FT: How to walk the fiscal tightrope that lies before us

The Wolf argues that the only way to prevent growing fiscal deficits would have been not to let credit booms and asset bubbles happen. The worst deficits are in countries that had the biggest bubbles. Once those bubbles burst everything else followed - the private sector had to deleverage (save more). And the mirror image of private saving is government fiscal deficits. (The domestic private sector cannot increase savings unless the country starts running a current account surplus (unlikely) or government spends more than its tax revenue.) MW says that balancing budgets now would lead to depression and that the benefits of higher output today (resulting from govt spending) exceed the costs of debt service tomorrow, but says there are long-term problems caused mainly by ageing.