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If you think about this in a more general context it's easier to see that "Debt-to-GDP" ratio alone isn't enough to determine that there is a problem. You need
by epicureanideal 12y ago
If you think about this in a more general context it's easier to see that "Debt-to-GDP" ratio alone isn't enough to determine that there is a problem. You need a combination of debt level and interest rate.
For example, I personally could have $100 Trillion in debt but with an infinitesimally small interest rate and an infinitely long repayment period, I would not be concerned.
What matters is Debt-Payment-to-GDP ratio. There is certainly some level of that ratio at which I would be concerned.
- nhaehnle 12y agoStill, there hasn't actually been any argument as to why a high debt-whatever-to-GDP ratio would cause a recession. I would actually argue the opposite: If debt payments suddenly increased, this would infuse cash into the economy which would likely boost GDP.