6 ms·

Debt-to-GDP ratio is a reasonable measure to use. Giving any special significance to 100% is the problem. It's similar to debt-to-income ratio that creditors l

Debt-to-GDP ratio is a reasonable measure to use. Giving any special significance to 100% is the problem. It's similar to debt-to-income ratio that creditors look at. A debt-to-income ratio of 100% is considered fine as long as it is low interest. Someone with a $100k mortgage on a $100k income is in great shape, they could actually afford a much larger mortgage.

ars 8y ago
> Debt-to-GDP ratio is a reasonable measure to use. Giving any special significance to 100% is the problem. The mistake is forgetting the units. Debt is in Dollars, GDP is Dollars/Year. That makes Debt-to-GDP ratio have the units of Time, not percent.