Quote:
Originally Posted by afc wimbledon
that might work but it would be essentially a deficit hawk system, the time you need to open the coffers is when GDP drops massively, and the problem for all economists and political systems is what you need to worry about is perception, the moment the US dollar is percieved to be worthless it is worthless, the only thing that actually gives the dollar value is belief, interest rates are the same, if banks and other lenders sense the economy of the US is weak and they may not get their money back they will charge more to lend it, interest rates go up
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Not really because you'd only start deficit-hawking if interest rates climb. A drop in GDP would mean more borrowing at hopefully lower interest rates. You're right that a drop in GDP that coincides with massive increase to interest rates would force cuts during a recession but that hasn't happened in the last few recessions.