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"'Greece/Argentina/Brazil/Japan/...'" ... were all just barely over 100% debt / GDP when things went bad? I don't recall that being the case. It is surely tr

"'Greece/Argentina/Brazil/Japan/...'" ... were all just barely over 100% debt / GDP when things went bad? I don't recall that being the case. It is surely true that there can be unsustainable levels of debt. You have not made the case that those are anywhere near 100% GDP. I would be surprised if there were any fixed number of GDP where it goes from good to bad - it's going to at least depend on the cost of borrowing that money, and that also looks much different between the US and many other countries (very much including the countries you listed).

forgetsusername 11y ago
>were all just barely over 100% debt / GDP when things went bad? Indeed. It's amazing to me that people don't blink an eye at borrowing 8-10x their annual income to buy a home in California, but think the US economy, which can print its own currency, is going to fold with debt levels at 1x income and rates at historic lows.
- sillygeese 11y ago
  Perhaps those are not the same people? Bear in mind that printing currency is not without consequences either. It's not like each printed (and used) dollar is worth exactly as much as the previous one - otherwise hyperinflations could not happen.
- dllthomas 11y ago
  I think that metaphor is useful for driving intuition about how it might not be a problem, if people aren't seeing that. I do worry about relying on it much beyond that. Households, companies, and governments all have balance sheets, but there are tremendous differences.
- bsbechtel 11y ago
  Actually, debt is held by the US Government, which has had historic average revenues of ~18% GDP. Therefore, to have 100% debt/GDP is actually the US Government borrowing 5.5x their annual income.
thecage411 11y ago
Not only that, but cause and effect isn't obvious either. Let's say there's some correlation between high ratios of debt / gdp (our proxy for "unsutainable levels of debt") and low growth. Is the low growth caused by the high debt or did the country get into high debt because they've had low growth (and thus lower than expected revenues)?

forgetsusername 11y ago

>were all just barely over 100% debt / GDP when things went bad? Indeed. It's amazing to me that people don't blink an eye at borrowing 8-10x their annual income to buy a home in California, but think the US economy, which can print its own currency, is going to fold with debt levels at 1x income and rates at historic lows.

sillygeese 11y ago
Perhaps those are not the same people? Bear in mind that printing currency is not without consequences either. It's not like each printed (and used) dollar is worth exactly as much as the previous one - otherwise hyperinflations could not happen.
dllthomas 11y ago
I think that metaphor is useful for driving intuition about how it might not be a problem, if people aren't seeing that. I do worry about relying on it much beyond that. Households, companies, and governments all have balance sheets, but there are tremendous differences.
bsbechtel 11y ago
Actually, debt is held by the US Government, which has had historic average revenues of ~18% GDP. Therefore, to have 100% debt/GDP is actually the US Government borrowing 5.5x their annual income.

thecage411 11y ago

Not only that, but cause and effect isn't obvious either. Let's say there's some correlation between high ratios of debt / gdp (our proxy for "unsutainable levels of debt") and low growth. Is the low growth caused by the high debt or did the country get into high debt because they've had low growth (and thus lower than expected revenues)?