Well flight to safety kind of maneuver implies buying US treasuries? .. My thoughts is this will uncover some leverage in the system, and cause deleveraging if anything
no, we are in just until maturity, and then we will roll over again at a higher rate (or lower rate, it doesn't matter, it is all just asset allocation.)
Not enuf debt! They're gonna need a bigger balance sheet! Not to worry, though. The Great and Powerful Fed has their back.
I think Mr Krugman makes a valid argument about govt debt being stimulative, unfortunately, that won't work anymore, or at least not the way he envisions, for a couple of reasons. #1. When this has been done in the past, we weren't already at record levels of debt, (with the exception of just after WWII). I doubt Mr Krugman would call for a WWIII to help the economy. #2. The most likely outcome of expanded debt would be to increase the social safety net. It would not go to infrastructure. Too many beholden interests have their hand in the pie that's there. There not going to make another pie for infrastructure.
Make no mistake, debt is a great way to get out of economic doldrums. But you're bang on - eventually, too much debt prevents the stimulus of more debt. What is debt? Simply put, it's just consumption brought forward from the future - at the expense of future economic benefit. Anything borrowed now must be paid later with future income, no matter if it's personal, corporate or sovereign.
it's the efficient market theory at work.. More capital leads to a lower return on capital.. same thing with economic stimulus.. more stimulus means less effect..