Start here.

Expand the deficit and debt even more..

National debts and deficits for dummies.

(relevant only for countries that issue their own currencies).

Start here. Recessions can be dealt with via deficits. But if theres a recession
Querie: but, that means more interest has to be paid, plus.. The debt has to be repaid eventually .

As Keynes and Milton Friedman suggested, have the deficit accumulate as extra monetary base rather than extra debt. Querie: wont extra monetary base be inflationary?

and the deficit and/or debt are already higher than normal, what do you do? There are two alternatives.

Answer: not if real interest rates remain near zero.

Querie: But what if interest rates rise?

Answer: in that case dont borrow!! Print money instead.

Answer: To large extent, national debt just isnt paid back: the historical fact is that national debts have grown constantly in dollar / yen / pound terms over the very long term. And anyway, as long as the real interest on the debt is zero, why pay it back? Even better: make the real interest rate slightly negative. That way the debtor country makes a profit out of its creditors. And the rate can always be reduced simply by borrowing a bit less and printing money instead (if stimulus is called for). And if stimulus is not called for, then government can reduce the above interest rate by raising taxes and borrowing less or paying down the debt.

Answer: no, because the economy is in recession doh! That is, there is spare capacity. Though obviously an EXCESSIVE expansion in the money supply will be inflationary. So government and central bank should aim to print and spend enough to take the economy out of recession without printing so much as to cause excess inflation. As an alternative to print and spend, government can of course increase its spending net of tax by cutting taxes instead of increasing its spending (an option youll prefer if you want the size of the government machine reduced). Confused? Theres no need to be: its all quite simple really :-) Querie: Ah, so debt MAY NEED to be paid back via confiscation or tax and thats a burden on taxpayers when that happens.

Querie: But that extra money may EVENTUALLY cause excess inflation. Answer: OK, if it does, then government can run a negative deficit, i.e. a surplus. Put another way it can confiscate money from the private sector and unprint it.

Once youve understood that, then congratulations: you know more about deficits and debts than the IMF, the OECD, 99% of politicians, and numerous so called professional economists.

Querie: but printing money will be inflationary.

Answer: No. That taxation is simply designed to avoid excess demand and excess inflation (stemming from private sector exuberance, as above, or from stemming from the interest rate cut mentioned on the left). To the extent that excess inflation is avoided, everyone is better off!!! Yes: tax can make you better off. Thats an irony way beyond the comprehension of 99% of politicians and numerous economists. . . . . . . . . . . . . . . . . . .

Note: the latter points ignore (for the sake of simplicity) debt held by foreigners. If foreigners take their money out of the relevant debtor country when their debt matures, that will involve a standard of living hit for the debtor country. But a government does not have much influence on what foreigners do (e.g. governments have limited powers to tax foreigners). So what foreigners do is largely a given, and not of much relevance here.