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Here's an interesting meta-study about the effects of a high debt to gdp ratio. http://www.nber.org/papers/w16827 http://www.nber.org/papers/w16827 I admire t

by thoward 11y ago

Here's an interesting meta-study about the effects of a high debt to gdp ratio. http://www.nber.org/papers/w16827 http://www.nber.org/papers/w16827 I admire the candor of your second point ("we just inflated it away.") I think this is ultimately what will happen here in the USA. I think that most people would choose austerity now over higher inflation down the road, but maybe I'm delusional. Our consumer savings rates continue to trend down so maybe people just wouldn't care much. http://www.tradingeconomics.com/united-states/personal-savings http://www.tradingeconomics.com/united-states/personal-savin...

Amezarak 11y ago
> Here's an interesting meta-study about the effects of a high debt to gdp ratio. I know you're sincere, but I kind of had to laugh. Reinhart and Rogoff have been through the ringer for publishing that paper, which is almost entirely bunk. There was a huge storm that made it even to the mainstream media about how truly flawed that paper was (with errors getting as basic as "they can't use Excel.") It's even mentioned in the OP. To be fair, the claim that slower economic growth is correlated with high debt is somewhat true. But most argue causation is in the other direction: slow growth causes high debt. > I admire the candor of your second point ("we just inflated it away.") You might recall that the time period in which we inflated that debt away was one of the most prosperous for all Americans. Meanwhile, austerity will directly lead to people losing their jobs and an economic slowdown that will prolong the suffering people are already going through...for what?
- thoward 11y ago
  I'll concede the point on the R&R paper. Didn't know there was so much controversy about it, and the accusations that some of their findings were due to a technology glitch are pretty damning. But still, the median age of the US population in 1950 was 30 years old. Today it's over 37 and climbing. And (not to beat a dead horse) the savings rate is half what it was then. To me that indicates that a far larger percentage of our population is going to be living on (paltry) fixed incomes than at any other time. Inflation would be crushing to our aging population. I just don't think you can compare our situation to the 1950's.

by thoward 11y ago

Amezarak 11y ago

> Here's an interesting meta-study about the effects of a high debt to gdp ratio. I know you're sincere, but I kind of had to laugh. Reinhart and Rogoff have been through the ringer for publishing that paper, which is almost entirely bunk. There was a huge storm that made it even to the mainstream media about how truly flawed that paper was (with errors getting as basic as "they can't use Excel.") It's even mentioned in the OP. To be fair, the claim that slower economic growth is correlated with high debt is somewhat true. But most argue causation is in the other direction: slow growth causes high debt. > I admire the candor of your second point ("we just inflated it away.") You might recall that the time period in which we inflated that debt away was one of the most prosperous for all Americans. Meanwhile, austerity will directly lead to people losing their jobs and an economic slowdown that will prolong the suffering people are already going through...for what?

thoward 11y ago
I'll concede the point on the R&R paper. Didn't know there was so much controversy about it, and the accusations that some of their findings were due to a technology glitch are pretty damning. But still, the median age of the US population in 1950 was 30 years old. Today it's over 37 and climbing. And (not to beat a dead horse) the savings rate is half what it was then. To me that indicates that a far larger percentage of our population is going to be living on (paltry) fixed incomes than at any other time. Inflation would be crushing to our aging population. I just don't think you can compare our situation to the 1950's.