Consumption-reducing public debt

The fact that – with high public debt but – relative monetary stability and – correspondingly low inflation expectations, many private households limit their current consumption in favor of saving because they expect a higher tax burden ratio in the near future. It is believed that such a correlation can be statistically proven for the euro area. – However, if households expect prices to rise due to high government debt, the opposite occurs: the saving rate falls and the consumption rate rises. – See Constancy Criterion, Ricardo Effect, Fiscal Drag, Government Debt Reduction, Government Debt-Interest Rate Relationship, Path Inflation.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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