Debt is rising more quickly in the United States than most people would prefer. This is happening in part because the U.S. current account deficit and the country’s high level of income inequality distort the structure and amount of American savings.
Many Americans are worried about the seemingly inexorable rise in U.S. debt, whether government debt, household debt, or business debt. They are right to be concerned. Rapidly rising debt is a problem not just in the United States but in many other countries too, including China, parts of Europe, and most of the developing world. In today’s environment, it seems, reasonable levels of economic growth cannot be achieved unless boosted by even faster growth in debt.
With so much debt in the world, and with debt levels rising so quickly, people tend to think that economists have studied this issue deeply and fully understand it. But there continues to be a great deal of confusion about debt and about whether and why excessive debt levels can harm growth prospects. To try to address these issues, this blog post is divided into two parts. The first part discusses debt and some of the conditions under which it affects the prospects for economic growth.
——
The article quotes Yellen as saying: “People like me grew up with the view: If people send you cheap goods, you should send a thank-you note. That’s what standard economics basically says,” she said. “I would never ever again say, ‘Send a thank-you note.’ ”