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GDP is in $/yr, while debt is in $. Thus, debt/GDP has units of time. 90% really means 10.8 months. One of the reasons the idea was sticky is that 90% seemed l
by tlb 14y ago
GDP is in $/yr, while debt is in $. Thus, debt/GDP has units of time. 90% really means 10.8 months.
One of the reasons the idea was sticky is that 90% seemed like a significant number, almost all the way to 100%. Where there's nothing so obviously magical about 10 or 12 months.
- Someone 14y agoFor an analogy, look at individual households. Many of them have over a year of debt, aka over 100%. Getting a mortgage of 3 or 4 times one's yearly income isn't that hard. Now, people will argue that, for many, the value of their house will be higher. That is true, but the same applies to governments. Infrastructure such as roads has value. Traditionally, in many countries, the state also owned airports, water pipes, and electrical wiring that brought in money. That, I think, is where the real problem lies for some countries: they have sold the stuff that brings in money without bringing down their debt.
- gd1 14y agoGDP isn't your income, tax receipts are. Tax receipts as a percentage of GDP are about ~25%, so 100% debt/GDP is 4 years worth of debt, not 1.
- humanrebar 14y agoIf the U.S. national debt was a mortgage, it would be a mortgage with a term that spans centuries with payments that don't even cover the interest. "Getting a mortgage of 3 or 4 times one's yearly income..." One of lessons of the last ten years is that people, businesses, and governments can very easily get loans they have no ability to repay. And too often, the borrowers have to default. This is bad for the borrower.