financing and refinancing of public debt?

Question

Explain how the financing and refinancing of public debt might affect real interest rates, private investment, the stock of capital and economic growth. What circumstances might mitigate some of these effects?

Answer 1

There is no major obstacles, or even negative effects, if instead of paying the national debt, we roll it over by selling new bonds. This is all predicated on an economy that continues to grow, with some short recessions sprinkled in.

As long as the National Debt doesn't rise much above the 60 -65% of GDP, we can continue deficit spending and rolling over debt.

There's a great blogger that discusses this quite actively, called the Skeptical Optimist. I suggest you read his blog for economic views you just won't get anywhere else.