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I don't understand why the comparison even makes any sense: Let's say debt is equivalent to the mortgage on your house. You compare an individual exposure by t
by karambahh 8y ago
I don't understand why the comparison even makes any sense:
Let's say debt is equivalent to the mortgage on your house.
You compare an individual exposure by their monthly repayment against their income, not income against mortgage amount! Why is it any different for this?
Usually in France, it's customary to allow this ratio to be 30%. With median income at 20k€, this leaves about 5k€/y, or 410€/month.
At current rates, mortgage size of 100k€, total cost of 150k€. The "debt to GDP" is thus 150/20=750%.
Apples to oranges?
- zaro 8y agoIt can be apples to oranges but it can be useful metric also. I think of it as the higher the debt to GDP ratio is the longer/harder it will be to repay the debt.