American Private Debt [was] 310% of Gross Domestic Product in 2008, the highest since 1929, the last Great Depression, when Private Debt was 240% of GDP.Government debt in 1929 was a paltry 40% of GDP. In 1945, when America was financing its participation in World War II, government debt exploded to 120% of GDP. That is the highest government debt has been in America, making the 85% of GDP in 2011 seem almost insignificant.Government debt vis-a-vis Gross Domestic Product is not astronomical, according to this chart. It was not high in 1929 either, the last time the global economy had a heart attack and died. Public Debt is, in fact, at the time of this chart at least, lower than in 1945, when the public financed American involvement in World War II.
And before you go comparing us to the EU, or misdiagnosing the EU's problem as excessive public debt, read this:
Spain and Ireland were spectacularly successful in reducing their government debt to GDP ratios prior to the financial crisis [emphasis mine], i.e. Spain from 60% to 40% and Ireland from 43% to 23%. These were the two countries, which followed the rules of the [EU] Stability and Growth Pact better than any other country – certainly better than Germany that allowed its government debt ratio to increase before 2007. Yet the two countries, which followed the fire code regulations most scrupulously, were hit by the fire, because they failed to contain domestic private debt.…
So what's the solution? Debt forgiveness: government regulators should be "forcing big banks, bondholders and other creditors to write down some of their bad debts."
No comments:
Post a Comment