Governments that lack credibility and reputation for fiscal responsibility will face much higher inflation and currency instability even at relatively low debt-to-GDP ratios, while credible governments can sustain high debt ratios with low inflation; the fiscal theory predicts this outcome because inflation expectations depend on whether markets believe the government will generate future primary surpluses
causalpending
Speaker
Peter StellaEvidence Quote
“you know I think if you look at the structures of the economies and and in my view again this issue of the development of the domestic debt Market uh has a lot to say but also about the reputation of the fiscal authorities”
Source
Debt Death Spirals, Fed's Losses, & Fiscal Theory Of Price Level | Peter Stella & Joseph Wang— Forward GuidanceCreated: 8/10/2026, 10:58:24 PM
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