Cut now or later?

In A2 economics we´ve started looking at the far reaching influence of bond markets and their effects on the demand and supply of loanable funds and so the rate of interest.

Monetarists argue that by increasing the budget deficit to finance spending, a government “crowds out” private capital investment whereas Keynesianists believe now, when consumption and investment demand are already low, is not the time to cut spending. This is arguably one of the most important economic debates and here is an excellent post from Jason Welker´s blog with video footage of economic historian Niall Ferguson outlining his fears about the US deficit plus a second video taken from Ferguson´s series the Ascent of Money about the history of government bonds.

On the other side of the economic spectrum, here´s a great article from the New York Times explaining the Keynsian view that Now Isn’t the Time to Cut the Deficit.