@GhostOnTheHalfShell @economics-that-works

#Economics #PublicFinances
#US #EU #ConvergenceCriteria

(5/n)

...because you have to pay ever more of your currency to repay the foreign debt. Also, imported goods become more expensive for the same reason (#ImportedInflation.)
In order to support your currency's external value, you need to increase national interest rates.

(And here, the #InternationalFisherEffect comes into play:
"The international Fisher effect...is a...

@loren @GottaLaff

...Otherwise, the dent in the economy is much worse than otherwise, destroying companies and jobs that in other circumstances would be sound.

Unlimited borrowing by a state leads to a fall in the value of its national currency (the exchange rate).

Foreign investors, who finance the #deficit spending will then ask for a higher price (#interest rate) to offset this higher risk that the borrower might default (#InternationalFisherEffect), as the goods and...