[quote=arraya]If you look at the capacity for the govt. to borrow and stimulate (go back to WW II and you’ll see federal debt to GDP at 122% – right now we’re at about 70%)
Attempts to reframe the argument in terms of only federal debt are red herrings. First because how we measure “GDP” has changed so dramatically over the years that it’s not really possible to accurately compare federal debt over the decades. Second because federal debt is only 20% of the debt pie.
Ultimately whether the debt is held by a town, a state, a corporation or the federal government it is the labor of individual people that pays it off.
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I framed in terms of federal debt because the govt. has the authority to tax in future years to bring that debt down.
Total non-financial debt-to-GDP is around 340%, which is almost an all-time high (only because it’s fallen a little in the last few months). That will be worked down to around 250% over the next 10 years by a combination of debt being written off and paid down, and GDP growing very modestly (probably averaging half the rate of the last decade). 250% is high, but sustainable.
Look, I’m quite bearish. But data suggests that avoiding a depression is easily achievable with the right policy response. We’ll see if the Officialdom is capable of maneuvering properly.
