly. The credit inheritance is assumed strictly by bondholders, and the debt inheritance is assumed strictly by taxpayers. Each individual has a different burden, equalling their tax outlays, minus their income from government spending (the net tax position).
A few points worth reading when it comes to China and its currency. Via Voxeu.
As China becomes ever more important in the global economy, will its currency take on an international role? This column argues that in some sense, this is already happening – an increasing number of emerging-market currencies seem to track (co-move with) the renminbi – and the trend is set to continue.
The staggering economic rise of China in the last three decades leads to the question of the potential internationalisation of its currency, the renminbi (RMB). Internationalisation has different dimensions. An international currency is widely used in financial and trade transactions, and crucially it is used as a store of value. Some, like Eichengreen (2011) and Frankel (2011) see a potential global role for the RMB, provided important ancillary reforms to the domestic financial system and to the financial account first take place. In Eclipse, one of us projected that such a shift might happen in less than two decades (Subramanian 2011).