3. Positive economic growth
Economy without growth is bad economy at least that is what majority of economists are claiming. Efforts for eternal and as big as possible economic growth are a motto of all states and economical blocks. So how does the economic growth influence the debt growth and how it can be financed?
It is obvious that growth in GDP is significantly slowing the growth of debt. Also with the purely theoretical full debt financing of transfers the final result after 40years is strikingly different, that is 255% compared with 480% without growth.
With combined methods of financing of transfers at rate 50% and 50% use of monetary policy the result is even more obvious:
If all companies were to reach on average 50% of their planned profits and to compete against each other at GDP growth at the rate of 3%, the state would have to incur annual debt of 1,7% HDP and use monetary policy at the size of 1,7%.
It is interesting to notice that size of annual deficit and monetary policy needed is indifferent of GDP growth. But the result would be much lower debt as without GDP growth:
After 40yeras of growth of 3% would debt to GDP constitute only 67% compared to 126% without growth.
With extra aggressive growth of 8% would debt reach only 31%!!!
GDP growth is extraordinarily important factor in lowering the pace of debt growth, but will not stop its growth by itself.
Without regard of GDP growth, with 50% transfers and 50% financing through monetary policy the state would have to incur annual debt of 1,7% HDP and use monetary policy at the size of 1,7% GDP.