– Pop in your mints… Cochabamba, Bolivia
We can’t shake the feeling that Armageddon is on the way for Bonds Markets in general and especially for any form of debt owed by a government of any size, no matter how powerful. The Keynesians believe that government debt is simply a myth, just another data point in their mechanical view of the world. Is private debt shrinking? Public debt must expand. In their fantasy world, as private debt is expanding, Public debt shrinks.
We do not know what planet Mr. Keynes lived on, but here on planet earth, government officials make promises to obtain votes. These promises cost money. Usually a lot more money than the government takes in. Remember, the government, by definition, cannot do anything productive, economically speaking. It can provide protection and justice, which has a price, but as for productive efforts, they are almost exclusively inept. Ditto for “government investments.” Investments worth making do not need government assistance.
Back to our point, public debt never shrinks as Keynes thought it would when the government in question runs a surplus. Too many promises to keep, “investments” to make, wars to wage. You see, Empires are built in the 21st century by incurring debt, not by paying it off.