[pydry]

Private debt is deflationary as people prioritize paying it off, reducing the velocity of money that would otherwise be spent.

The causality is reversed for public debt though - governments react to deflationary environments by increasing public spending to compensate for the private sector's propensity to save - as a "spender of last resort" as it were.

That's how Japan ended up the way it did.

Arguably it should have spent even more to offset deflation in the 90s.

[throwaway20875]

>The causality is reversed for public debt though - governments react to deflationary environments by increasing public spending to compensate for the private sector's propensity to save - as a "spender of last resort" as it were.

Again, we're at levels record levels of global public debt. There is no free lunch. Debt financed spending is only possible through financial repression (real default through inflation in this case and in the 1940's following WWII, the last time US debt reached 130% of GDP) which ultimately drives speculation as capital searches for yield. Rinse repeat deflationary shock as a result.

[pydry]

All this speculation and capital going a little crazy searching for yield are side effects of an overabundance of capital.

We are seeing this now thanks to wealth inequality brought on by capital being given preferential tax status to labor for decades and stagnant wage growth again for decades.

This wasnt a problem following WW2 - wage growth was high and given vastly preferential tax treatment to labor.

[throwaway20875]

>All this speculation and capital going a little crazy searching for yield are side effects of an overabundance of capital.

The stock market is where savers have been forced to. Pensions included. ZIRP/negative real rates have consequences. There "isn't too much capital". It's being misallocated due to misguided policy. It will get worse.

You need to start thinking in second and third order effects.

[Pokepokalypse]

The data and financial instruments available to investors is a completely different universe than what they had in the 1940's. It's very unlikely that history will repeat itself.