1) Japan's public sector debt has risen over time, but is not unusually high by global standards. Mainstream macro suggested that Japan would struggle to stimulate further growth once its interest rates hit zero (structural reasons why Japan's economy slowed down is a book length topic) which is of course what happened to Japan before the rest of the world. QE was a slightly unconventional way of achieving the textbook macroeconomic goal of injecting more money into the economy when it slows down.
2) The European Central Bank announced emergency measures to ensure all governments affected by COVID have access to reserves of Euros. In 2011-2012 it didn't, taking the view that countries with massive deficits should resolve their problems by cutting spending. Bond buyers didn't trust that they would, which made national debt servicing even more expensive, though these countries would have had problems even without that.
3) I'm not aware of any country repaying all its public debts or any textbook macro suggestion that this would be a remotely sensible goal for them to aim for. Textbooks would imply that continuing to aim for the necessary fiscal surpluses during an economic slowdown would result in massive recessions long before the debt got near zero.
4) Monetary policy produces inflation from credit becoming cheaper resulting in more money being available to spend on goods and services (and less reluctance to lend or spend based on concerns about the cost of debt service). The responsiveness to monetary policy is reduced when people still don't want to borrow more and central banks can't make it any cheaper to borrow money than it already is. More unconventional interventions like buying stocks obviously directly and immediately increase stock prices, but the average stock holder is less likely to go out and buy more goods, services or staff with their returns than the average borrower, so doesn't necessarily boost the economy/inflation as much as injecting money to reduce interest rates.
5) Cowen's phrasing is, admittedly, vague and crap here. Much of the velocity of money decrease has already happened because people are not spending or investing or borrowing as much in the middle of an economic crisis. On top of that, you've got much of the additional spending being ring fenced or restricted to those not spending.
That's a long and good answer. Thanks for taking the time.
This is an interesting discussion but I don't want to extend it ad infinitum. A parting thought:
Your answer about ECB tell me that you agree that central banks can control bond yields. So, I have to ask myself who is the "mainstream economics" that we are discusing about. Maybe we are thinking of different people.
Was not Martin Feldstein? (1) is not Paul Krugman? (2)
Feldman quite clearly states that Japan moving from deflation to inflation would be the trigger that caused a central bank to increase interest rates (orthodox policy response to inflation) which would increase public debt service costs. So there's no contradiction between central banks affecting bond yields and the effect of the central bank increasing the cost of borrowing being bad for the budget of the Japanese government issuing those bonds.
You'll forgive me for not bothering to defend the half dozen articles Mitchell takes exception to in the second post (though I will say Krugman is given to glib generalisation when writing for mainstream audiences. A quality shared with pretty much every MMT blog going...)
1) Japan's public sector debt has risen over time, but is not unusually high by global standards. Mainstream macro suggested that Japan would struggle to stimulate further growth once its interest rates hit zero (structural reasons why Japan's economy slowed down is a book length topic) which is of course what happened to Japan before the rest of the world. QE was a slightly unconventional way of achieving the textbook macroeconomic goal of injecting more money into the economy when it slows down.
2) The European Central Bank announced emergency measures to ensure all governments affected by COVID have access to reserves of Euros. In 2011-2012 it didn't, taking the view that countries with massive deficits should resolve their problems by cutting spending. Bond buyers didn't trust that they would, which made national debt servicing even more expensive, though these countries would have had problems even without that.
3) I'm not aware of any country repaying all its public debts or any textbook macro suggestion that this would be a remotely sensible goal for them to aim for. Textbooks would imply that continuing to aim for the necessary fiscal surpluses during an economic slowdown would result in massive recessions long before the debt got near zero.
4) Monetary policy produces inflation from credit becoming cheaper resulting in more money being available to spend on goods and services (and less reluctance to lend or spend based on concerns about the cost of debt service). The responsiveness to monetary policy is reduced when people still don't want to borrow more and central banks can't make it any cheaper to borrow money than it already is. More unconventional interventions like buying stocks obviously directly and immediately increase stock prices, but the average stock holder is less likely to go out and buy more goods, services or staff with their returns than the average borrower, so doesn't necessarily boost the economy/inflation as much as injecting money to reduce interest rates.
5) Cowen's phrasing is, admittedly, vague and crap here. Much of the velocity of money decrease has already happened because people are not spending or investing or borrowing as much in the middle of an economic crisis. On top of that, you've got much of the additional spending being ring fenced or restricted to those not spending.