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I wanted to ask the following:

What would be the "text-book" result of governement taking on massive debt immediately before a significant recession


Supposing, entirely hypothetically ;), that a major Western government had taken on massive future debts (by spontaneously giving away vast amounts of money) immediately before a significant recession.

What would be the simplistic prediction of the impact on:

  • Interest Rates
  • Inflation

over the following, say, 20 years?


Obviously such situations are incredibly complex and there are numerous ways that the outcomes could be changed. But I want to get a feel for what the "base line" or "default" expectation might be.

I wrote it up and was about to tag it with economics when I saw the notes on that tag. This definitely isn't speculative, since I'm asking about what standard expectations would be, not what will actually happen.

But the tag also asks that questions pertain to personal situations. I am asking in order to apply the answer to my personal situation ... but the question seems decidely not-individual to me.

Am I right in thinking this would be closed as off-topic? And is there an alternative SE? The "Economics" one seems more like an academia space, and I'm not sure that this Q would be welcomed there?

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Yes, your gut is correct, it would be closed as an economics question.

This definitely isn't speculative, since I'm asking about what standard expectations would be, not what will actually happen.

I find this assertion curious.

"'The dismal science' is a derogatory alternative name for economics coined by the Victorian historian Thomas Carlyle in the 19th century." Part of the reason for the adjective is that unlike physical science which builds upon agreed facts, economics offers theories which simply fail from time to time. If there were a 'standard expectation', there would be no jokes about economists needing three hands for a typical conversation. I've seen too many examples of policies that have failed due to differing opinions.

Personally, I'd welcome pushing the boundary a bit, and letting such a question remain, with a careful monitoring of the activity. I think such questions, if kept on track, can be useful. Unfortunately, that would take a bit more effort, as it would require a change to the "on topic" guidance. I offer this last thought as a member, not a mod.

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  • I'm no economist :) I'm aware that it's a ... fuzzy ... science. But I'd assumed that was in the sense that it had consensus models that were sometimes wrong. I think you're saying that there isn't even a consensus? In which case the answer is probably that. i.e. "In answer to your question, "what is the standard answer" ... there is none.". – Brondahl May 20 at 13:21
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    Right. I don't believe there is a single answer. The best you'll find are different groups of economists forming say, 3-4, different scenario predictions, all quite different, and each one having some % subscribing to it. I hope you post this at Economics, I'd follow the answers there as I'm really curious at the response. – JTP - Apologise to Monica May 20 at 13:47
  • Your wish is granted :) economics.stackexchange.com/questions/36772/… – Brondahl May 20 at 14:01

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